HALLIBURTON CO (HAL) Q1 2025 Earnings Summary

Executive Summary

• Q1 2025 headline results: revenue $5.42B, GAAP EPS $0.24, adjusted EPS $0.60; GAAP operating margin 8% and adjusted operating margin 14.5% . Versus consensus, revenue beat (Street $5.28B*) and EPS was in line (~$0.60*) as non-GAAP matched estimates ; see Estimates Context.
• Mix headwinds: North America down 12% YoY on lower stimulation activity; international down 2% YoY driven by sharp Mexico declines, partly offset by +6% YoY growth in Middle East/Asia and Europe/Africa . Segment EBIT fell YoY on reduced pressure pumping and Mexico softness (C&P -23% EBIT YoY; D&E -12% YoY) .
• One-time items: $356M pre-tax impairments (severance, asset held-for-sale, real estate, other, primarily legacy environmental reserves) weighed on GAAP EPS; adjusted results back out these charges .
• Outlook/tone: Q2 guide embeds a $0.02–$0.03 EPS tariff headwind; C&P revenue +1–3% q/q with flat margins; D&E flat to -2% revenue with 125–175 bps margin downtick from mobilization and mix; 2H D&E margins expected to return to 2024 “zip code.” FY25 capex ~6% of revenue; plan to return ≥$1.6B to shareholders in 2025 .

What Went Well and What Went Wrong

What Went Well

• International resilience outside Mexico: Middle East/Asia and Europe/Africa each grew 6% YoY, supported by Kuwait, Saudi and Namibia/Norway activity; tenders were strong with multi‑year integrated offshore wins extending into 2026+ .
• Technology adoption: Achieved the world’s first closed‑loop, autonomous fracturing operation (Zeus IQ) and highlighted automated drilling (LOGIX) deployments in Norway and the Middle East, reinforcing differentiation and stickiness of contracted e‑fleets .
• Capital returns intact: Repurchased ~$250M in Q1 and paid a $0.17 dividend; management reiterated ≥$1.6B 2025 cash returns despite macro volatility .

Quote: “We achieved the world’s first closed-loop, autonomous fracturing operation. I believe this unlocks the next big step in unconventionals.” – Jeff Miller, CEO .

What Went Wrong

• Mexico-driven international softness: International revenue -2% YoY with Latin America -19% YoY primarily from Mexico across multiple product lines; management does not see an “immediate recovery” in Mexico .
• North America down 12% YoY: Lower U.S. land stimulation and Gulf completion tool sales pressured C&P; segment operating income fell 23% YoY despite technology traction .
• One-time charges compressed GAAP results: $356M pre-tax impairments (severance $107M, assets held-for-sale $104M, real estate $53M, other $92M) reduced GAAP operating margin to 8% (adjusted 14.5%) .

Financial Results

Headline summary vs prior year, prior quarter, and Street

Note: Consensus (Primary EPS, Revenue) from S&P Global. Values retrieved from S&P Global.*

Segment performance

Management reported Q1 2025 segment margins: C&P ~17% and D&E ~15% .

Geographic revenue

KPIs and cash returns

Non‑GAAP reconciliation highlights: $356M pre‑tax impairments (severance $107M; assets held for sale $104M; real estate $53M; other $92M) reduced GAAP results; adjusted operating income was $787M and adjusted net income was $517M .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• Strategy: “Maximize value in North America, drive our growth engines internationally and deliver technology that creates value… I expect Halliburton [to] generate solid free cash flow in 2025 and we are on pace to return at least $1.6 billion of cash to shareholders” .
• International view: “While our overall international outlook has not materially changed, it is reasonable to assume that there is more risk embedded… As a result, year-over-year international revenue [to be] flat to slightly down” .
• Technology: “Closed loop [Zeus IQ] means the platform utilizes real-time feedback… to control where water and sand are placed, all without human intervention… I expect this technology… will change the game in unconventionals” .
• Mexico: “Clearly not settled… I don’t see immediate recovery in Mexico… decline rates are pretty meaningful… that’s going to drive recovery” (timing uncertain) .
• Saudi: “We expect growth for our portfolio in 2025 in Saudi… unique strength in unconventionals, intervention and artificial lift” .

Q&A Highlights

• Tariffs: Q2 EPS headwind ~$0.02–$0.03; ~60% impact in C&P and 40% in D&E (components like drilling collars, gun bodies). Mitigation levers under evaluation; more clarity next quarter .
• D&E margin cadence: Q2 down 125–175 bps on mobilization ($20M), tariffs ($10M), and mix (~$10M); 2H margins expected back to 2024 levels as startup costs roll off and new work ramps .
• North America demand: Customers digesting macro; >40% Zeus fleets under term contracts; company will retire/export capacity rather than price irrationally .
• Capital returns: Despite lower FCF outlook vs earlier color, buyback pace unchanged relative to last year; dividend priority remains .
• Investments: Increased equity stake in VoltaGrid for distributed power optionality; approach remains prudent and stepwise .

Estimates Context

• Outcome: Revenue beat; EPS essentially in line with consensus (non‑GAAP). Management’s tariff headwind and mobilization expenses are likely to pressure near‑term EPS (Q2), with modeled recovery in 2H as new awards ramp .

Note: Consensus values retrieved from S&P Global.*

Key Takeaways for Investors

• Mix/one‑offs obscured core margin power: Adjusted margin of 14.5% (vs GAAP 8%) and in‑line EPS signal resilient underlying profitability despite Mexico and NA stimulation headwinds .
• Sequential setup: Q2 guided modest C&P growth with flat margins and D&E margin dip on mobilization/tariffs; 2H D&E margin normalization targeted as startup costs fade and projects go productive .
• International pipeline healthy: Multi‑year offshore wins (e.g., Shell, Suriname/Brazil; Petrobras integrated drilling) underpin H2 momentum and 2026+ visibility even as FY25 international is guided flat to slightly down YoY due to Mexico .
• NA strategy defends returns: >40% contracted Zeus e‑fleets and willingness to retire/export capacity should mitigate pricing pressure vs peers through softer patches .
• Tariffs are a near‑term overhang but manageable: $0.02–$0.03 Q2 EPS impact with multiple mitigation levers; watch for magnitude updates next quarter .
• Cash returns remain central: Q1 repurchases ~$250M; ≥$1.6B 2025 cash returns reiterated, supporting shareholder yield even amid macro noise .
• Watch Mexico trajectory and Saudi execution: Timing of Mexico stabilization and Saudi growth in growth engines (unconventionals, intervention, lift) are swing factors for 2H/2026 trajectory .

Additional Q1 2025 Press Releases (Context)

• Dividend: Declared $0.17 per share payable March 26, 2025 .
• Brazil offshore: Awarded Petrobras integrated drilling services (largest service contract with Petrobras; three‑year scope) starting 2025 .

S&P Global disclaimer: Consensus estimates marked with an asterisk (*) are values retrieved from S&P Global.