Q1 2025 Earnings Summary
- International Growth Potential: Executives highlighted strong opportunities in Saudi Arabia and other key regions, noting that Saudi is a huge market with significant contract wins expected in 2025, which supports further portfolio growth.
- Technology Leadership with Zeus IQ: The significant emphasis on Zeus IQ—a closed‐loop autonomous frac system—demonstrates Halliburton's commitment to technological differentiation that can improve operating efficiencies, drive value creation, and create customer stickiness in North America.
- Robust Free Cash Flow and Capital Return Strategy: Management expressed confidence in generating solid free cash flow in 2025 and is on pace to return at least $1.6 billion of cash to shareholders, underlining strong financial discipline even in a dynamic market environment.
- Tariff Uncertainty and Cost Pressure: Management highlighted that tariffs could impact free cash flow by $0.02 to $0.03 per share in Q2, with ongoing uncertainty over their structure and the ability to fully mitigate these costs, adding risk to margins and overall earnings.
- Margin Volatility Amid Increased Costs: Executives discussed that operational challenges in Q2—including mobilization costs and incremental expenses—are leading to a significant drop in margins (e.g., a $40 million decline in the Drilling & Evaluation segment's profits), with aggressive margin improvement targets that may be hard to achieve under current market conditions.
- Prolonged Headwinds in the Mexican Market: There is concern over Mexico, where revenue declines are severe and recovery timing remains uncertain, potentially dragging on international performance and adding to overall revenue and margin pressures.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | –6.7% (from $5.804B to $5.417B) | Total revenue declined by approximately 6.7% due to lower demand in key domestic markets such as North America (down 12%) and Latin America (down 19%), partially offset by modest gains in Europe/Africa/CIS and Middle East/Asia. |
Operating Income | –46% (from $987M to $531M) | Operating income dropped sharply by 46% primarily because of significant impairments and other charges which reduced profitability, along with weaker segment performance compared to Q1 2024. |
Net Income | –67% (from $609M to $203M) | Net income fell by roughly 67% as the impact of $356M in impairments and other charges, combined with declining operating income, outweighed any offsetting revenue or margin improvements. |
Basic EPS | –65% (from $0.68 to $0.24) | Basic EPS decreased by 65% in line with the severe drop in net income due to impairments and lower operating results, reflecting lower earnings available to common shareholders. |
North America Revenue | –12% (from $2.546B to $2.236B) | North America revenue declined by 12% driven by reduced pressure pumping services, lower wireline activity, and pricing pressures that weighed down revenue compared to previous periods. |
Latin America Revenue | –19% (from $1.108B to $896M) | Latin America revenue fell by 19% as decreased activity across multiple product service lines, particularly lower completion tool sales, led to a sharper decline relative to the prior period. |
Europe/Africa/CIS Revenue | +6% (from $729M to $775M) | Europe/Africa/CIS revenue increased by 6% as improved activity in regions like the North Sea and Italy partially offset declines elsewhere, demonstrating regional resilience compared to previous quarters. |
Middle East/Asia Revenue | +6% (from $1,421M to $1,510M) | Middle East/Asia revenue grew by 6% driven by higher activity—such as increased stimulation and completion tool sales—and better overall performance in key markets compared to the prior period. |
Operating Cash Flow | –23% (from $487M to $377M) | Operating cash flow dropped by 23% due to lower net income and the impact of significant non-cash adjustments and less favorable working capital changes, despite some improvements in components like inventory and payable trends. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
C&P Division Revenue | Q2 2025 | no prior guidance | Sequential revenue expected to increase by 1% to 3% | no prior guidance |
C&P Division Margins | Q2 2025 | no prior guidance | Margins expected to remain approximately flat | no prior guidance |
C&P Division Tariff Impact | Q2 2025 | no prior guidance | About 60% of the tariff impact | no prior guidance |
D&E Division Revenue | Q2 2025 | no prior guidance | Sequential revenue expected to be flat to down 2% | no prior guidance |
D&E Division Margins | Q2 2025 | no prior guidance | Margins expected to decline by 125 to 175 bp | no prior guidance |
D&E Division Profit Impact | Q2 2025 | no prior guidance | Q2 profits expected to drop by approximately $40M | no prior guidance |
D&E Division Tariff Impact | Q2 2025 | no prior guidance | About 40% of the tariff impact | no prior guidance |
Corporate Expenses | Q2 2025 | no prior guidance | Expected to remain flat | no prior guidance |
SAP Migration Expense | Q2 2025 | no prior guidance | Expected to remain flat at $30 million | no prior guidance |
Net Interest Expense | Q2 2025 | no prior guidance | Expected to increase by $5 million | no prior guidance |
Other Net Expense | Q2 2025 | no prior guidance | Expected to increase by $5 million | no prior guidance |
Effective Tax Rate | Q2 2025 | no prior guidance | Expected to be approximately 23% | no prior guidance |
Capital Expenditures (CapEx) | FY 2025 | ~6% of revenue | ~6% of revenue | no change |
Free Cash Flow | FY 2025 | Return at least $1.6 billion to shareholders | At the lower end of prior expectations | lowered |
International Revenue | FY 2025 | no prior guidance | Expected to be flat to slightly down | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Net Interest Expense | Q1 2025 | About $90 million | $86 million (from Income Statement: Interest expense, net of interest income, (86)) | Beat |
Other Net Expense | Q1 2025 | Approximately $40 million | $39 million (from Income Statement: Other, net, (39)) | Met |
Effective Tax Rate | Q1 2025 | Approximately 23% | ~33.7% (Income tax provision of $103M / Income before income taxes of $306M = 33.7%) | Missed |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
International Growth and Regional Market Dynamics | Discussed extensively in Q4, Q3, and Q2 2024 with strong Middle East/Asia growth, challenges in Mexico, and early mentions of Argentina | Q1 2025 highlights robust opportunities in Saudi Arabia and the Middle East, reiterates challenges in Mexico (19% revenue drop), and spotlights Argentina as a future growth focus | Consistent focus on international markets with renewed optimism in key regions (Saudi Arabia and Middle East) while Mexico remains a challenge. |
Consistent Technological Innovation and Automation | Emphasized across Q4, Q3, and Q2 2024 through discussions on Zeus platforms, e‑fleets, AutoFrac, and Sensori, underscoring efficiency gains and competitive differentiation | Q1 2025 reaffirms innovations with the introduction of Zeus IQ closed‑loop autonomous fracturing system and continued global deployment of advanced technologies | Consistent and positive commitment to technology innovation; the current period deepens the focus with breakthrough autonomous systems. |
Margin and Pricing Dynamics | Detailed in Q4, Q3, and Q2 2024 with mentions of downward pricing pressure, fleet pricing uncertainty, and margin declines driven by soft North American activity | Q1 2025 continues to discuss margin pressures and pricing uncertainty, noting declining margins in key segments yet expecting improvements later in the year | Ongoing challenges with pricing and margin pressures; while concerns persist, there is cautious optimism for recovery through technology and contract stability. |
Emerging Tariff Uncertainty and Cost Pressures | Not mentioned in Q4, Q3, or Q2 2024 earnings calls [–] | Introduced in Q1 2025 with quantified impacts (around $0.02–$0.03 per share) and additional cost pressures from mobilization and mix issues | A new topic in the current period that introduces additional cost uncertainty, potentially impacting margins if not mitigated. |
Free Cash Flow Generation and Capital Return Strategies | Consistently discussed in Q4, Q3, and Q2 2024, with strong free cash flow figures and robust capital return targets (repurchases and dividends) | Q1 2025 reiterates the focus with solid operating and free cash flow production, though overall guidance is on the lower end; persistent commitment to share repurchase targets | A consistent focus with disciplined capital allocation; while free cash flow remains robust, there is slight caution in annual guidance in the current period. |
Evolving Fleet Commitment and Efficiency Trends | Raised in Q4, Q3, and Q2 2024 through strong contract achievements for e‑fleets, technological integration, improved equipment efficiency, and commitment targets (40–50% e‑fleet penetration) | Q1 2025 continues to emphasize evolving fleet commitments with the deployment of advanced technologies (e.g. Zeus IQ) and strategy to retire/redirect fleets in low‐activity areas | A steady trend, with clear focus on efficiency and technological leverage; slight strategic shifts noted due to North American activity declines. |
Execution Risks from Future Technology Development and Bolt‑on M&A | Touched upon in Q4 2024 with remarks on the disciplined, step‑by‑step approach to technology integration and targeted bolt‑on M&A | Not explicitly mentioned in Q1 2025 earnings call | Previously a point of caution in Q4 2024, this topic is absent in Q1 2025, suggesting it is currently less top‑of‑mind. |
Natural Gas Market Dynamics | Discussed in Q4 and Q2 2024 with emphasis on tight markets, equipment constraints, and anticipation of increased activity driven by tech demand and structural changes | Q1 2025 presents a positive outlook by highlighting structural demand drivers such as increased power demand and LNG exports, leading to improved market activity | A consistently significant topic; sentiment appears slightly more optimistic in Q1 2025 with emphasis on long‑term structural strength in the gas market. |
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Margin Outlook
Q: How will margins evolve this year?
A: Management expects a Q2 dip in D&E margins—driven by $10 million in tariffs and mobilization costs—but anticipates Q3/Q4 margins to return to levels similar to last year, largely through operational adjustments and technology improvements. -
Free Cash Flow
Q: How will free cash flow be deployed?
A: They plan to continue returning cash via share repurchases and dividends on a pace very similar to last year, keeping free cash flow use consistent. -
Tariff Impact
Q: What are the tariff impacts moving forward?
A: Tariffs are expected to impact about $0.02–$0.03 per share in Q2, with roughly 60% affecting the C&P division and 40% impacting D&E, though management is actively working to mitigate these effects. -
International Growth
Q: Which regions will drive international growth?
A: Excluding the weak performance in Mexico, management sees mid-single digit growth from markets in Europe, Africa, the Middle East, and Latin America, with improved contract activity in Q3 and Q4. -
CapEx Spend
Q: Why is CapEx above DD&A maintained?
A: They are targeting a CapEx level of about 6% of revenue to support growth initiatives; spending adjusts in a self-regulating manner as revenue fluctuates, aligning with long-term investments. -
VoltaGrid Strategy
Q: What is the plan with VoltaGrid?
A: VoltaGrid remains a strategic equity investment for now, providing management with optionality as they prudently evaluate any move toward majority ownership to enhance exposure in power and industrial sectors. -
U.S. Activity Outlook
Q: How will U.S. rig and completion counts fare?
A: Despite commodity price volatility, U.S. operators are digesting market data and activity is expected to stay within a range that supports production without major new equipment expansion. -
Mexico Recovery
Q: What is the outlook for Mexico operations?
A: Recovery in Mexico remains uncertain due to ongoing political and operational challenges, with turnaround expected to be gradual as the market adjusts. -
Offshore Cycle
Q: How favorable is this offshore cycle?
A: The company is well positioned in offshore segments, winning technology-driven contracts that reflect a stronger, more aligned approach compared to previous cycles. -
Gas Market Outlook
Q: How will gas market activity progress?
A: Structural growth is expected in the gas sector, bolstered by strong demand from LNG exports and power generation, which bodes well for sustained activity. -
Pricing Stability
Q: Are pressure pumping contract prices stable?
A: Long-term contracts in the pressure pumping business remain resilient, with pricing consistent with the high value provided by advanced technologies. -
Zeus IQ Impact
Q: What advantage does Zeus IQ offer?
A: Zeus IQ’s autonomous operations are delivering real-time smart fracturing, enhancing asset recovery and creating stickier customer relationships in North America. -
Margin Recovery
Q: Will margins recover post-tariff reversal?
A: Management indicated that with tariff reversals, margins are expected to trend back to levels comparable to last year, supporting overall profitability. -
Severance Charges
Q: How will severance costs affect margins?
A: The severance charges are factored into current guidance, with a payback period of less than one year, thus mitigating long-term margin impacts. -
Saudi Growth
Q: Can Saudi opportunities boost growth?
A: Saudi Arabia is seen as a significant market with ample growth potential, reinforced by major contract wins and ongoing technology initiatives. -
Cash Flow Details
Q: What about the minor acquisition and cash adjustments?
A: A $345 million equity investment in VoltaGrid was recorded, with other cash adjustments reflecting routine restructuring charges and tax payments, all part of normal operating activities.