Sign in

    Halliburton Co (HAL)

    Q1 2025 Earnings Summary

    Reported on Apr 22, 2025 (Before Market Open)
    Pre-Earnings Price$21.92Last close (Apr 21, 2025)
    Post-Earnings Price$20.11Open (Apr 22, 2025)
    Price Change
    $-1.81(-8.26%)
    • 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.
    MetricYoY ChangeReason

    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.

    MetricPeriodPrevious GuidanceCurrent GuidanceChange

    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

    MetricPeriodGuidanceActualPerformance
    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
    TopicPrevious MentionsCurrent PeriodTrend

    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.

    1. 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.

    2. 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.

    3. 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.

    4. 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.

    5. 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.

    6. 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.

    7. 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.

    8. 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.

    9. 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.

    10. 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.

    11. 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.

    12. 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.

    13. 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.

    14. 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.

    15. 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.

    16. 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.