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Halliburton Company (HAL)

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Halliburton Company (HAL)

Q4 2017 Results Earnings Conference Call

January 22, 2018 09:00 AM ET

Executives

Lance Loeffler - IR

Jeff Miller - President and CEO

Chris Weber - CFO

Analysts

Jim Wicklund - Credit Suisse

James West - Evercore ISI

Angie Sedita - UBS

Jud Bailey - Wells Fargo

Bill Herbert - Simmons & Company

Scott Gruber - Citigroup

David Anderson - Barclays

Waqar Syed - Goldman Sachs

Sean Meakim - JP Morgan

Timna Tanners - Bank of America/Merrill Lynch

Chase Mulvehill - Wolfe Research

Presentation

Operator

Good day, ladies and gentlemen. And welcome to the Halliburton's Fourth Quarter 2017 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer-session and instructions will follow at that time. [Operator Instructions] And as a reminder, today’s conference call is being recorded.

I’d now like to turn the conference over to Lance Loeffler. Please go ahead.

Lance Loeffler

Good morning. And welcome to the Halliburton fourth quarter 2017 conference call. As a reminder, today's call is being webcast and a replay will be available on Halliburton's website for seven days.

Joining me today are Jeff Miller, President and CEO; and Chris Weber, CFO. Some of our comments today may include forward-looking statements, reflecting Halliburton’s views about future events. These matters involve risks and uncertainties that could cause our actual results to materially differ from our forward-looking statements.

These risks are discussed in Halliburton’s Form 10-K for the year ended December 31, 2016, Form 10-Q for the quarter ended September 30, 2017, recent current reports on Form 8-K, and other Securities and Exchange Commission filings. We undertake no obligation to revise or publicly update any forward-looking statements for any reason. Our comments today also include non-GAAP financial measures. And unless otherwise noted, in our discussion today, we will be excluding those items which are detailed in our fourth quarter press release.

Additional details and reconciliation to the most directly comparable GAAP financial measures are also included in our fourth quarter press release and can be found in the investor download section of our website. Finally, after our prepared remarks, we ask that you please limit yourself to one question and one related follow-up during the Q&A period in order to allow more time for others who may be in the queue.

Now, I’ll turn the call over to Jeff.

Jeff Miller

Thank you, Lance, and good morning everyone. Outstanding execution resulted in an excellent fourth quarter and we are in a strong position to take care of opportunities presented by a growing North America market and improving international conditions. 2017 was a dynamic year for the oil and gas sector that marked another step on the road to recovery for our industry. I am pleased with the way our Halliburton team executed our value proposition, maintained strong service quality, generated superior results and industry leading returns. I’d like to thank the outstanding employees of Halliburton for their hard work and focus the entire year and for tremendous fourth quarter.

I am very excited about the way 2018 is shaping up. Commodity prices have moved up. North America unconventional activity should be very busy, international markets are starting to show signs of life and our value proposition is resonating with our customers. I will address each of these in a few minutes. But first, I want to recap the highlights for the full year and fourth quarter.

During the course of 2017, we grew our market share, generated industry-leading returns and outperformed our peers across every region. We accomplished this by aligning with customers in the fastest growing market segments and collaborating in engineering solutions to maximize their asset value.

Total Company revenue grew 30% and adjusted operating income tripled, finishing the year with total Company revenue of $20.6 billion and adjusted operating income of $2 billion. In North America, we told you, we would win the recovery and we did. We recognized the changing market before anyone else, moved more quickly to reactive equipment, maintained historically high market share, raised prices and captured key customers before others could, a pretty tough task to pull off and we did it.

Our international business began to show signs of recovery in the latter half of the year, driven primarily by improved performance in the Middle East, the North Sea and Latin America. And finally, we generated approximately $2.5 billion in operating cash flow and retired $1.4 billion in debt.

And now, a few highlights for the fourth quarter. We finished the quarter with total Company revenue of $5.9 billion and adjusted operating income of $764 million, representing a sequential increase of 9% and 21%, respectively.

Our Drilling and Evaluation division delivered a strong quarter, achieving nearly 50% incrementals, reflecting improved drilling activity in multiple regions and year-end software sales. As I've said many times before, we are way more than a completions company.

Our Completion and Production division revenue grew 8% sequentially, once again outperforming the change in the average U.S. land rig count. And we increased our cash position by $440 million in the fourth quarter, demonstrating our commitment to capital discipline and efficient working capital management.

This quarter demonstrates the strength and diversity of our portfolio. We have the leading position in hydraulic fracturing, which is clearly important. However, the results this quarter demonstrate the value of Halliburton's position as a multidisciplinary, integrated service provider with industry leading cementing, completion tools, drilling fluids, drill bits and software product lines, and much improved positions in artificial lift, directional drilling and wireline.

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