Halliburton Co ($HAL) Q4 2025 Earnings Call

Good day ladies and gentlemen and thank you for standing by. Welcome to the fourth quarter 2025 Halliburton Company earnings conference call. At this time all participants are in a listen-only mode. After the speaker's presentation there will be a question and answer session. To ask a question simply press star one on your telephone keypad. As a reminder this conference call is being recorded. At this time I would like to turn the conference over to Mr. David Coleman, senior vice president of investor relations. Sir, please begin.

Hello and thank you for joining the Halliburton fourth quarter 2025 conference call. We will make a recording of today's webcast available for 7 days on Halliburton's website after this call. Joining me today are Jeff Miller, chairman, president, and CEO, and Eric Caret, executive vice president, and CFO. Some of today's comments may include forward-looking statements that reflect 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 10K for the year ended December 31st, 2024, form 10Q for the quarter ended September 30th, 2025, recent current reports on form 8K, and other Securities and Exchange Commission filings. We undertake no obligation to revise or update publicly any forward-looking statements for any reason except as required by law. Our comments today also include non-GAAP financial measures. Additional details and reconciliation to the most directly comparable GAAP financial measures are included in our fourth quarter earnings release and in the quarterly results and presentation section of our website. Now I'll turn the call over to Jeff.

Thank you, Jeff, and good morning. Our Q4 reported net income per diluted share was $0.70. Adjusted net income per diluted share was $0.69. Total company revenue for Q4 2025 was $5.7 billion, flat when compared to Q3 2025. Adjusted operating income was $829 million and adjusted operating margin was 15%. Our Q4 cash flow from operations was $1.2 billion and free cash flow was $875 million. During Q4, we repurchased $250 million of our common stock. For the full year, we repurchased approximately 42 million shares at an average price of $23.80 per share.

Now, turning to the segment results, beginning with our completion and production division, revenue in Q4 was $3.3 billion, flat when compared to Q3 2025. Operating income was $570 million, an increase of 11% when compared to Q3 2025, and operating income margin was 17%. Revenue improvements were primarily driven by higher year-end completion tool sales globally and offset by lower stimulation activity in the Western Hemisphere. Operating income increased due to activity mix improvements from completion tool sales. In our drilling and evaluation division, revenue in Q4 was $2.4 billion, flat when compared to Q3 2025. Operating income was $367 million, an increase of 5% sequentially, and operating income margin was 15%. Revenue improvements driven by higher wireline activity in the eastern hemisphere and increased Landmark software sales were offset by lower fluid services in North America. Operating income increased due to better activity mix from our wireline business in the Eastern Hemisphere and the year-end software sales.

Now let's move on to geographic results. Our Q4 international revenue increased 7% when compared to Q3 2025. Europe Africa revenue in Q4 was $928 million, an increase of 12% sequentially. This increase was primarily driven by higher completion tool sales in the North Sea and improved activity across multiple product service lines in Africa. Middle East Asia revenue in Q4 was $1.5 billion, an increase of 3% sequentially. This improvement was primarily driven by increased well-intervention services and higher stimulation activity in the Middle East and improved activity across multiple product service lines in Asia. Latin America revenue in Q4 was $1.1 billion, a 7% increase sequentially. This increase was primarily driven by higher completion tool sales in Brazil and the Caribbean and higher software sales in Mexico. In North America, Q4 revenue was $2.2 billion, a 7% decrease sequentially. This decline was primarily driven by lower stimulation activity in US land and Canada, decreased fluid services in the Gulf of America, and lower well intervention services in US land.

Moving on to other items in Q4, our corporate and other expense was $66 million. We expect our Q1 corporate expenses to increase about $5 million. In Q4, we spent $42 million on SAP S4 migration, which is included in our results. For Q1, we expect SAP expenses to be about $45 million. Net interest expense for the quarter was $86 million. For Q1, we expect net interest expense to increase about $5 million. Other net expense in Q4 was $25 million. We expect Q1 expense to be about $35 million. Our normalized effective tax rate for Q4 was 19.8%. Based on our anticipated geographic earnings mix, we expect our Q1 and full year 2026 effective tax rate to be approximately 21%. Capital expenditures for Q4 were $337 million, which is $100 million lower than expected due to late equipment deliveries. For the full year 2026, we expect capital expenditures to be about $1.1 billion, consistent with our prior guidance adjusted for the timing impact of late deliveries. This guidance excludes any capital spending necessary for a potential re-entry into Venezuela.

Now, let me provide you with comments on our expectation for Q1 2026. In our completion and production division in Q1, we anticipate a higher than normal rolloff of year-end completion tool sales and lower international activity. As a result, we anticipate sequential revenue to decrease 7 to 9% and margins to decline about 300 basis points. In our drilling and evaluation division, we expect sequential revenue to decline 2 to 4% and margins to decline 25 to 75 basis points. I will now turn the call back to Jeff.

Ladies and gentlemen, if you have a question or comment at this time, please press star 1 on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue, simply press the pound key. Again, if you have a question or comment at this time, please press star 1 on your telephone keypad. Stand by while we compile the Q&A roster. Our first question or comment comes from the line of Sarab Pant from Bank of America. Mr. Pant, your line is open.

Good morning, Jeff and Eric. Jeff, maybe I want to start with the topic which everybody has been bombarding us for the past two weeks which is Venezuela if you don't mind. I noted you said in your prepared remarks that I know it's early days but you talked about early steps are well underway. So my question is maybe just help us think about how quickly can Halliburton, your customers move into the country, what do you need to see to start doing that, and then secondly ultimately I know this is not certain but what is the potential size of the opportunity and how quickly can you scale up in Venezuela?

Right. No, that's a good update. Jeff, I think we need to stay in tune on what's going on, but that sounds like a good opportunity. Just a very different pivot going back to 2026. Jeff, I know you gave some color on your expectations for activity, for revenue, which frankly is in line to a little better than I think several people were thinking. So that's a good place to start. But on the margin side of things, Jeff, as we think about the pluses and minuses, pricing is part of it, and not just NAM, but international pricing, operating leverage, cost is part of it, and then Eric, maybe a little color on SAP spending trajectory. If we put all of that together, what does the margin side of the story look like for 26? Any preliminary thoughts on that?

Yes sir. Is it related... No. I was going to jump to your SAP question but if you have a follow-up for Jeff go ahead.

No SAP. Let's cover SAP first. Eric.

Okay. Yes. So SAP we guided $45 million for Q1 and that's pretty much the run rate that you should be thinking about throughout 2026. So $40 to $45 million. We anticipate the project to complete in Q4 of this year which is a little later than we had earlier guided. We've adjusted the plan slightly as we learn progressing through the roll out of the system. We've also broadened the scope of the project to include some of the adjacent processes such as outsourcing our payroll and redesigning our overall OTC process. So in summary about $40 to $45 million a quarter until the end of the year and project completed in Q4 with expected savings of about $100 million a year after the project is completed.

Right, no that makes a ton of sense Jeff. Like you said, rebalancing year and really the focus should be on 27, 28 right and hopefully things go in the right direction. So thank you Jeff, Eric. Thanks a lot.

Thank you. Our next question or comment comes from the line of Neil Mehta from Goldman Sachs. Mr. Mehta, your line is now open.

Hey, good morning team. Quick question here first on the international breakout. You said up slightly 26 versus 25. Can you just give us a tour around the world, Jeff, and give us perspective by market. Where do you see increments and decrements?

Yeah, that's a helpful breakout. And Jeff, maybe take a moment to talk about Volta Grid. I think we've gotten more comfortable as an investment community around that business and the potential, and you've announced an important joint venture in the Middle East. From where you sit, how important is this business for you guys? How big can it be? Do you see yourself as a logical consolidator over time? Do you like the minority position? Just your perspective. Anything you're willing to share about it?

Yeah, thanks, Chuck.

Next question or comment comes from the line of David Anderson from Barclays. Mr. Anderson, your line is now open.

Great. Thank you very much. Good morning, Jeff. How are you?

You've talked about rebalancing of the market. I was wondering if you could talk more specifically about North America and the stimulation market and how that's rebalancing. You talked about the attrition going on, but I'm wondering how pricing is holding up here and whether or not you see this firming up throughout the year because you're also seeing equipment moving over to Middle East. I know you've talked about you're bringing some equipment down to Vaca Muerta. So how is that component kind of factoring into pricing? Do you expect pricing to kind of hold up here and is this sort of a part of the rebalancing story?

That makes a lot of sense. Of course you do on that side. I was wondering if you could talk, Eric, maybe you could talk a little bit more about the CNP margin progression throughout the year. The guide for first quarter is more or less in line what we were looking for but how should we think about kind of where the rest of the year shakes out in the margin side? And perhaps you could also just talk a little bit how the sale of Multicam impacts that and maybe the decision to sell Multicam and does that provide an uplift for margins throughout the year?

So let me start with the Multicam. We think the sale should be completed this quarter. The impact on the margin will be positive but frankly it will not be material overall. Talking about the progression of CNP margin, we think the margin progresses throughout the year. But let me give you some color as well to the guide of margins from Q4 to Q1 because while it is not out of line with the differential in margin that we've seen in prior year, the actual makeup is a bit different. So if you look at Q1, we guided about 300 basis points down for CNP margin. So that is actually coming from three buckets. The first bucket, which is over half of the drop, is related to the roll-off of completion tool sales. That part is not unusual. What is a bit unusual is the amount of completion tool sales we had in Q4. If you look at the progression Q3 to Q4, our completion tool revenue increase was 3x what we saw in the prior two years. So that talks a lot to the strength of our completion business. But that's about over half of the drop. Then you get about 25% of the drop that's related to the typical seasonality in the international business for CNP as our CNP business is increasingly an increasingly large footprint in the international markets and that's about 3 to 6% reduction in revenue. So that's kind of typical with historical decreases. And the rest is really a products geographic mix issue which is really not structural as it relates to CNP. And then there is a bit of an optical view on Q4 to Q1 which is we typically have a lot of tailwind with the US frac business which goes through seasonality in Q4 and benefits from an uplift going into Q1. We don't have any of that this year as our Q1 frac business in the US looks to be just straight flat to Q4. So again, a little bit of color as the makeup of the delta is a bit different from prior years.

Understood. Thank you very much.

All right. Our next question or comment comes from the line of Aaron Jaram from JP Morgan. Mr. Jaram, your line is now open.

Yeah, good morning Jeff and Eric. Appreciate the outlook comments on 2026. I was wondering if we could maybe think about what your outlook comments around international and North America could mean for overall margins. You gave us some good color on where you expect the revenues to kind of shake out, but just trying to narrow thoughts around, you know, the street today sitting at just under four billion of EBITDA for '26 and just trying to get just general comfort level of where the street sits today based on your outlook comments.

Yeah, go ahead, Jeff. No, if you look at just kind of margins overall as Jeff progresses, we think H2 is better than H1. So, you're going to see some slight progression through the year. And while we typically don't comment on street estimates or provide guidance at this stage on margins, the 4 billion that you quoted is really within the range of outcomes that we are looking at.

Great. That's helpful, Eric. And just my follow-up, Jeff, in your prepared comments, you talked about Zeus IQ and some of the things that Halliburton's doing to help North American operators boost well productivity. I also wanted to talk to you a little bit about some of the updates we've gotten from the majors where they're talking about using lightweight proppant and surfactants. And I was wondering if you could discuss some of these efforts and maybe how you're helping clients maybe to use some of these emerging technologies and could these be needle movers for Halliburton?

Great. Thanks.

Our next question or comment comes from the line of James West from Evercore ISI. Mr. West, your line is open.

Thanks. Good morning, Jeff and Eric.

Hey, James.

So, Jeff, clearly, international outlook, second half better than first half. We get that. Venezuela a little bit of a wild card but curious where you think there could be pockets of strength that emerge knowing that neither you or I as long as we've been doing this have a crystal ball and the cycle is always going to play out a little bit differently. But we've got a lot of things in the works here that could influence the oil price and so could cause some markets to either inflect higher or lower. But where do you think the maybe the surprises could come from? If you think about a higher oil price environment in the second half and leading into of course as you described it, a solid upturn in '27, '28.

Okay, that's very helpful, Jeff. And just a follow-up for me, on the power markets, broadly, you know, Volta Grid is obviously you with your investment there and taking them into the Middle East and leveraging your platform is critical here. How are you thinking about other potential investments in power? Is Volta Grid kind of your main objective here or are you talking with others? I mean, how do you think about just the buildout of the electrification theme and the data center theme and the power theme as it relates to Halliburton?

Got it. Thanks.

Thank you. Our next question or comment comes from the line of Stephen Gengaro from Stifel. Mr. Gengaro, your line is open.

Thank you. Good morning everybody.

So curious Jeff, what do you think about like the fourth quarter was stronger than we had thought and there was less downtime, white space, etc. We've heard that from many going into earnings. Why do you think that was? Like does that tell you anything about the way E&Ps are thinking about it or is it just weather related? Is there any drivers behind that and what it might mean going forward?

Thank you. And then the follow-up is just around sort of your expectations for sort of completion efficiency and sort of the impact on US production. Just as we're sort of thinking about, you know, kind of frac demand relative to some of the other high-tech services you provide and how that kind of impacts US production and if you think we have enough activity right now to sustain production.

Great, thanks for all the color.

Thank you. Our next question or comment comes from the line of Scott Gruber from Citigroup. Mr. Gruber, your line is now open.

Yes. Good morning, Jeff and Eric.

So, morning. I want to come back to power as the growth prospects are certainly exciting and exciting to hear that they're bubbling to the surface internationally. How do the perspective returns on these power projects compare to your organic investments? You know, you also have pockets of growth obviously within your core and maybe that expands with Venezuela. So, just curious how the power project returns kind of compare. Are they higher, lower, broadly in line and more importantly kind of how does that shape, you know, the vigor with which you could deploy capital into the power opportunity set?

Yeah, it's Eric here. So I think it will depend on the opportunities, the country, what type of other potential power sources we would be competing with. So it's really early to tell you that it's accretive or dilutive to our current return. It will depend. But overall these are typically very long-term contracts where you enter it with a fairly low-risk, long-term very good view of what you have to deliver. And if we look at the comparison of what's been happening in North America then you could say the returns are probably higher than what we have today.

I got it. Thank you, Eric. And then Eric, maybe if you could walk through, you know, some of the items that will impact cash conversion this year, you know, thinking about working capital. Do you anticipate continued catch-up payments? You know, from your customer in Mexico, anything to note on cash taxes and, you know, any comment on SAP spending, you know, for the full course of year would be appreciated.

Yeah, I mean look there is a lot of moving parts in what you're describing. It's a bit early to comment on working capital impact, collections, etc. I mean collections have been great throughout the year. It was a bit challenging as we talked on several calls collecting from Mexico. The situation seems to be going a lot better. So look we'll give more details and we'll update our thoughts overall on all the kind of ins and outs that touches the projection around free cash flow.

Okay. Thank you.

Our next question or comment comes from the line of Derek Podhaizer from Piper Sandler. Mr. Podhaizer, your line is now open.

Hey, good morning. Just wanted to go back to the attrition discussion in US land. Obviously a lot of moving pieces here between equipment high-grading, idling, stacking, legacy diesel fleets, redeploying some of those fleets to international unconventional markets but just when you look at your fleet and maybe Kansas, the market, is everything deployed that could be or are there a few fleets that could be thrown together? Just trying to think through the tangible attrition and your comment around a small increase in demand could tighten this market quickly. What does that look like for you and the market and what could it mean for CNP specifically this year?

Got it. That's helpful. Moving over to the Middle East, I know in your comments you talked about a flattish outlook, even slightly down. Can you just maybe walk through some of the regions for us and what you're seeing, specifically Saudi, UAE, Kuwait, Oman, Iraq, and anything else you'd like to highlight?

Got it. Great. Thanks, Jeff. I'll turn it back.

Thank you. Our next question or comment comes from the line of Marc Bianchi from TD Cowen. Mr. Bianchi, your line is now open.

Hey, thank you. Jeff, I was hoping you could comment on the offshore market outlook in a little bit more detail. I think everybody's sort of anticipating some sort of uptick in the second half of '26. But there have been prior calls for upticks that didn't materialize. So just kind of curious what your view is on that.

Okay, great. Thanks. And then the other question I had was on Venezuela. Going back to that. So you had mentioned that you're looking to grow the business as soon as commercial and legal terms are resolved and including payment certainty. Can you maybe level set for us what that timeline might look like? And is this going to be led by the IOCs and then Halliburton follow, or do you anticipate Halliburton moving in either coincident or perhaps before some of these IOCs make up their mind?

Okay, very good. I'll turn it back.

Thank you. I'm afraid that's all the time we have for questions at this time. I would like to turn the conference back over to Mr. Miller for any closing remarks.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect.