Halliburton Company (HAL) Q4 2025 Earnings Call Transcript

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Overview

The earnings call summary and Q&A reveal a generally positive outlook for Halliburton. Key factors include strong Q4 performance, strategic partnerships like VoltaGrid, stable international markets, and technological advancements like ZEUS IQ. While North American revenue is expected to decline, international growth and cost reductions offer optimism. The positive guidance for 2026, especially in emerging markets and offshore activities, suggests a favorable stock price reaction. However, uncertainties remain regarding specific timelines and impacts, slightly tempering the overall sentiment.

Key Financial Performance

Total Company Revenue $22.2 billion, with an adjusted operating margin of 14%.

International Revenue $13.1 billion, down 2% year-over-year. The decline was attributed to notable decreases in Saudi Arabia and Mexico, though the rest of the international business grew by about 7%.

North America Revenue $9.1 billion, a decrease of 6% year-over-year. This was due to reduced customer activity in land operations and the timing of customer programs in the Gulf of America.

Cash Flow from Operations $2.9 billion.

Free Cash Flow $1.9 billion.

Share Repurchase $1 billion worth of common stock repurchased, reducing the share count to its lowest levels in 10 years.

Q4 Revenue $5.7 billion, flat compared to Q3 2025.

Q4 Adjusted Operating Income $829 million, with an adjusted operating margin of 15%.

Q4 Cash Flow from Operations $1.2 billion.

Q4 Free Cash Flow $875 million.

Completion and Production Division Q4 Revenue $3.3 billion, flat compared to Q3 2025. Operating income was $570 million, an 11% increase from Q3 2025, driven by higher year-end completion tool sales globally.

Drilling and Evaluation Division Q4 Revenue $2.4 billion, flat compared to Q3 2025. Operating income was $367 million, a 5% increase sequentially, driven by higher wireline activity in the Eastern Hemisphere and increased year-end software sales.

Europe/Africa Q4 Revenue $928 million, a 12% sequential increase, driven by higher completion tool sales in the North Sea and improved activity across multiple product service lines in Africa.

Middle East/Asia Q4 Revenue $1.5 billion, a 3% sequential increase, driven by increased well intervention services and higher stimulation activity in the Middle East, along with improved activity across multiple product service lines in Asia.

Latin America Q4 Revenue $1.1 billion, a 7% sequential increase, driven by higher completion tool sales in Brazil and the Caribbean and higher software sales in Mexico.

North America Q4 Revenue $2.2 billion, a 7% sequential decrease, driven by lower stimulation activity in U.S. land and Canada, decreased fluid services in the Gulf of America, and lower well intervention services in U.S. land.

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Operating Highlights

ZEUS IQ, Sensori, and Auto Frac: Increased customer adoption by 18%, showcasing their effectiveness in improving recovery and drilling efficiency.

iCruise rotary steerable system and LOGIX automation: These technologies have significantly enhanced precision and reliability in long lateral drilling, contributing to meaningful growth in North America despite a 6% decline in rig count.

International revenue: Generated $13.1 billion in 2025, with a 2% year-over-year decline but outperformed a 7% decline in rig count. Growth engines include unconventionals, drilling, production services, and artificial lift.

North America revenue: Generated $9.1 billion in 2025, a 6% year-over-year decline. Expected to decline further by high single digits in 2026 due to reduced customer activity and strategic fleet stacking.

Venezuela market: Halliburton is preparing for reentry into Venezuela, contingent on resolving commercial and legal terms, including payment certainty.

Cash flow and shareholder returns: Generated $2.9 billion in cash flow from operations and $1.9 billion in free cash flow in 2025. Returned 85% of free cash flow to shareholders, reducing share count to a 10-year low.

Completion and Production division: Q4 revenue was $3.3 billion, flat sequentially, with a 17% operating income margin driven by higher year-end completion tool sales.

Drilling and Evaluation division: Q4 revenue was $2.4 billion, flat sequentially, with a 15% operating income margin driven by higher wireline activity and software sales.

Collaborative value proposition: Expanded alliances with independents, IOCs, and NOCs, driving outperformance and aligning with market evolution.

Technology differentiation: Drilling and Formation Evaluation technology and ZEUS platform are key differentiators, enabling Halliburton to lead in technically demanding projects and improve recovery rates.

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Risk or Challenges

North America Revenue Decline: Halliburton expects North America revenue to decline by high single digits in 2026 due to reduced customer activity in land operations, the decision to stack uneconomic fleets, and the timing of customer programs in the Gulf of America.

Attrition and Equipment Stress: Accelerated attrition and reduced capital investment are causing equipment to work harder than ever, which could lead to operational inefficiencies and increased maintenance costs.

International Revenue Challenges: International revenue decreased by 2% year-over-year in 2025, with notable declines in Saudi Arabia and Mexico, although partially offset by growth in other regions.

Venezuela Market Reentry Risks: Halliburton's potential reentry into Venezuela is contingent on resolving commercial and legal terms, including payment certainty, which poses significant risks.

Commodity Price Uncertainty: Near-term commodity prices are unlikely to rise absent geopolitical disruptions, which could impact profitability and market dynamics.

Completion and Production Division Risks: In Q1 2026, Halliburton anticipates a higher-than-normal roll-off of year-end completion tool sales and lower international activity, leading to a projected revenue decrease of 7% to 9% and a margin decline of about 300 basis points.

Drilling and Evaluation Division Risks: Sequential revenue for this division is expected to decline by 2% to 4% in Q1 2026, with margins declining by 25 to 75 basis points.

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Guidance & Outlook

Macro Outlook for 2026: 2026 is expected to be a year of rebalancing with abundant supply due to OPEC spare capacity and higher non-OPEC production. Supply increases are anticipated to moderate as demand rises. Commodity prices are unlikely to rise absent geopolitical disruptions. Moderate softness is expected in North America, while international activity is expected to remain stable year-over-year. Medium-term, supply and demand are expected to rebalance, creating favorable conditions for oilfield services.

International Business Outlook: Total international revenue is expected to be flat to up modestly in 2026. Growth engines include unconventionals, drilling, production services, and artificial lift. Collaborative strategies and advanced technologies like Auto Frac and Sensori are expected to drive outperformance. Opportunities in Venezuela are anticipated once commercial and legal terms are resolved.

North America Business Outlook: North America revenue is expected to decline by high single digits in 2026 due to reduced customer activity in land operations, stacking of uneconomic fleets, and timing of customer programs in the Gulf of America. However, a small increase in demand is expected to tighten the market quickly. Technology adoption, such as ZEUS IQ and iCruise, is expected to drive recovery and improve operational efficiency. North America is expected to be the first to recover when commodity outlook improves.

Capital Expenditures for 2026: Capital expenditures are expected to be approximately $1.1 billion, consistent with prior guidance, adjusted for timing impacts of late equipment deliveries. This excludes potential capital spending for reentry into Venezuela.

Q1 2026 Segment Expectations: Completion and Production division revenue is expected to decrease 7% to 9% sequentially, with margins declining about 300 basis points. Drilling and Evaluation division revenue is expected to decline 2% to 4% sequentially, with margins declining 25 to 75 basis points.

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Shareholder Return Plan

Cash flow from operations: $2.9 billion

Free cash flow: $1.9 billion

Percentage of free cash flow returned to shareholders: 85%

Share repurchase amount: $1 billion

Reduction in share count: Lowest levels in 10 years

Q4 share repurchase: $250 million

Full year share repurchase: Approximately 42 million shares at an average price of $23.8 per share

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Key Q&A

Q:How quickly can Halliburton and its customers move into Venezuela, and what is the potential size of the opportunity?

A:Jeffrey Miller stated that Halliburton could scale up fairly quickly in Venezuela. The company is working on licenses and has a footprint in the country, making equipment mobilization straightforward. Operators are already present in Venezuela, and there is significant interest in Halliburton's return. The market is small today compared to a decade ago when it was a $0.5 billion business for Halliburton, but there is optimism for long-term growth.

Q:What are the expectations for activity, revenue, and margins in 2026?

A:Jeffrey Miller mentioned that the second half of 2026 looks stronger than the first half. The market is stable internationally, with larger tenders being more competitive. Eric Carre added that SAP spending is expected to be $40-$45 million per quarter until the end of 2026, with the project completing in Q4. Expected savings post-project are about $100 million annually. Overall, 2026 is seen as a rebalancing year for supply and demand, setting up for sustained strength in subsequent years.

Q:What is the international market outlook for 2026?

A:Jeffrey Miller described the outlook as flattish to slightly up. Latin America leads growth, with strong activity in Brazil, Argentina, Ecuador, and Guyana. The Middle East is flattish to slightly down, with Saudi Arabia showing activity growth but with uncertain timing. Asia Pacific is expected to remain flattish, driven by gas demand.

Q:What is the significance of the VoltaGrid business for Halliburton?

A:Jeffrey Miller expressed excitement about VoltaGrid's potential, particularly internationally. The business has a solid pipeline and could grow significantly over time. Halliburton has committed to 400 megawatts, which is expected to expand as demand for electricity generation increases globally.

Q:What is the outlook for the North American stimulation market and pricing?

A:Jeffrey Miller stated that frac pricing is stable, with no significant investment in new equipment. Equipment is being moved internationally or stacked, and the market is at a bottom. Attrition and rational behavior in the market are expected to lead to improved pricing over time.

Q:What is the expected impact of the Multi-Chem sale on margins?

A:Eric Carre noted that the sale of Multi-Chem is expected to complete in Q1 2026. The impact on margins will be positive but not material overall.

Q:What are the expectations for overall margins and EBITDA in 2026?

A:Eric Carre stated that margins are expected to improve in the second half of 2026. While not providing specific guidance, he mentioned that the Street's estimate of just under $4 billion in EBITDA for 2026 is within the range of outcomes Halliburton is considering.

Q:What is Halliburton's approach to emerging technologies like ZEUS IQ?

A:Jeffrey Miller highlighted ZEUS IQ's ability to improve well productivity by controlling sand placement. This technology is seen as a significant advancement in recovery and reservoir management.

Q:What are the potential surprises in the international market for 2026?

A:Jeffrey Miller identified Argentina, the Caribbean, West Africa, and Algeria as regions with potential upside surprises due to increased activity and better terms for operators.

Q:What is Halliburton's strategy for power markets and electrification?

A:Jeffrey Miller stated that Halliburton is aligned with VoltaGrid in the U.S. and is exploring international opportunities. The company takes a step-by-step approach to building businesses in this area, focusing on long-term growth and deal execution.

Q:What factors contributed to a stronger-than-expected Q4 performance?

A:Jeffrey Miller attributed the strong Q4 performance to favorable weather, solid customer activity, and a long-term view of unconventionals and technology by operators.

Q:What is the outlook for U.S. production and completion efficiency?

A:Jeffrey Miller stated that U.S. production is at maintenance levels or below. Technology is key to improving recovery, and Halliburton's drilling services are strengthening despite a slowing rig count.

Q:What is the offshore market outlook for 2026?

A:Jeffrey Miller described the offshore market as strong, with significant activity in Norway, Latin America, and West Africa. Halliburton's completion tool order book is at an all-time high, indicating robust demand.

Q:What is the timeline for Halliburton's return to Venezuela?

A:Jeffrey Miller stated that Halliburton could mobilize in weeks and begin operations in months, depending on the resolution of commercial and legal terms, including payment certainty.

Q:What is the outlook for the Middle East market in 2026?

A:Jeffrey Miller described the Middle East market as stable, with strong activity in UAE, Kuwait, and Iraq. Saudi Arabia is adding rigs, but the timing of increased activity is uncertain.

Q:Review of Unclear Management Responses

A:Management avoided providing specific timelines or details on certain topics, such as the exact timing of Halliburton's return to Venezuela, the specific impact of power market investments on returns, and the precise timeline for improvements in North American frac pricing. Additionally, while they acknowledged the potential for growth in various markets, their responses lacked detailed data or clarity on how these opportunities would be realized.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

HAL Transcript

Halliburton Company (HAL) Q4 2025 Earnings Call Transcript

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The earnings call indicates declining revenues in North America and internationally, with reduced margins and activity. Although there is growth in artificial lift and strategic partnerships like VoltaGrid, overall guidance is weak, and management avoided specifics in key areas. The Q&A section highlights market tightness concerns and a flattish outlook for North America, suggesting potential near-term stock pressure.

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The earnings report presents a mixed picture with several negative factors. Financial performance shows a decline in revenue and a flat margin, while international and North America revenues decreased. The Q&A reveals concerns about activity slowdown, unclear recovery timing in Mexico, and tariff impacts. Although there are positive elements like shareholder returns and potential growth in Saudi Arabia, the overall sentiment is negative due to weak financial results, unclear guidance, and challenges in key markets.

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Halliburton Company (HAL) Q4 2025 Earnings Call Transcript