Halliburton Company (HAL) Earnings

Management highlights

### Macro Outlook - Energy security remains a top priority for both producing and consuming nations, driving multi-year efforts to rebuild inventories, expand strategic reserves, and diversify supply. - Growing global economic expansion increases energy demand, creating a sustained positive outlook for the oil field services industry. ### International Operational Highlights - International business opportunities are the strongest in over a decade, with expected low double-digit YoY growth for 2026 outside the Middle East. - Middle East: Activity is recovering gradually from conflict-driven lows, with the pace of recovery tied to ongoing security conditions. Land well construction was mostly steady in Q2, while offshore activity has not yet returned to pre-conflict levels. Key recent wins include a foundational Integrated Field Management Service Award in Iraq, resumed unconventional fracturing operations in Jafura, and multiple onshore and offshore integrated project awards. - Non-Middle East growth: Commissioning began on a new North Sea stem vessel, which will be the first offshore deployment of Halliburton's automated Octave pumping control system. The recently acquired Saccol is fully integrated with Halliburton's Logix automation platform, enabling closed-loop drilling that delivered back-to-back record wells for Ocker BP in Norway this quarter. International unconventional growth includes a first-of-its-kind multi-well integrated award in Algeria (where Halliburton drilled the longest lateral in the country to date) and mobilization of the first Zeus fracturing fleet to Argentina, expected to start operations in Q4 2026. ### North America Operational Highlights - Sequential improvement in activity, with modest pricing gains and ongoing technology adoption; D&E division grew 9% YoY. - Halliburton maintains a value-over-share strategy, only reactivating idled fleets for North America work if margins meet a high threshold, and redeploying equipment to higher-margin international opportunities when possible. - The latest version of Zeus IQ fracturing technology was deployed this quarter, adding improved subsurface measurements and well-by-well treatment control to deliver better fracture placement and higher asset value for customers. ### Financial Operational Highlights - Total Q2 2026 company revenue hit $5.7 billion, up 6% QoQ. Adjusted operating margin was 12%, with adjusted operating income of $683 million. Adjusted diluted net income per share was 55 cents, reported diluted net income per share was 64 cents. - Q2 generated $824 million in operating cash flow and $668 million in free cash flow; Halliburton repurchased $200 million of common stock during the quarter. - Capital expenditures for Q2 were $235 million.

Guidance

- Full year 2026 capital expenditures are expected to total ~$1.1 billion, unchanged from prior plans. - Q3 2026 expectations: - Corporate expenses: ~$80 million; SAP S4 migration expenses ~$45 million; net interest expense expected to increase ~$5 million to ~$88 million; other net expense ~$35 million; effective tax rate ~19%. - Completion and Production: Sequential revenue expected to be flat to down 2%, with margins improving 125 to 175 basis points. The revenue decline is primarily driven by the completed sale of the North American chemical business, which will not contribute revenue in Q3. - Drilling and Evaluation: Sequential revenue expected to decline 3% to 5%, with margins improving 25 to 75 basis points. The revenue decline is driven by non-structural timing factors including end of active programs and rig moves, partially offset by seasonal growth in higher-margin software sales. - Guidance assumes steady activity in the Middle East at current levels, with no assumption of a recovery to pre-conflict activity levels or major additional disruption. - Long-term: International growth engines (offshore, unconventional, drilling, intervention/lift) are currently ahead of the prior 2025 target of $2.5 to $3 billion in additional annual revenue by 2028, with upside to that target expected. Management expects sustained overall revenue growth and margin expansion through 2027 and 2028, with above-normal incremental margins possible as mobilization costs fade and Middle East activity recovers. - Share repurchase policy has returned to the historical multi-year run rate, after being more conservative at the start of 2026 due to macro uncertainty.

Segment performance

Halliburton reports two core product segments for Q2 2026: 1. Completion and Production (C&P): Revenue of $3.2 billion, a 6% increase quarter-over-quarter (QoQ). Operating income was $474 million, an 8% increase QoQ, with an operating margin of 15%. This result was driven by higher stimulation activity in the Western Hemisphere and improved well intervention in Asia, partially offset by lower specialty chemical activity in North America (following the sale of the chemical business), decreased cementing activity in Latin America, and lower activity across multiple service lines in the Middle East. C&P contributes ~56% of total company revenue. 2. Drilling and Evaluation (D&E): Revenue of $2.5 billion, a 5% increase QoQ. Operating income was $338 million, a 4% decrease QoQ, with an operating margin of 13%. Revenue grew on higher drilling services and wireline activity in North America and Europe-Africa, partially offset by lower global software sales, decreased project management in Latin America, and lower activity in the Middle East. D&E contributes ~44% of total company revenue. Geographic segment performance (Q2 2026): - International: Total revenue of $3.4 billion, up 5% QoQ, up 6% year-over-year (YoY). Europe-Africa revenue $1.0 billion (+19% QoQ); Middle East Asia revenue $1.3 billion (-2% QoQ, impacted by regional conflict); Latin America revenue $1.1 billion (+3% QoQ). International contributes ~60% of total company revenue. - North America: Total revenue of $2.3 billion, up 7% QoQ, flat YoY. North America contributes ~40% of total company revenue.

Risks & headwinds

- Ongoing conflict and geopolitical instability in the Middle East creates significant uncertainty around the pace of activity recovery, with recent escalations causing a temporary pullback in activity after Q2 progress. Full recovery to pre-conflict activity levels is uncertain in timing. - Mobilization and start-up costs for new international contract wins create temporary margin headwinds in near-term results, though these costs are expected to fade as projects scale. - Non-structural timing volatility in quarter-to-quarter revenue for the D&E segment, driven by factors like rig moves and end of programs, can create near-term revenue declines unrelated to underlying demand trends.

Analyst Q&A

• Q: North American completion markets have improved as previously idle capacity (white space) has filled in. How is pricing evolving, and what does this mean for second half C&P margins? Also, what is the updated impact of Middle East dislocation on guidance? /

  A: Management confirms white space in North America has filled, with steady ongoing price increases across the entire fleet, and the positive margin trajectory will continue into Q3 and Q4. When pricing for North America fleets does not meet margin thresholds, Halliburton redeploys equipment to higher-margin international opportunities to maximize total portfolio value. For the Middle East, activity was on a recovery path in Q2 but saw a small step back from recent escalations, making near-term activity highly fluid. Guidance assumes steady activity at current levels, with no assumption of full pre-conflict recovery or major new disruption. While the timing of full recovery is uncertain, Halliburton has an intact operational footprint and has already won long-term work in the region that will deliver future growth. (356 characters)

• Q: Halliburton has secured multiple large offshore wins this quarter. When will offshore see a meaningful inflection, and how is technology driving growth? /

  A: Offshore demand is growing across all major deepwater markets, including Suriname, Guyana, West Africa, the North Sea, and the Gulf of Mexico. Management expects meaningful inflection to occur in the second half of 2027, rather than Q4 2026. Growth is driven by Halliburton's differentiated technology, particularly closed-loop geosteering enabled by the integration of the recently acquired Saccol with Halliburton's Logix automation platform. This technology delivers more precise well placement, faster drilling, and better reservoir contact, which has helped Halliburton win market share in the space. (338 characters)

• Q: What is driving Halliburton's recent international market share gains, and why does the company redeploy equipment from North America to international markets? /

  A: Share gains are driven by Halliburton's full, technically competitive global product portfolio, customer collaboration on long-term projects, and an industry-wide lack of overcapacity that supports margin expansion. Halliburton redeploys equipment internationally purely based on margin: the company first pursues price increases for North America fleets, but will move equipment to international opportunities when they deliver higher returns, a strategy that has been used for unconventional fracturing fleets deployed to Argentina, Algeria, and the UAE. These new international projects are expected to be margin accretive over time. (321 characters)

• Q: The prior 2025 target for $2.5 to $3 billion in incremental annual international revenue by 2028 is still on track? How is progress on the four growth engines? /

  A: Management confirms the international business is ahead of schedule on this target, and now expects upside to the original 2.5-3 billion dollar target. The Saccol acquisition has strengthened Halliburton's offshore technology and competitive positioning. International unconventional growth is progressing well with large, multi-year contracts in Argentina, Saudi Arabia, and Algeria. Intervention and artificial lift businesses are also seeing strong positive global growth trajectory, putting the entire portfolio ahead of original plans. (277 characters)