Halliburton Free Cash Flow Falls to $156 Million Despite Improved Profitability
Key Facts
Halliburton's free cash flow fell to $156 million in the third quarter from $668 million in the second quarter, according to company results released on October 20, as adjusted earnings per share improved. The decline extended to cash generated from operations, with operating cash flow totaling $368 million in the third quarter, compared with $824 million in the previous quarter, according to the company's two quarterly earnings releases. Revenue held steady at $5.7 billion compared with the second quarter, with international operations and North American business delivering divergent performances during the period. Adjusted diluted earnings per share, meanwhile, rose to $0.60 from $0.55 in the second quarter, putting adjusted earnings on a different trajectory from cash flows. The quarter's results thus combined stable revenue and improved profitability per share with declines in operating cash flow and free cash flow from their previous-period levels.
Net income attributable to Halliburton totaled $417 million in the third quarter, according to the company's statement, alongside an adjusted operating margin of 12.8% for the same period. The company recorded $107 million in pretax charges related to impairments and other items in its reported quarterly results. On spending, Halliburton said it spent $42 million on its transition to SAP during the months covered by the results. The company also repurchased about $250 million of shares during the third quarter, continuing to return money to shareholders as cash flows declined. It paid cash dividends of $0.17 per share during the same period, alongside the funds allocated to share repurchases. The value of buybacks alone exceeded free cash flow for the period, even before accounting for cash dividends paid to shareholders.
Geographically, Halliburton's international revenue rose 3% from the previous quarter, according to the company, supporting overall revenue as activity contracted in North America. The Middle East and Asia region posted quarterly revenue growth of 8%, outpacing growth across international operations as a whole during the third quarter. Halliburton attributed the increase to higher activity across multiple service lines in Saudi Arabia and Kuwait, which featured among the drivers of regional performance in the earnings release. North American revenue, by contrast, fell 5% compared with the second quarter, with a decline in pressure pumping services in U.S. land operations, according to the company's explanation of the region's performance. Revenue growth outside North America coincided with flat overall quarterly revenue at Halliburton, as international gains offset a decline in the North American market.
Against the backdrop of its activity in Kuwait, Halliburton announced that Kuwait Oil Company had awarded it a multiyear agreement to support the development of Al-Ahmadi Innovation Valley. The company described the agreement as a "multiyear agreement to support the development of Al-Ahmadi Innovation Valley" in an announcement separate from its quarterly results. The agreement adds development support activity to Halliburton's presence in Kuwait, where increased activity across multiple service lines contributed to third-quarter revenue growth in the Middle East and Asia. For next year, management said it initially expects revenue growth "in the mid-single digits." That preliminary estimate follows a quarter in which overall revenue held steady, with growth coming from international operations against a decline in North American revenue.