Halliburton's Middle East Outlook and Frac Recovery Timing Don't Match in 2025 Earnings Calls

Date of Call: Jan 21, 2026

Financials Results

• Revenue: Q4: $5.7 billion, flat sequentially. Full year: $22.2 billion.
• EPS: Q4 reported net income per diluted share: $0.70. Adjusted: $0.69.
• Operating Margin: Q4 adjusted operating margin: 15%. Full year: 14%.

Guidance:

• Q1 2026: Completion & Production revenue expected to decrease 7%-9% sequentially; margins to decline ~300 bps. Drilling & Evaluation revenue expected to decline 2%-4%; margins to decline 25-75 bps. - Full year 2026: International revenue expected flat to up modestly. North America revenue expected to decline high single digits. - Full year 2026 capital expenditures expected ~$1.1 billion. - Q1 2026 corporate expenses expected ~$5M higher; SAP expenses ~$45M; net interest expense ~$5M higher; effective tax rate ~21%.

Business Commentary:

Revenue and Margin Performance:

• Halliburton reported total company revenue of $22.2 billion for 2025, with an adjusted operating margin of 14%.
• International revenue was $13.1 billion, down 2% year over year, while North America revenue was $9.1 billion, a decrease of 6%.
• The decline in international and North America revenue was due to reduced customer activity and market conditions, yet the company outperformed expectations with solid execution.

2026 Outlook and Market Rebalancing:

• Halliburton anticipates 2026 to be a year of rebalancing, with moderate softness in some key markets, particularly North America, and expects international activity to be stable year over year.
• The company foresees a market rebalance due to the return of OPEC spare capacity, higher non-OPEC production, and growing demand.

International Business and Growth Engines:

• Halliburton's international revenue was $13.1 billion for 2025, down 2% from the previous year, outperforming a 7% decline in rig count.
• Growth in unconventionals, drilling, production services, and artificial lift are key drivers for international expansion, with strong progress in multiple countries.

North America Strategy and Market Conditions:

• North America revenue was $9.1 billion, down 6% year over year in 2025, with an expectation for a high single-digit decline in 2026.
• Attrition is accelerating due to reduced customer activity and equipment wear, but Halliburton plans to maximize value by prioritizing returns over market share and investing in differentiated technology.

Technological Advancements and Customer Adoption:

• Customer adoption of Halliburton's Zeus IQ, sensory, and auto frac technologies increased by 18%.
• The adoption of these technologies is driving value through automation and subsurface measurement, enhancing sand placement control and improving recovery.

Sentiment Analysis:

Overall Tone: Positive

• "I am pleased with Halliburton’s fourth quarter performance and the way we closed out 2025. We outperformed our expectations with stronger-than-anticipated activity and solid execution." "I am confident in the outlook for our business and Halliburton’s ability to deliver leading returns and capitalize on future growth opportunities." "I’ve never been more excited about the future of Halliburton."

Q&A:

• Question from Saurabh Pant (Bank of America): Help us think about how quickly can Halliburton and customers move into Venezuela and the potential size of the opportunity?
  Response: Equipment mobilization could be quick; market was historically ~$500M but has shrunk, with potential for longer-term growth.

• Question from Saurabh Pant (Bank of America): Preliminary thoughts on margin story for 2026 and SAP spending trajectory?
  Response: Second half margins expected stronger than first half; international market stable. SAP run rate $40M-$45M per quarter through Q4 completion, with ~$100M annual savings post-project.

• Question from Neil Mehta (Goldman Sachs): International breakdown for 2026 by market?
  Response: Latin America growth led by Brazil, Argentina, Guyana; Middle East flatish to down slightly due to cautious timing on Saudi Arabia recovery; Asia-Pacific flatish.

• Question from Neil Mehta (Goldman Sachs): Perspective on VoltaGrid business importance, size potential, and ownership?
  Response: Excited about international pipeline; 400 MW capacity secured; could be a very big business over time, aligned with global power demand trends.

• Question from David Anderson (Barclays): How is North America stimulation market rebalancing and pricing holding up?
  Response: Frac pricing stable; equipment is wearing out and moving internationally; outperforming market despite low investment, expecting improvement over time.

• Question from David Anderson (Barclays): C&P margin progression for 2026 and impact of Multi-Chem sale?
  Response: Multi-Chem sale completes this quarter with positive but not material margin impact. Q1 CMP margin decline driven by completion tool roll-off, international seasonality, and flat U.S. frac business.

• Question from Arun Jayaram (JPMorgan): Thoughts on overall margins given outlook and street EBITDA estimates?
  Response: Margins expected to progress through 2026 with H2 better than H1; $4B EBITDA estimate is within company's range of outcomes.

• Question from Arun Jayaram (JPMorgan): How is Halliburton helping clients with emerging technologies like lightweight proppant and surfactants?
  Response: Focused on own technology; Zeus IQ uniquely measures and controls sand placement, a key building block for improving recovery.

• Question from James West (Melius Research): Pockets of strength or surprises in international markets if oil prices rise?
  Response: Argentina, Caribbean, West Africa, and Algeria could be upside surprises due to responsiveness to commodity prices and growing activity.

• Question from James West (Melius Research): Thoughts on other power investments beyond VoltaGrid?
  Response: Taking a step-by-step approach; focused on building the business with current partnerships, expecting continued growth as deals are done.

• Question from Stephen Gengaro (Stifel): Why was Q4 stronger than expected and what does it mean going forward?
  Response: Weather, solid customer activity, and long-term views on unconventionals contributed; market may trend this way over time with commodity price support.

• Question from Stephen Gengaro (Stifel): Expectations for completion efficiency and U.S. production sustainability?
  Response: Current activity likely at maintenance or below; technology for better recovery is key; drilling services growing due to automation and complex well demands.

• Question from Scott Gruber (Citigroup): How do prospective returns on power projects compare to organic investments?
  Response: Returns depend on opportunity specifics; typically long-term low-risk contracts with potential returns higher than current North American levels.

• Question from Scott Gruber (Citigroup): Items impacting cash conversion for the year?
  Response: Too early to detail working capital or collections; Mexico collections improving; more details on free cash flow to be provided later.

• Question from Derek Podhaizer (Piper Sandler): Status of U.S. land fleet deployment and attrition?
  Response: Consciously stacked fleets for acceptable returns; market moving toward larger fracs with limited spare equipment, suggesting quick tightening with demand increase.

• Question from Derek Podhaizer (Piper Sandler): Offshore market outlook and specific Middle East regions?
  Response: Offshore remains strong with high completion tool order book. Middle East mostly stable: UAE strong, Kuwait very strong, Iraq emerging, Saudi Arabia timing uncertain.

• Question from Mark Bianchi (TD Cowen): Offshore market outlook in detail?
  Response: Strong offshore business with wins in Norway, Latin America, West Africa; completion tool orders at all-time high indicate strength.

• Question from Mark Bianchi (TD Cowen): Timeline for re-entry into Venezuela and who leads?
  Response: Mobilization possible in weeks; resolution of payment certainty and commercial terms needed; can work with existing operators sooner.

Contradiction Point 1

Middle East Market Outlook

The expected growth trajectory for the Middle East region shifts from optimism in Q1 to caution in Q4, affecting international revenue expectations.

What is the outlook for the Middle East by region (Saudi, UAE, Kuwait, etc.)? - Derek Podhaizer (Piper Sandler)

2025Q4: Overall Middle East activity is viewed as stable. The UAE and Kuwait are strong. Iraq shows promising activity. While Saudi Arabia is adding rigs, the company is taking a cautious view on the timing of that growth. - Jeff Miller(CEO)

How significant is Saudi's growth and the Jafurah tenders to Halliburton's portfolio this year, given flat international performance? - J. David Anderson (Barclays Bank)

2025Q1: Saudi Arabia is a huge market, and Halliburton expects growth in its portfolio in 2025. Opportunities exist beyond Jafurah... The company's unique strength in these areas positions it well for growth in Saudi Arabia. - Jeff Miller(CEO)

Contradiction Point 2

North America Frac Activity Recovery Timing

Contradiction on which region will recover first impacts equipment deployment strategy and revenue forecasting.

Is all U.S. land equipment deployed, and how does market tightness impact C&T? - Derek Podhaizer (Piper Sandler)

2025Q4: The high performance requirements... suggest the market is tightening, and a small demand increase could create quick tightness. - Jeff Miller(CEO)

When are frac crews being idled and how does this affect North America's revenue outlook? - Scott Gruber (Citigroup Inc.)

2025Q3: The recovery in North America is expected to be the first region to snap back. - Jeff Miller(CEO)

Contradiction Point 3

North America Frac Pricing and Market Outlook

Inconsistent characterization of market bottom and pricing trend in North American land business affects investment and cost-saving expectations.

Can you detail North America's stimulation sector market rebalancing, pricing trends and firming, and equipment relocation to other regions? - David Anderson (Barclays)

2025Q4: Frac pricing is currently stable. The market is at a bottom where companies are not investing new equipment... This rational behavior is driven by the need for returns. - Jeffrey Miller(CEO)

What factors contributed to the softer C&P margins in Q2, and how can they be improved moving forward? - Neil Singhvi Mehta (Goldman Sachs Group, Inc.)

2025Q2: Q2 C&P margins were 80 bps below guidance due to... pricing headwinds in US Land. - Eric Carre(CFO) / "Activity is expected to pick up earlier in the year from current low levels in Q3/Q4, but significant investment is unlikely until there are catalysts that change the price outlook." - Jeffrey Miller(CEO)

Contradiction Point 4

Financial Impact of Equipment Idling/Margin Drivers

Contradiction on whether idling assets drives margin improvement or is a cost roll-off affects understanding of cost structure and profitability drivers.

Can you explain the C&P margin progression for the year and the impact of the Multi-Chem sale? - David Anderson (Barclays)

2025Q4: The Q1 C&P margin decline (~300 bps) is driven by three factors: 1) Over half is due to the roll-off of exceptionally high year-end completion tool sales... 2) 25% is from typical seasonal international activity decline... - Eric Carre(CFO)

What portion of the strong Q3 margin is due to the $100M quarterly cost savings? - John Anderson (Barclays Bank PLC)

2025Q3: The Q3 margin beat was driven by: 1) Labor cost savings realized earlier than expected (from idling uneconomic assets), 2) Stronger-than-anticipated performance... due to... market discipline. - Eric Carre(CFO)

Contradiction Point 5

VoltaGrid Investment Strategy and Ambitions

The description of the investment's purpose evolves from a clear strategic fit to a more cautious, opportunistic stance, indicating shifting strategic priorities.

How significant is the VoltaGrid power business to Halliburton's future growth and potential scale, and do you see the company as a consolidator in this space? - Neil Mehta (Goldman Sachs)

2025Q4: The company is taking a measured, step-by-step approach. The international power team is building the business and looking for opportunities to contribute... - Jeff Miller(CEO)

How do you view VoltaGrid and whether it's a commoditized service? - Stephen Gengaro (Stifel, Nicolaus & Company)

2025Q1: The VoltaGrid investment provides a front row seat to the power business, which is seen as an area of long-term opportunity. The company is taking a prudent, step-by-step approach to its involvement. - Jeff Miller(CEO)