# Halliburton Co: Form 10-Q for the period ended Mar 31, 2018

- Company: [Halliburton Co](/companies/hal.md) (CIK 45012)
- Form: 10-Q
- Filed: 2018-04-27
- Accepted by EDGAR: Apr 27, 2018, 14:44 ET
- Period: 2018-03-31
- Accession: 0000045012-18-000086
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/45012/000004501218000086/hal_03312018-10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/45012/000004501218000086/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2018-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Cost of revenue | 3 months, 2018-01-01 to 2018-03-31 | $1.06bn | us-gaap:CostOfGoodsSold |
| Operating income | 3 months, 2018-01-01 to 2018-03-31 | $354.0m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2018-01-01 to 2018-03-31 | $142.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2018-01-01 to 2018-03-31 | $46.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2018-01-01 to 2018-03-31 | $0.05 | us-gaap:EarningsPerShareBasicAndDiluted |
| Diluted shares (weighted) | 3 months, 2018-01-01 to 2018-03-31 | 878,000,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2018-01-01 to 2018-03-31 | $572.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2018-01-01 to 2018-03-31 | $501.0m | us-gaap:PaymentsToAcquireProductiveAssets |
| Dividends paid | 3 months, 2018-01-01 to 2018-03-31 | $158.0m | us-gaap:PaymentsOfDividendsCommonStock |
| Current assets | at 2018-03-31 | $11.04bn | us-gaap:AssetsCurrent |
| Total assets | at 2018-03-31 | $25.19bn | us-gaap:Assets |
| Current liabilities | at 2018-03-31 | $4.97bn | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2018-03-31 | $16.80bn | us-gaap:Liabilities |
| Long-term debt | at 2018-03-31 | $10.43bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2018-03-31 | $466.0m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2018-03-31 | $8.37bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 32,168 characters.

### EXECUTIVE OVERVIEW

### Organization

We are one of the world's largest providers of products and services to the energy industry. We help our customers maximize value throughout the lifecycle of the reservoir - from locating hydrocarbons and managing geological data, to drilling and formation evaluation, well construction and completion, and optimizing production throughout the life of the asset. Activity levels within our operations are significantly impacted by spending on upstream exploration, development and production programs by major, national and independent oil and natural gas companies. We report our results under two segments, the Completion and Production segment and the Drilling and Evaluation segment:

- our Completion and Production segment delivers cementing, stimulation, intervention, pressure control, specialty chemicals, artificial lift, and completion products and services. The segment consists of Production Enhancement, Cementing, Completion Tools, Production Solutions, Pipeline and Process Services, Multi-Chem and Artificial Lift.
- our Drilling and Evaluation segment provides field and reservoir modeling, drilling, evaluation and precise wellbore placement solutions that enable customers to model, measure, drill and optimize their well construction activities. The segment consists of Baroid, Sperry Drilling, Wireline and Perforating, Drill Bits and Services, Landmark Software and Services, Testing and Subsea, and Consulting and Project Management.

The business operations of our segments are organized around four primary geographic regions: North America, Latin America, Europe/Africa/CIS and Middle East/Asia. We have manufacturing operations in various locations, the most significant of which are located in the United States, Canada, Malaysia, Singapore and the United Kingdom. With over 55,000 employees, we operate in approximately 70 countries around the world, and our corporate headquarters are in Houston, Texas and Dubai, United Arab Emirates.

### Financial results

We generated total company revenue of $5.7 billion during the first quarter of 2018, a 34% increase from the $4.3 billion of revenue generated during the first quarter of 2017. Total company operating income was $354 million during the first quarter of 2018, which included $265 million of impairments and other charges related to a write-down of all of our remaining investment in Venezuela, compared to operating income of $203 million in the first quarter of 2017. Our business was impacted during the first quarter of 2018 by the continued rig count and activity growth in the North American market, while pricing pressure and seasonality negatively affected the international markets. Our Completion and Production segment revenue improved 46% and our Drilling and Evaluation segment revenue increased 15% from the first quarter of 2017. We continue to focus on cost efficiencies and aligning our business with customers in the fastest growing market segments to collaborate and engineer solutions to maximize their asset value.

Our North American business continued to improve during the first quarter of 2018, with revenue growth of 58% outperforming the growth in average North American rig count of 19%, when compared to the first quarter of 2017. The steady growth in rig count, combined with the continued completions intensity has improved demand across our product lines. While we experienced significant year-over-year margin improvement and profitability growth as a result of activity increases, we were challenged in the first quarter of 2018 by weather-related disruptions in rail service, which had a corresponding impact on our sand supply chain. Strong U.S. economic activity is creating tightness across the supply chain, particularly in rail service, trucking and labor. We are focused on managing these challenges and are diligently working towards optimizing margins and reaching targets we have set for our organization.

Revenue in our international markets in the first quarter of 2018 increased 9% compared to the first quarter of 2017, driven primarily by increased drilling activity and pressure pumping services in the Eastern Hemisphere, as well as pressure pumping activity in Argentina. We experienced modest increases in activity in the Middle East and Asia, offset by pricing pressure. We have grown our market share in the international markets throughout the downturn as a result of our strong service quality and technology offerings, and our product service lines continue to focus on delivering technology driven value propositions to help our customers increase production and lower costs.

### Business outlook

In North America, we gained significant market share over the past few years by demonstrating to our customers the benefits of our service quality and technology. We have been utilizing this increased market share to drive margin improvement and will continue to seek price increases as this market remains tight and cost inflation occurs. Our customers in this region have a large portfolio of economic projects and a number of international oil companies are actively re-directing spending from international non-OPEC opportunities towards North America. The steady growth in rig count combined with the continued completions intensity has improved demand across our product service lines, which we expect will continue through the remainder of 2018. Our customers continue to focus on efficiencies, optimization and production and we will maintain our diligence on increasing equipment utilization, managing costs and expanding our surface efficiency model. We will continue to focus on managing the logistical complexities that come with the growing market by leveraging our supply chain and logistics infrastructure, capturing efficiencies around our repair and maintenance programs and implementing technologies at scale to reduce cost and increase production.

Internationally, we are encouraged by these markets as we are experiencing enhanced tender activity and are holding constructive conversations with our customers. While we expect international activity to improve over the next few years, pricing pressure and concessions that have been given throughout the cycle need to be unwound. We are well-positioned for the growth in the international markets as a result of the investment we made to grow our global footprint in the last cycle. We will continue to collaborate with our customers to create solutions through technology and improved operating efficiency to help overcome challenging project economics.

During the first quarter of 2018, we had approximately $501 million of capital expenditures, an increase of 89% from the first quarter of 2017, which was predominantly made in our Production Enhancement, Sperry Drilling, Wireline and Perforating, Cementing, and Artificial Lift product service lines.

We intend to continue to strengthen our product service lines through a combination of organic growth, investment and selective acquisitions. We plan to continue executing the following strategies in 2018:

- directing capital and resources into strategic growth markets, including unconventional plays and mature fields;
- leveraging our broad technology offerings to provide value to our customers and enable them to more efficiently drill and complete their wells;
- exploring additional opportunities for acquisitions that will enhance or augment our current portfolio of services and products, including those with unique technologies or distribution networks in areas where we do not already have significant operations;
- investing in technology that will help our customers reduce reservoir uncertainty and increase operational efficiency;
- improving working capital and managing our balance sheet to maximize our financial flexibility;
- continuing to seek ways to be one of the most cost-efficient service providers in the industry by maintaining capital discipline and leveraging our scale and breadth of operations;

\- collaborating and engineering solutions to maximize asset value for our customers; and

- striving to achieve superior growth and returns for our shareholders.

Our operating performance and business outlook are described in more detail in “Business Environment and Results of Operations.”

### Financial markets, liquidity, and capital resources

We believe we have invested our cash balances conservatively and secured sufficient financing to help mitigate any near-term negative impact on our operations from adverse market conditions. We had $2.3 billion of cash and equivalents as of March 31, 2018. We also have $3.0 billion available under our revolving credit facility which, combined with our cash balance, we believe provides us with sufficient liquidity to address the challenges and opportunities of the current market. For additional information on market conditions, see “Liquidity and Capital Resources” and “Business Environment and Results of Operations.”

### LIQUIDITY AND CAPITAL RESOURCES

We had $2.3 billion of cash and equivalents at both March 31, 2018 and December 31, 2017. Additionally, we held $106 million of investments in fixed income securities at December 31, 2017 which are reflected in "Other current assets" and "Other assets" in our condensed consolidated balance sheets. Approximately $820 million of our cash and equivalents as of March 31, 2018 was held by our foreign subsidiaries, a substantial portion of which is available to be repatriated into the United States, with a portion subject to certain country-specific restrictions.

### Significant sources and uses of cash

#### Sources of cash:

\- Cash flows from operating activities were $572 million during the first three months of 2018.

#### Uses of cash:

\- Capital expenditures were $501 million in the first three months of 2018, and were predominantly made in our Production Enhancement, Sperry Drilling, Wireline and Perforating, Cementing, and Artificial Lift product service lines.

\- We paid $158 million in dividends to our shareholders during the first three months of 2018.

\- During the first three months of 2018, working capital (receivables, inventories and accounts payable) increased by a net $88 million, primarily due to increased business activity.

### Future sources and uses of cash

We manufacture most of our own equipment, which allows us flexibility to increase or decrease our capital expenditures based on market conditions. Capital spending for the full year 2018 is currently expected to be approximately $2.0 billion, a 53% increase from 2017. The capital expenditures plan for 2018 is primarily directed towards our industry-leading pressure pumping fleet, the deployment of new Sperry drilling tools and the continued investment in our Artificial Lift and Multi-Chem product service lines.

Currently, our quarterly dividend rate is $0.18 per common share, or approximately $158 million. Subject to Board of Directors approval, our intention is to continue paying dividends at our current rate during 2018. We also have $400 million senior notes that mature in August 2018, which we intend to repay with cash on hand.

Our Board of Directors has authorized a program to repurchase our common stock from time to time. Approximately $5.7 billion remains authorized for repurchases as of March 31, 2018 and may be used for open market and other share purchases. There were no repurchases made under the program during the three months ended March 31, 2018.

### Other factors affecting liquidity

*Financial position in current market.* As of March 31, 2018, we had $2.3 billion of cash and equivalents and $3.0 billion of available committed bank credit under our revolving credit facility. Furthermore, we have no financial covenants or material adverse change provisions in our bank agreements, and our debt maturities extend over a long period of time. We believe our cash on hand, cash flows generated from operations and our available credit facility will provide sufficient liquidity to address our global cash needs in 2018, including debt retirement, capital expenditures, working capital investments, dividends, if any, and contingent liabilities.

*Guarantee agreements.* In the normal course of business, we have agreements with financial institutions under which approximately $2.0 billion of letters of credit, bank guarantees or surety bonds were outstanding as of March 31, 2018. Some of the outstanding letters of credit have triggering events that would entitle a bank to require cash collateralization.

*Credit ratings.* Our credit ratings with Standard & Poor’s (S&P) improved from BBB+ to A- for our long-term debt and remains A-2 for our short-term debt, with a stable outlook. Our credit ratings with Moody’s Investors Service (Moody's) remain Baa1 for our long-term debt and P-2 for our short-term debt, with a stable outlook.

*Customer receivables*. In line with industry practice, we bill our customers for our services in arrears and are, therefore, subject to our customers delaying or failing to pay our invoices. In weak economic environments, we may experience increased delays and failures to pay our invoices due to, among other reasons, a reduction in our customers’ cash flow from operations and their access to the credit markets as well as unsettled political conditions. If our customers delay paying or fail to pay us a significant amount of our outstanding receivables, it could have a material adverse effect on our liquidity, consolidated results of operations and consolidated financial condition. See Note 2 to the condensed consolidated financial statements for further discussion related to receivables in Venezuela.

### BUSINESS ENVIRONMENT AND RESULTS OF OPERATIONS

We operate in approximately 70 countries throughout the world to provide a comprehensive range of services and products to the energy industry. A significant amount of our consolidated revenue is derived from the sale of services and products to major, national, and independent oil and natural gas companies worldwide. The industry we serve is highly competitive with many substantial competitors in each segment of our business. During the first three months of 2018, based upon the location of the services provided and products sold, 58% of our consolidated revenue was from the United States, compared to 49% of consolidated revenue from the United States in the first three months of 2017. No other country accounted for more than 10% of our revenue.

Operations in some countries may be adversely affected by unsettled political conditions, acts of terrorism, civil unrest, force majeure, war or other armed conflict, sanctions, expropriation or other governmental actions, inflation, changes in foreign currency exchange rates, foreign currency exchange restrictions and highly inflationary currencies, as well as other geopolitical factors. We believe the geographic diversification of our business activities reduces the risk that loss of operations in any one country, other than the United States, would be materially adverse to our consolidated results of operations.

Activity within our business segments is significantly impacted by spending on upstream exploration, development and production programs by our customers. Also impacting our activity is the status of the global economy, which impacts oil and natural gas consumption.

Some of the more significant determinants of current and future spending levels of our customers are oil and natural gas prices, global oil supply, completions intensity, the world economy, the availability of credit, government regulation and global stability, which together drive worldwide drilling and completions activity. Lower oil and natural gas prices usually translate into lower exploration and production budgets and lower rig count. Our financial performance is therefore significantly affected by oil and natural gas prices and worldwide rig activity, which are summarized in the tables below.

The following table shows the average oil and natural gas prices for West Texas Intermediate (WTI), United Kingdom Brent crude oil, and Henry Hub natural gas:

|  | Three Months Ended March 31 2018 | 2017 | Year Ended December 31 2017 |
| --- | ---: | ---: | ---: |
| Oil price - WTI (1) | $62.88 | $51.77 | $50.93 |
| Oil price - Brent (1) | 66.81 | 53.68 | 54.30 |
| Natural gas price - Henry Hub (2) | 3.08 | 3.01 | 3.04 |
| (1) Oil price measured in dollars per barrel (2) Natural gas price measured in dollars per million British thermal units (Btu), or MMBtu |  |  |  |

15

The historical average rig counts based on the weekly Baker Hughes Incorporated rig count information were as follows:

| Land vs. Offshore United States: | Three Months Ended March 31 2018 2017 | Year Ended December 31 2017 |
| --- | ---: | ---: |
| Land | 951 722 | 856 |
| Offshore (incl. Gulf of Mexico) | 16 20 | 20 |
| Total | 967 742 | 876 |
| Canada: |  |  |
| Land | 267 294 | 205 |
| Offshore | 2 1 | 1 |
| Total | 269 295 | 206 |
| International (excluding Canada): |  |  |
| Land | 779 738 | 751 |
| Offshore | 192 201 | 198 |
| Total | 971 939 | 949 |
| Worldwide total | 2,207 1,976 | 2,031 |
| Land total | 1,997 1,754 | 1,812 |
| Offshore total | 210 222 | 219 |
|  | Three Months Ended March 31 | Year Ended December 31 |
| **Oil vs. Natural Gas** | 2018 2017 | 2017 |
| United States (incl. Gulf of Mexico): |  |  |
| Oil | 781 594 | 704 |
| Natural gas | 186 148 | 172 |
| Total | 967 742 | 876 |
| Canada: |  |  |
| Oil | 178 162 | 109 |
| Natural gas | 91 133 | 97 |
| Total | 269 295 | 206 |
| International (excluding Canada): |  |  |
| Oil | 764 718 | 732 |
| Natural gas | 207 221 | 217 |
| Total | 971 939 | 949 |
| Worldwide total | 2,207 1,976 | 2,031 |
| Oil total | 1,723 1,474 | 1,545 |
| Natural gas total | 484 502 | 486 |

| Drilling Type United States (incl. Gulf of Mexico): | Three Months Ended March 31 2018 | 2017 | Year Ended December 31 2017 |
| --- | ---: | ---: | ---: |
| Horizontal | 833 | 610 | 736 |
| Vertical | 63 | 69 | 70 |
| Directional | 71 | 63 | 70 |
| Total | 967 | 742 | 876 |

16

Crude oil prices have been extremely volatile during the past few years. WTI oil spot prices declined significantly beginning in 2014 from a peak price of $108 per barrel in June 2014 to a low of $26 per barrel in February 2016, a level which had not been experienced since 2003. Brent crude oil spot prices declined from a high of $115 per barrel in June 2014 to $26 per barrel in January 2016. Since the low point experienced in early 2016, oil prices have increased substantially. WTI oil spot prices reached a high of $67 per barrel in April 2018 and Brent crude oil spot prices reached a high of $73 per barrel in April 2018. The average WTI and Brent crude oil spot prices during the first quarter of 2018 were $63 per barrel and $67 per barrel, respectively.

In the United States Energy Information Administration (EIA) April 2018 "Short Term Energy Outlook," the EIA projects Brent prices to average $63 per barrel in 2018 and 2019, while WTI prices are projected to average about $4 less per barrel for both years. Crude oil production in the United States is now projected to average 10.7 million barrels per day in 2018, a 15% increase from 2017, which would mark the highest annual average United States crude oil production level, surpassing the previous record set in 1970. Additionally, the EIA projects that production will increase 7% in 2019, to average 11.4 million barrels per day. The International Energy Agency's (IEA) April 2018 "Oil Market Report" forecasts the 2018 global demand to average approximately 99.3 million barrels per day, which is up 2% from 2017, driven by an increase in the Asia Pacific region, while all other regions remain approximately the same.

The Henry Hub natural gas spot price in the United States averaged $2.69 per MMBtu in March 2018, a decrease of $0.19 per MMBtu, or 7%, from 2017. The EIA April 2018 “Short Term Energy Outlook” projects Henry Hub natural gas prices to average $2.99 per MMBtu in 2018 and $3.07 per MMBtu in 2019.

### North America operations

The average North America oil-directed rig count increased 203 rigs, or 27%, for the first quarter of 2018 as compared to the first quarter of 2017, while the average North America natural gas-directed rig count was essentially flat during the same period. During the first quarter of 2018, the United States land market experienced a 32% improvement in the average rig count compared to the first quarter of 2017 and completions activity continued to strengthen. This combination is improving demand across all of our product service lines, which we expect will continue during 2018.

In the Gulf of Mexico, the average offshore rig count for the first quarter of 2018 was down 20% compared to the first quarter of 2017. Low commodity prices have stressed budgets and have impacted economics across the deepwater market, negatively impacting activity and pricing. These headwinds persist today, and we believe there will continue to be challenges in 2018 to deepwater project economics. Activity in the Gulf of Mexico is dependent on governmental approvals for permits, our customers' actions and the entry and exit of deepwater rigs in the market.

### International operations

The average international rig count for the first quarter of 2018 increased by 3% compared to the first quarter of 2017, with corresponding drilling activity increases primarily in the North Sea and the Middle East. International tendering activity has been increasing from the previous year and we continue to work with our customers to improve project economics through technology and improved operating efficiency. The Middle East remains our most active international market, with the largest part of the work focused on maximizing production in mature fields with the use of technology and expanded reservoir knowledge. While we expect the international markets will continue to improve over the next few years, and we are encouraged by the activity outlook, there are headwinds that must be overcome to obtain a full recovery. This includes an over capitalized market, pricing pressure and price concessions that we have given throughout the down cycle which we need to recapture. We will continue to remain focused on efficiencies in our execution.

*Venezuela.* Venezuela continues to experience significant political and economic turmoil. During the first quarter of 2018, the Venezuelan government announced that it changed the existing dual-rate foreign currency exchange system by eliminating the DIPRO foreign exchange rate, which had a protected rate of 10 Bolívares per United States dollar, and all future currency transactions will be carried out at the DICOM floating rate, which was approximately 50,000 Bolívares per United States dollar at March 31, 2018. Additionally, the Office of Foreign Assets Control of the U.S. Department of the Treasury issued guidance during the quarter that prohibits acceptance of payments on receivables issued on or after August 25, 2017 and outstanding longer than 90 days from customers subject to U.S. sanctions related to Venezuela in the absence of an OFAC license. See Note 2 to the condensed consolidated financial statements for further discussion on the write-down of our investment in Venezuela that we recognized in the first quarter of 2018 as a result of these events. Also, see Part II, Item 1(a), “Risk Factors” for additional information on risks associated with our operations in Venezuela.

### RESULTS OF OPERATIONS IN 2018 COMPARED TO 2017

### Three Months Ended March 31, 2018 Compared with Three Months Ended March 31, 2017

| REVENUE: Millions of dollars | Three Months Ended March 31 2018 | 2017 | Favorable (Unfavorable) | Percentage Change |
| --- | ---: | ---: | ---: | ---: |
| Completion and Production | $3,807 | $2,604 | $1,203 | 46% |
| Drilling and Evaluation | 1,933 | 1,675 | 258 | 15 |
| Total revenue | $5,740 | $4,279 | $1,461 | 34% |
| By geographic region: |  |  |  |  |
| North America | $3,517 | $2,231 | $1,286 | 58% |
| Latin America | 457 | 463 | (6) | (1) |
| Europe/Africa/CIS | 716 | 604 | 112 | 19 |
| Middle East/Asia | 1,050 | 981 | 69 | 7 |
| Total revenue | $5,740 | $4,279 | $1,461 | 34% |

| OPERATING INCOME: Millions of dollars | Three Months Ended March 31 2018 | 2017 | Favorable (Unfavorable) | Percentage Change |
| --- | ---: | ---: | ---: | ---: |
| Completion and Production | $500 | $147 | $353 | 240% |
| Drilling and Evaluation | 188 | 122 | 66 | 54 |
| Total | 688 | 269 | 419 | 156 |
| Corporate and other | (69) | (66) | (3) | (5) |
| Impairments and other charges | (265) | — | (265) | — |
| Total operating income | $354 | $203 | $151 | 74% |

Consolidated revenue was $5.7 billion in the first quarter of 2018, an increase of $1.5 billion, or 34%, as compared to the first quarter of 2017, primarily associated with improvements in pressure pumping services and drilling activity, as well as contributions from our recently acquired artificial lift business in North America. Revenue from North America was 61% of consolidated revenue in the first quarter of 2018, compared to 52% of consolidated revenue in the first quarter of 2017, reflecting the increase that our North America operations are experiencing from improved market conditions.

Consolidated operating income was $354 million during the first quarter of 2018 compared to $203 million in the first quarter of 2017. Operating results improved primarily from increased pressure pumping activity. Operating results in the first quarter of 2018 were also impacted by $265 million of impairments and other charges related to Venezuela. See Note 2 to the condensed consolidated financial statements for further information.

### OPERATING SEGMENTS

#### Completion and Production

Completion and Production revenue in the first quarter of 2018 was $3.8 billion, an increase of $1.2 billion, or 46%, from the first quarter of 2017. Operating income in the first quarter of 2018 was $500 million, an increase of $353 million from the first quarter of 2017. Improvements were led by increased activity in the United States land sector. Additionally, results improved due to increased well completion services in Europe/Africa/CIS and higher stimulation activity in the Middle East.

#### Drilling and Evaluation

Drilling and Evaluation revenue in the first quarter of 2018 was $1.9 billion, an increase of $258 million, or 15%, from the first quarter of 2017. Operating income in the first quarter of 2018 was $188 million, an increase of $66 million, or 54%, compared to the first quarter of 2017. These increases were primarily due to increased drilling activity in North America and the Eastern Hemisphere, specifically in the North Sea. Results were partially offset by activity declines across multiple product service lines in Latin America.

### GEOGRAPHIC REGIONS

#### North America

North America revenue in the first quarter of 2018 was $3.5 billion, a 58% increase compared to the first quarter of 2017. This improvement was driven by increased activity throughout the United States land sector in the majority of our product service lines, primarily pressure pumping, as well as higher drilling activity and contributions from our recently acquired artificial lift business.

#### Latin America

Latin America revenue in the first quarter of 2018 was $457 million, a 1% decrease compared to the first quarter of 2017, resulting primarily from activity declines across multiple product service lines in Venezuela, as well as decreases in pressure pumping and project management activity in Mexico. These results were partially offset by increases in pressure pumping services and drilling activity in Argentina.

#### Europe/Africa/CIS

Europe/Africa/CIS revenue in the first quarter of 2018 was $716 million, a 19% increase compared to the first quarter of 2017, primarily due to higher drilling activity and well completion services in the North Sea, coupled with increased activity in Russia and Azerbaijan. These results were partially offset by activity reductions in Angola.

#### Middle East/Asia

Middle East/Asia revenue in the first quarter of 2018 was $1.1 billion, a 7% increase compared to the first quarter of 2017, primarily resulting from increased drilling and stimulation activity in the Middle East and increased drilling activity in Indonesia, offset by lower completion tool sales and project management activity in the Middle East.

### OTHER OPERATING ITEMS

*Impairments and other charges* were $265 million in the three months ended March 31, 2018 related to a write-down of all of our remaining investment in Venezuela. See Note 2 to the condensed consolidated financial statements for further discussion on the first quarter charge and Part II, Item 1(a), “Risk Factors” for additional information on risks associated with our operations in Venezuela.

### NONOPERATING ITEMS

*Interest expense, net* decreased $102 million in the first quarter of 2018, compared to the first quarter of 2017, primarily due to $104 million in costs related to the early extinguishment of $1.4 billion of senior notes during the first quarter of 2017.

*Effective tax rate*. During the three months ended March 31, 2018, we recorded a total income tax provision of $142 million on pre-tax income of $189 million, resulting in an effective tax rate of 75.4%. Our effective tax rate during the first quarter of 2018 was significantly impacted by our investment write-down in Venezuela for which we are not recognizing a corresponding tax benefit since the write-down is not tax-deductible, along with additional accrued local Venezuela taxes we recognized in our tax provision. See Note 2 to the condensed consolidated financial statements for further information. Our effective tax rate for this period was also impacted by the lower corporate rate from the recently enacted U.S. tax reform as well as the geographic mix of earnings.

During the three months ended March 31, 2017, we recorded a total income tax benefit of $25 million on pre-tax losses of $57 million, resulting in an effective tax rate of 44.2%. Our effective tax rate during the first quarter of 2017 was impacted by the low level of earnings and associated geographic mix for the period.

### ENVIRONMENTAL MATTERS

We are subject to numerous environmental, legal and regulatory requirements related to our operations worldwide. For information related to environmental matters, see Note 6 to the condensed consolidated financial statements.

### FORWARD-LOOKING INFORMATION

The Private Securities Litigation Reform Act of 1995 provides safe harbor provisions for forward-looking information. Forward-looking information is based on projections and estimates, not historical information. Some statements in this Form 10-Q are forward-looking and use words like “may,” “may not,” “believe,” “do not believe,” “plan,” “estimate,” “intend,” “expect,” “do not expect,” “anticipate,” “do not anticipate,” “should,” “likely” and other expressions. We may also provide oral or written forward-looking information in other materials we release to the public. Forward-looking information involves risk and uncertainties and reflects our best judgment based on current information. Our results of operations can be affected by inaccurate assumptions we make or by known or unknown risks and uncertainties. In addition, other factors may affect the accuracy of our forward-looking information. As a result, no forward-looking information can be guaranteed. Actual events and the results of our operations may vary materially.

We do not assume any responsibility to publicly update any of our forward-looking statements regardless of whether factors change as a result of new information, future events or for any other reason. You should review any additional disclosures we make in our press releases and Forms 10-K, 10-Q and 8-K filed with or furnished to the SEC. We also suggest that you listen to our quarterly earnings release conference calls with financial analysts.

## Market risk

As filed, 269 characters.

For quantitative and qualitative disclosures about market risk, see Part II, Item 7(a), “Quantitative and Qualitative Disclosures About Market Risk,” in our 2017 Annual Report on Form 10-K. Our exposure to market risk has not changed materially since December 31, 2017.

## Controls and procedures

As filed, 1,429 characters.

In accordance with the Securities Exchange Act of 1934 Rules 13a-15 and 15d-15, we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2018 to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Our disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

There has been no change in our internal control over financial reporting that occurred during the quarter ended March 31, 2018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Filed Apr 27, 2018.
Source: SEC EDGAR, the filing index for accession 0000045012-18-000086. Last ingested by Listed: Nov 2, 2026, 13:24 ET. No prices; not investment advice.