# Halliburton Co: Form 10-Q for the period ended Mar 31, 2025 - Company: [Halliburton Co](/companies/hal.md) (CIK 45012) - Form: 10-Q - Filed: 2025-04-25 - Accepted by EDGAR: Apr 25, 2025, 11:20 ET - Period: 2025-03-31 - Accession: 0000045012-25-000035 - Inline XBRL: yes - Main document: https://www.sec.gov/Archives/edgar/data/45012/000004501225000035/hal-20250331.htm - All documents and exhibits: https://www.sec.gov/Archives/edgar/data/45012/000004501225000035/ ## Figures reported in this filing Standardized XBRL line items for the period ended 2025-03-31. | Line item | Period | Value | XBRL concept | | --- | --- | ---: | --- | | Revenue | 3 months, 2025-01-01 to 2025-03-31 | $5.42bn | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax | | Operating income | 3 months, 2025-01-01 to 2025-03-31 | $431.0m | us-gaap:OperatingIncomeLoss | | Income tax | 3 months, 2025-01-01 to 2025-03-31 | $103.0m | us-gaap:IncomeTaxExpenseBenefit | | Net income | 3 months, 2025-01-01 to 2025-03-31 | $204.0m | us-gaap:NetIncomeLoss | | Diluted EPS | 3 months, 2025-01-01 to 2025-03-31 | $0.24 | us-gaap:EarningsPerShareDiluted | | Basic EPS | 3 months, 2025-01-01 to 2025-03-31 | $0.24 | us-gaap:EarningsPerShareBasic | | Diluted shares (weighted) | 3 months, 2025-01-01 to 2025-03-31 | 866,000,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding | | Operating cash flow | 3 months, 2025-01-01 to 2025-03-31 | $377.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities | | Capital expenditure | 3 months, 2025-01-01 to 2025-03-31 | $302.0m | us-gaap:PaymentsToAcquireProductiveAssets | | Dividends paid | 3 months, 2025-01-01 to 2025-03-31 | $147.0m | us-gaap:PaymentsOfDividendsCommonStock | | Share repurchases | 3 months, 2025-01-01 to 2025-03-31 | $250.0m | us-gaap:PaymentsForRepurchaseOfCommonStock | | Current assets | at 2025-03-31 | $11.53bn | us-gaap:AssetsCurrent | | Total assets | at 2025-03-31 | $25.18bn | us-gaap:Assets | | Current liabilities | at 2025-03-31 | $5.82bn | us-gaap:LiabilitiesCurrent | | Total liabilities | at 2025-03-31 | $14.77bn | us-gaap:Liabilities | | Current portion of debt | at 2025-03-31 | $381.0m | us-gaap:LongTermDebtCurrent | | Shareholders' equity | at 2025-03-31 | $10.37bn | us-gaap:StockholdersEquity | ## Management's discussion and analysis As filed, 33,435 characters. Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the condensed consolidated financial statements included in “Item 1. Financial Statements” contained herein. ### 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 asset 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. - Completion and Production delivers cementing, stimulation, specialty chemicals, intervention, pressure control, artificial lift, and completion products and services. The segment consists of Artificial Lift, Cementing, Completion Tools, Multi-Chem, Pipeline and Process Services, Production Enhancement, and Production Solutions. During the third quarter of 2024, we made a strategic decision to market for sale a portion of our chemical business. - Drilling and Evaluation provides field and reservoir modeling, drilling, fluids, evaluation, and precise wellbore placement solutions that enable customers to model, measure, drill, and optimize their well construction activities. The segment consists of Baroid, Drill Bits and Services, Halliburton Project Management, Landmark Software and Services, Sperry Drilling, Testing and Subsea, and Wireline and Perforating. 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 in the United States, Malaysia, Singapore, and the United Kingdom. With approximately 48,000 employees, we operate in more than 70 countries around the world, and our corporate headquarters is in Houston, Texas. Our value proposition is to collaborate and engineer solutions to maximize asset value for our customers. We work to achieve strong cash flows and returns for our shareholders by delivering technology and services that improve efficiency, increase recovery, and maximize production for our customers. Our strategic priorities are to: - *International*: Increase international growth in our directional drilling, unconventionals, well intervention, and artificial lift businesses. - *North America*: Maximize value by, among other things, increasing the utilization by our customers of our Zeus electric fracturing platform and our iCruise rotary steerable systems, and incorporating automation technologies in certain of our processes. - *Digital*: Continue to drive differentiation and efficiencies through the deployment of digital and automation technologies, both internally and for our customers. - *Capital efficiency*: Maintain our capital expenditures at approximately 6% of revenue while utilizing technology and targeted process improvements to enhance the effectiveness and efficiency of our utilization of capital. - *Shareholder returns*: Return over 50% of annual free cash flow to shareholders through dividends and share repurchases. - *Advance a Sustainable Energy Future*: Continue to develop technologies and solutions to help lower our customers’ and our emissions intensity, participate in carbon capture, utilization, and storage, and geothermal projects globally, and support Halliburton Labs early-stage company participants. HAL Q1 2025 FORM 10-Q \| 15 The following charts depict the revenue split between our two operating segments and our four primary geographic regions for the three months ended March 31, 2025. ### Market conditions Oil prices increased in the first quarter of 2025 from the fourth quarter of 2024 partially from an improving demand outlook in Europe and China while tighter sanctions on Venezuela, Iran and Russia weighed on the supply-side. Risks associated with trade tensions and geopolitical unrest in the Middle East and the Russia-Ukraine conflict continue to be major sources of volatility for the oil and natural gas markets. During the first quarter of 2025, the U.S. active rig count increased slightly as compared to the three months ended December 31, 2024 as oil basins saw a small increase while natural gas basins declined. The international rig count declined in the first quarter of 2025 from the fourth quarter of 2024 driven by declines in Latin America, Asia-Pacific, and Africa. Since the end of the first quarter of 2025, the macro environment for oil and natural gas has seen significant fluctuations, as the trade environment injected uncertainty into markets, raised broad economic concerns, and along with the faster-than-expected return of OPEC production, weighed on commodity prices. As of April 22, 2025, both West Texas Intermediate (WTI) and United Kingdom Brent crude oil prices decreased by approximately 10% since the end of the first quarter of 2025. We continue to monitor and assess the potential impact of newly implemented tariffs on goods being imported into the United States. Our global supply chain organization continuously monitors market trends and works to mitigate those and other cost increases through economies of scale in global procurement, technology modifications, and efficient sourcing practices. Globally, we continue to be impacted by extended supply chain lead times for the supply of select raw materials. Also, while we have been impacted by inflationary cost increases, we generally try to pass much of those increases on to our customers and we believe we have effective solutions to minimize their operational impact. HAL Q1 2025 FORM 10-Q \| 16 ### Financial results The following graph illustrates our revenue and operating margins for each operating segment for the first quarter of 2024 and 2025. During the first quarter of 2025, we generated total company revenue of $5.4 billion, a 7% decrease as compared to the first quarter of 2024. We reported operating income of $431 million, including impairments and other charges of $356 million, in the first quarter of 2025, this compares to operating income of $987 million in the first quarter of 2024. Our Completion and Production segment revenue decreased 8% in the first quarter of 2025 as compared to the first quarter of 2024. These results were primarily driven by decreased pressure pumping services and lower completion tool sales in the Western Hemisphere. Partially offsetting these decreases were increased completion tool sales and improved stimulation activity in the Middle East. Our Drilling and Evaluation segment revenue decreased 6% in the first quarter of 2025 as compared to the first quarter of 2024. These results were primarily driven by decreased drilling services in Mexico and the Middle East, reduced project management activity in Mexico, and lower wireline activity in the Middle East/Asia. Partially offsetting these decreases was increased fluid services in the Middle East. Our North America revenue decreased 12% in the first quarter of 2025, as compared to the first quarter of 2024. This decrease was primarily driven by lower stimulation activity in US Land and reduced completion tool sales in the Gulf of America. Partially offsetting these decreases were higher artificial lift activity and improved drilling services in US Land and increased stimulation activity in the Gulf of America. Internationally, revenue decreased 2% in the first quarter of 2025, as compared to the first quarter of 2024, largely driven by lower activity across multiple product service lines in Mexico, Senegal, and Italy. Partially offsetting these decreases were increased activity across multiple product services lines in Kuwait, higher stimulation activity in Saudi Arabia, improved drilling-related services in Argentina, Brazil, and the Caribbean, and higher completion tool sales in Europe. Our operating performance and liquidity are described in more detail in “Liquidity and Capital Resources” and “Business Environment and Results of Operations.” ### Sustainability and Energy Mix Transition In 2021, we announced our target to achieve a 40% reduction in our Scope 1 and 2 emissions by 2035 from the 2018 baseline. We continue to execute on our priorities to drive down our emissions intensity. At the same time, we support our customers in their emissions reduction efforts by continuously developing and deploying goods and services that are accretive to their goals as well as ours. As the energy mix transition unfolds, we seek to apply our expertise and resources in growth sectors adjacent to our traditional oilfield services space, including carbon capture, utilization, and storage, and geothermal. Finally, we will continue to focus on accelerating the success of clean tech start-ups via Halliburton Labs, which also allows us to participate in the energy mix transition at relatively low risk by investing our expertise, resources, and team without a significant outlay of capital while we learn where we can strategically engage new markets. As of March 31, 2025, Halliburton Labs had 38 participating companies and alumni. HAL Q1 2025 FORM 10-Q \| 17 ### LIQUIDITY AND CAPITAL RESOURCES As of March 31, 2025, we had $1.8 billion of cash and equivalents, compared to $2.6 billion of cash and equivalents at December 31, 2024. ### Significant sources and uses of cash during the first three months of 2025 #### Sources of cash: - Cash flows from operating activities were $377 million. Working capital, which consists of receivables, inventories, and accounts payable, had a negative impact of $154 million, primarily due to increased receivables and decreased payables. #### Uses of cash: - Capital expenditures were $302 million. - We repurchased 9.6 million shares of our common stock for $250 million. - We paid $147 million of dividends to our shareholders. - We paid $461 million related to a purchase of an equity investment and payments to acquire businesses. ### Future sources and uses of cash We manufacture most of our own equipment, which provides us with some flexibility to increase or decrease our capital expenditures based on market conditions. We currently expect capital spending for 2025 to be approximately 6% of revenue. We believe this level of spend will allow us to invest in our key strategic technologies and businesses, including the construction and deployment of our Zeus electric fracturing systems in North America and the international growth of our artificial lift, well intervention, unconventionals, and drilling technologies. We will maintain our capital discipline and we may adjust our capital spend to address changing market dynamics. While we maintain focus on liquidity and debt reduction, we are also focused on providing cash returns to our shareholders. Our quarterly dividend rate is $0.17 per common share, or approximately $147 million. In 2023, our Board approved a capital return framework with a goal of returning at least 50% of our annual free cash flow to shareholders through dividends and share repurchases and we expect our returns to shareholders will be in line with our capital return framework for 2025. We may utilize share repurchases as part of our capital return framework. Our Board of Directors has authorized a program to repurchase our common stock from time to time. We repurchased 9.6 million shares of common stock during the first quarter of 2025 under this program. Approximately $2.8 billion remained authorized for repurchases as of March 31, 2025 and may be used for open market and other share purchases. During 2023, we began our migration to SAP S4 which we expect to complete in the first half of 2026. During the three months ended March 31, 2025 we incurred $30 million in expense on our SAP S4 migration. The total project investment is estimated to cost approximately $270 million. We believe the new system will provide important efficiency benefits, cost savings, enhanced visibility to our operations, and advanced analytics that will benefit us and our customers. Currently, we do not intend to incur additional debt in 2025, as we believe our cash on hand and earnings from operations are sufficient to cover our obligations for the year. ### Other factors affecting liquidity *Financial condition in current market.* As of March 31, 2025, we had $1.8 billion of cash and equivalents and $3.5 billion of available committed bank credit under a revolving credit facility with an expiration date of April 27, 2027. We believe we have a manageable debt maturity profile, with approximately $471 million coming due beginning in 2025 through 2027, with the majority due in 2025. 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 the challenges and opportunities of the current market and our expected global cash needs, including capital expenditures, working capital investments, shareholder returns, if any, debt repurchases, if any, and scheduled interest and principal payments. *Guarantee agreements.* In the normal course of business, we have agreements with financial institutions under which approximately $2.7 billion of letters of credit, bank guarantees, or surety bonds were outstanding as of March 31, 2025. Some of the outstanding letters of credit have triggering events that would entitle a bank to require cash collateralization; however, none of these triggering events have occurred. As of March 31, 2025, we had no material off-balance sheet liabilities and were not required to make any material cash distributions to our unconsolidated subsidiaries. HAL Q1 2025 FORM 10-Q \| 18 We have entered into CDSs with third-party financial institutions that have an aggregate notional amount outstanding as of March 31, 2025 of $1.0 billion related to borrowings provided by the financial institutions to one of our primary customers in Mexico, of which, portions of the proceeds were utilized by this customer to pay certain of our outstanding receivables. Approximately $155 million of the outstanding amount of the CDSs reduces monthly over its remaining 11-month term and $171 million reduces monthly over its remaining 15-month term. The remaining $717 million outstanding amount reduces monthly over its remaining 18-month term. *Credit ratings.* Our credit ratings with Standard & Poor’s remain BBB+ for our long-term debt and A-2 for our short- term debt, with a positive outlook. Our credit ratings with Moody's Investors Service remain A3 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. Receivables from our primary customer in Mexico accounted for approximately 7% of our total receivables as of March 31, 2025. While we have experienced payment delays from our primary customer in Mexico, the amounts are not in dispute and we have not historically had, and we do not expect any material write-offs due to collectability of receivables from this customer. HAL Q1 2025 FORM 10-Q \| 19 ### BUSINESS ENVIRONMENT AND RESULTS OF OPERATIONS We operate in more than 70 countries throughout the world to provide a comprehensive range of services and products to the energy industry. Our revenue is generated 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 2025, based on the location of the services provided and products sold, 39% of our consolidated revenue was from the United States, compared to 42% of our consolidated revenue from the United States in the first three months of 2024. No other country accounted for more than 10% of our revenue for those periods. 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, our customers’ expectations about future prices, global oil supply and demand, the impact on natural gas supply and demand in North America of electrification and data centers power requirements, completions intensity, the world economy, the availability of capital, government regulation, and global stability, which together drive worldwide drilling and completions activity. We expect that many of our customers in North America will continue their strategy of operating within their cash flows and generating returns rather than prioritizing production growth. Lower oil and natural gas prices usually translate into lower exploration and production budgets and lower rig count, while the opposite is usually true for higher oil and natural gas prices. 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 table below shows the average prices for West Texas Intermediate (WTI) crude oil, United Kingdom Brent crude oil, and Henry Hub natural gas. | | Three Months Ended March 31, 2025 | 2024 | Year Ended December 31, 2024 | | --- | ---: | ---: | ---: | | Oil Price - WTI (1) | $71.84 | $77.55 | $76.55 | | Oil Price - Brent (1) | 75.81 | 83.00 | 80.53 | | Natural Gas Price - Henry Hub (2) | 4.15 | 2.13 | 2.19 | (1) Oil prices measured in dollars per barrel. (2) Natural gas price measured in dollars per million British thermal units (Btu), or MMBtu. The historical average rig counts based on the weekly Baker Hughes rig count data were as follows: | | Three Months Ended March 31, 2025 | 2024 | Year Ended December 31, 2024 | | --- | ---: | ---: | ---: | | US Land | 573 | 602 | 580 | | US Offshore | 15 | 21 | 19 | | Canada | 216 | 208 | 187 | | North America | 804 | 831 | 786 | | International | 903 | 965 | 948 | | Worldwide Total | 1,707 | 1,796 | 1,734 | HAL Q1 2025 FORM 10-Q \| 20 Table of Contents Part I. Item 2 \| Business Environment and Results of Operations ### Business outlook The tariffs announced on April 2, 2025 by the United States government included sweeping measures affecting many goods imported into the United States, with rates starting at 10%, and higher rates for specific countries and products. These tariffs could significantly increase the cost of imported goods and materials. The tariffs have brought uncertainty into markets, raised broad economic concerns, which, together with the faster-than-expected return of OPEC production, caused a decrease in the price of crude oil of approximately 10% since the end of the first quarter of 2025. While the situation is still fluid, we expect that the decrease in the price of crude oil will negatively impact our earnings per share in the second quarter of 2025. However, we continue to believe oil and natural gas will play a fundamental role in global economic growth and will be driven by economic expansion, energy security concerns and population growth. Additionally, we believe increased investment in existing and new sources of oil and natural gas production is needed to address future demand. This will necessitate production from conventional and unconventional, deep-water and shallow-water, and short and long-cycle projects. We expect that increased oil and natural gas production requirements will in turn create demand for our products and services. HAL Q1 2025 FORM 10-Q \| 21 Table of Contents Part I. Item 2 \| Results of Operations in 2025 compared to 2024 (QTD) ### RESULTS OF OPERATIONS IN 2025 COMPARED TO 2024 ### Three Months Ended March 31, 2025 Compared with Three Months Ended March 31, 2024 | Millions of dollars Revenue: By operating segment: | Three Months Ended March 31, 2025 | 2024 | Favorable (Unfavorable) | Percentage Change | | --- | ---: | ---: | ---: | ---: | | Completion and Production | $3,120 | $3,373 | $(253) | (8)% | | Drilling and Evaluation | 2,297 | 2,431 | (134) | (6) | | Total revenue | $5,417 | $5,804 | $(387) | (7)% | | By geographic region: | | | | | | North America | $2,236 | $2,546 | $(310) | (12)% | | Latin America | 896 | 1,108 | (212) | (19) | | Europe/Africa/CIS | 775 | 729 | 46 | 6 | | Middle East/Asia | 1,510 | 1,421 | 89 | 6 | | Total revenue | $5,417 | $5,804 | $(387) | (7)% | | **Operating income:** | | | | | | By operating segment: | | | | | | Completion and Production | $531 | $688 | $(157) | (23)% | | Drilling and Evaluation | 352 | 398 | (46) | (12) | | Total operations | 883 | 1,086 | (203) | (19) | | Corporate and other | (66) | (65) | (1) | (2) | | SAP S4 upgrade expense | (30) | (34) | 4 | 12 | | Impairments and other charges | (356) | — | (356) | n/m | | Total operating income | $431 | $987 | $(556) | (56)% | | n/m = not meaningful | | | | | ### Operating Segments #### Completion and Production Completion and Production revenue in the first quarter of 2025 was $3.1 billion, a decrease of $253 million, or 8%, when compared to the first quarter of 2024. Operating income in the first quarter of 2025 was $531 million, a decrease of $157 million, or 23%, when compared to the first quarter of 2024. These results were primarily driven by decreased pressure pumping services and lower completion tool sales in the Western Hemisphere. Partially offsetting these decreases were increased completion tool sales and improved stimulation activity in the Middle East. #### Drilling and Evaluation Drilling and Evaluation revenue in the first quarter of 2025 was $2.3 billion, a decrease of $134 million, or 6%, when compared to the first quarter of 2024. Operating income in the first quarter of 2025 was $352 million, a decrease of $46 million, or 12%, when compared to the first quarter of 2024. These results were primarily driven by decreased drilling services in Mexico and the Middle East, reduced project management activity in Mexico, and lower wireline activity in the Middle East/ Asia. Partially offsetting these decreases was increased fluid services in the Middle East. ### Geographic Regions #### North America North America revenue in the first quarter of 2025 was $2.2 billion, a 12% decrease compared to the first quarter of 2024\. This decrease was primarily driven by lower stimulation activity in US Land and reduced completion tool sales in the Gulf of America. Partially offsetting these decreases were higher artificial lift activity and improved drilling services in US Land and increased stimulation activity in the Gulf of America. HAL Q1 2025 FORM 10-Q \| 22 Table of Contents Part I. Item 2 \| Results of Operations in 2025 Compared to 2024 (QTD) #### Latin America Latin America revenue in the first quarter of 2025 was $896 million, a 19% decrease compared to the first quarter of 2024\. This decrease was primarily due to lower activity across multiple product service lines in Mexico and decreased completion tool sales across the region. Partially offsetting these decreases were increased drilling-related services in Argentina, Brazil, and the Caribbean. #### Europe/Africa/CIS Europe/Africa/CIS revenue in the first quarter of 2025 was $775 million, a 6% increase compared to the first quarter of 2024\. This increase was primarily driven by improved activity across multiple product service lines in Norway, higher well construction activity in Namibia, as well as improved completion tools sales in the Caspian Area. Partially offsetting these increases was decreased activity across multiple product service lines in Senegal and Italy. #### Middle East/Asia Middle East/Asia revenue in the first quarter of 2025 was $1.5 billion, a 6% increase compared to the first quarter of 2024\. This increase resulted from improved activity across multiple product service lines in Kuwait, improved stimulation activity and increased completion tool sales in Saudi Arabia, and higher fluid services in the United Arab Emirates. Partially offsetting these improvements were lower well construction activity in Saudi Arabia and Australia, decreased completion tool sales in Malaysia, and declined drilling-related activity in Oman. ### Other Operating Items *SAP S4 Upgrade Expense.* As previously mentioned, during 2023, we began our migration to SAP S4, which we expect to complete in the first half of 2026. During the first quarter of 2025, we recognized $30 million of expense on our SAP S4 migration. During the first quarter of 2024, we recognized $34 million of expense on our SAP S4 migration. *Impairments and Other Charges.* During the three months ended March 31, 2025, we took a pre-tax charge of $356 million to adjust our cost structure to market conditions. These charges consisted primarily of severance costs, an impairment of assets held for sale, an impairment of facility closures and lease terminations, and other items. See Notes to Condensed Consolidated Financial Statements, Note 2. Impairments and Other Charges for further discussion of these charges. ### Nonoperating Items *Argentina Impairment on Investment.* In 2022 and 2023, we executed a series of loans to a third party and received notes that are to be repaid in U.S. dollars upon maturity or earlier if certain conditions are met. During the three months ended March 31, 2024, we recorded a loss of $38 million due to the fair value decrease in one of the notes in March 2024, resulting from the deterioration in the outlook of the debtor’s liquidity and financial projections. This is included in “Other, net” on the consolidated statements of operations. *Egypt Currency Impact.* In the first quarter of 2024, the Egyptian pound devalued by approximately 35% relative to the U.S. dollar. Consequently, we incurred a loss of $38 million during the three months ended March 31, 2024 due to the devaluation of the currency in Egypt. This is included in “Other, net” on the consolidated statements of operations. *Income Tax Provision.* During the three months ended March 31, 2025, we recorded a total income tax provision of $103 million on a pre-tax income of $306 million, resulting in an effective tax rate of 33.7% for the quarter. The effective tax rate for this period was primarily impacted by the additional valuation allowance recognized on our deferred tax assets, which resulted from the pre-tax $356 million of impairments and other charges. During the three months ended March 31, 2024, we recorded a total income tax provision of $178 million on a pre-tax income of $787 million, resulting in an effective tax rate of 22.6% for the quarter. *Pillar Two.* The Organization for Economic Co-operation and Development enacted model rules for a new global minimum tax framework, also known as Pillar Two, and certain governments globally have enacted, or are in the process of enacting, legislation considering these model rules. These rules did not have a material impact on our taxes for the three months ended March 31, 2025. HAL Q1 2025 FORM 10-Q \| 23 Table of Contents Part I. Item 2 \| Results of Operations in 2025 Compared to 2024 (QTD) *Internal Revenue Service Notice of Proposed Adjustment.* We are subject to taxes in the United States and in numerous jurisdictions where we operate or where our subsidiaries are organized. Our tax returns are routinely subject to examination by the taxing authorities in the jurisdictions where we file tax returns. In most cases we are no longer subject to examination by tax authorities for years before 2013. The only significant operating jurisdiction that has tax filings under review or subject to examination by the tax authorities is the United States. Our United States federal income tax filings for tax years 2016 through 2023, including carry back of 2016 net operating losses to 2014, are currently under review or remain open for review by the IRS. On September 28, 2023, we received a NOPA from the IRS covering our 2016 U.S. tax return. The NOPA proposed an adjustment to reclassify approximately 95% of the $3.5 billion termination fee paid to Baker Hughes in 2016 from an ordinary expense deduction to a capital loss. The termination fee was paid to Baker Hughes under the merger agreement after antitrust regulators in multiple jurisdictions failed to approve our proposed merger. It is common commercial practice to include a termination fee in a merger agreement to compensate the target for damages incurred when the acquisition does not go forward. The IRS’s long-understood position at the time of the payment had been to treat such payments as an ordinary and necessary business expense. We strongly disagree with the proposed adjustment on both a factual and legal basis, and we plan to vigorously contest it. We expect that resolving this dispute will take substantial time. In 2023, we initiated the IRS administrative appeals process, which is ongoing. Failing a resolution through that process, the matter would ultimately be resolved by the United States federal courts. We regularly assess the likelihood of adverse outcomes resulting from tax examinations to determine the adequacy of our tax reserves, and we believe our income tax reserves are appropriately provided for all open tax years. We cannot assure you that the matter will be determined in our favor or against us, and if the matter is ultimately determined unfavorably to us, it could have a material adverse impact on our results of operations and cash flows. Based on tax attributes currently available, we estimate that, should the IRS's position prevail through its appellate process and subsequent litigation, the proposed adjustment could result in cash taxes due of approximately $640 million (plus interest thereon in the case of amounts due for previous tax years). Our estimates are calculated under current tax law and on the bases of our assumptions regarding taxable income and loss and other tax attributes over the relevant period, which law could change and which assumptions could and likely will differ materially from actual results. In any event, no payment of any additional tax is currently required, nor do we anticipate that the proposed adjustment would materially and adversely impact our ability to meet our expected uses of cash, including future capital expenditures, working capital investments, and scheduled debt repayments, or our ability to return cash to shareholders, even if a final determination of the matter is reached that is adverse to us. HAL Q1 2025 FORM 10-Q \| 24 ### 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 our statements and other materials we release to the public. Forward-looking information involves risks 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, 271 characters. For quantitative and qualitative disclosures about market risk, see Part II, Item 7(a), “Quantitative and Qualitative Disclosures About Market Risk,” in our 2024 Annual Report on Form 10-K. Our exposure to market risk has not changed materially since December 31, 2024. ## Controls and procedures As filed, 1,441 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, 2025 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, 2025 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Filed Apr 25, 2025. Source: SEC EDGAR, the filing index for accession 0000045012-25-000035. Last ingested by Listed: Nov 2, 2026, 13:24 ET. No prices; not investment advice.