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HALLIBURTON: Management report and analysis of financial position and operating results (Form 10-Q)

By on October 22, 2021 0

Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) should be read in conjunction with the condensed consolidated financial statements included in Section 1. Financial Statements included 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 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, artificial lift, and completion products and
services. The segment consists of Production Enhancement, Cementing, Completion
Tools, Production Solutions, Artificial Lift, and Pipeline and Process Services.
•our Drilling and Evaluation segment provides field and reservoir modeling,
drilling, fluids and specialty chemicals, 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 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 in the United States, Malaysia, Singapore, and the
United Kingdom. With approximately 40,000 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:
-deliver profitable growth in our international business;
-maximize cash flows in our North America business;
-accelerate the deployment and integration of our digital technologies, both
internally and with our customers;
-improve capital efficiency by advancing our technologies and making strategic
choices that lower our capital expenditure profile; and
-actively participate in advancing a sustainable energy future.

The following charts illustrate the distribution of revenues between our two operating segments and our four main geographic regions for the quarter ended. September 30, 2021.

[[Image Removed: hal-20210930_g1.jpg]][[Image Removed: hal-20210930_g2.jpg]]

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  Table of Contents           Part I. Item 2 | Executive Overview


Market conditions update and COVID-19 pandemic
The oil and gas industry continued to be impacted from shutdowns as a result of
the COVID-19 pandemic, specifically in Asia. In spite of COVID-19 interruptions
from mobility restrictions and daily precautions continuing to remain in place,
business activity around the world has adjusted and continues to improve. West
Texas Intermediate (WTI) oil prices have recovered to pre-pandemic levels,
averaging approximately $71 per barrel during the third quarter of 2021. The
U.S. land average rig count continues to be well below pre-pandemic levels, but
it did rise 11% in the third quarter of 2021 compared to the second quarter of
2021. The Brent crude oil price averaged over $73 per barrel during the third
quarter of 2021 and the international average rig count increased 5% as compared
to the second quarter of 2021. With the current shortage of other sources of
energy, and the economic growth associated with what appears to be a global
emergence from the pandemic, the demand for and price of oil has improved. We
believe that global oil demand will continue increasing in the fourth quarter of
2021 and into 2022.

Financial Results The following graph illustrates our revenue and operating margins for each operating segment for the third quarter of 2020 and 2021.

                     [[Image Removed: hal-20210930_g3.jpg]]

During the third quarter of 2021, we generated total company revenue of $3.9
billion, a 30% increase as compared to the third quarter of 2020. We reported
operating income of $446 million during the third quarter of 2021 that included
$12 million of special items. This compares to operating income of $142 million
during the third quarter of 2020 which was impacted by $133 million of severance
and other charges. Our Completion and Production segment revenue increased 36%
in the third quarter of 2021 as compared to the third quarter of 2020, primarily
due to increased pressure pumping services in North America land. Our Drilling
and Evaluation segment revenue increased 23% in the third quarter of 2021 as
compared to the third quarter of 2020, driven primarily by improvements in
drilling-related services activity in the Western Hemisphere. Operating margins
in both of our operating segments improved in the third quarter of 2021 as
compared to the third quarter of 2020 on higher commodity prices driving
increased activity, higher utilization, and better operating leverage from our
structural cost reductions implemented during 2020.

In North America, our revenue increased 64% in the third quarter of 2021, as
compared to the third quarter of 2020, driven by increased pressure pumping
services in North America land, as well as increased activity in most other
product service lines. Both of our segments' revenue increased over 50% in the
third quarter of 2021 compared to the third quarter of 2020, while the average
North America rig count more than doubled for the same period. Although the
North America rig count is increasing, it is still below pre-pandemic levels.

Revenue in our international markets increased 13% in the third quarter of 2021,
as compared to the third quarter of 2020, primarily driven by improvements in
most product service lines in Latin America, particularly Argentina,
drilling-related services, project management activity, and pipeline services in
Middle East/Asia, and cementing and well intervention in Europe/Africa/CIS,
partially offset by lower completion tool sales in the Eastern Hemisphere.
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  Table of Contents           Part I. Item 2 | Executive Overview



Sustainability and Energy Advancement
We continue to pursue our strategic initiatives around advancing cleaner,
affordable energy, and supporting sustainable energy advancements, using
innovation and technology to reduce the environmental impact of producing oil
and gas. As such, we are continuing to develop and deploy low-carbon solutions
to help oil and gas operators lower their current emissions profiles while also
using our existing technologies in renewable energy applications. In addition,
Halliburton Labs, our energy transition accelerator, announced its inaugural
group of participating companies in the first quarter of 2021 and announced four
additional participating companies in the third quarter of 2021, doubling the
number of participating companies to eight.

Our operational performance and liquidity are described in more detail under the sections “Liquidity and capital resources” and “Business environment and operating results”.

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Table of contents Part I. Article 2 | Liquidity and capital resources

LIQUIDITY AND CAPITAL RESOURCES

Like both September 30, 2021 and December 31, 2020, we have had $ 2.6 billion cash and equivalents.

Significant sources and uses of cash during the first nine months of 2021
Sources of cash:
•Cash flows from operating activities were $1.2 billion. This included a
positive impact from the primary components of our working capital (receivables,
inventories, and accounts payable) of a net $81 million.

Uses of cash:
•In February of 2021, we repaid the $185 million principal balance of our 8.75%
senior debentures at maturity.
•In August of 2021, we redeemed the entire $500 million aggregate principal
amount outstanding of our 3.25% senior notes at par.
•Capital expenditures were $483 million, a decrease of 5% from the first nine
months of 2020, as we adjusted to market conditions.
•We paid $121 million in dividends to our shareholders.

Future sources and uses of cash
We manufacture most of our own equipment, which allows flexibility to increase
or decrease our capital expenditures based on market conditions. We expect
capital spending for the full year 2021 will be approximately 5-6% of revenue.
We believe this level of spend will allow us to invest in accordance with our
key strategic priorities, while continuing to rationalize our business to market
conditions. We intend to continue to maintain capital discipline, monitor the
rapidly changing market dynamics, and adjust capital spending accordingly.

Our quarterly dividend rate is $0.045 per common share, or approximately $40
million. We will continue to maintain our focus on liquidity and review our
quarterly dividend considering our priorities of debt reduction and, as market
conditions evolve, reinvesting in our business.
Our Board of Directors has authorized a program to repurchase our common stock
from time to time. No repurchases occurred during the third quarter of 2021
under this program. Approximately $5.1 billion remained authorized for
repurchases as of September 30, 2021 and may be used for open market and other
share purchases.

Other factors affecting liquidity
Financial position in current market. As of September 30, 2021, we had $2.6
billion of cash and equivalents and $3.5 billion of available committed bank
credit under our revolving credit facility. We believe we have a manageable debt
maturity profile, with approximately $1.6 billion coming due through 2026.
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 global
cash needs, including 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 $1.9 billion of letters of
credit, bank guarantees, or surety bonds were outstanding as of September 30,
2021. 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.

Credit ratings. Our credit ratings with Standard & Poor's (S&P) remain BBB+ for
our long-term debt and A-2 for our short-term debt, with a negative 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 risk that our customers
may delay or fail 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. Given
the nature and significance of the pandemic and disruption in the oil and gas
industry, we have experienced delayed customer payments and payment defaults
associated with customer liquidity issues and bankruptcies.
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  Table of Contents          Part I. Item 2 | Liquidity and Capital Resources



Receivables from our primary customer in Mexico accounted for approximately 10%
of our total receivables as of September 30, 2021. While we have experienced
payment delays in Mexico, these 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.
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                                                      Part I. Item 2 | 

Business environment and results of

  Table of Contents                                                                             Operations


BUSINESS ENVIRONMENT AND OPERATING RESULTS

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 nine months of 2021, based upon the location of the
services provided and products sold, 40% of our consolidated revenue was from
the United States, compared to 38% of consolidated revenue from the United
States in the first nine months of 2020. 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 an interruption 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. The COVID-19 pandemic and efforts to mitigate
its effect had a substantial negative impact on the global economy and demand
for oil. As discussed earlier, although there are signs of improvement in many
areas around the world, the potential for new lockdowns and other mitigation
efforts to deal with an increase in infection rates in certain areas remains a
key risk for oil demand.

Some of the more significant determinants of current and future spending levels
of our customers are oil and natural gas prices and our customers' expectations
about future prices, global oil supply and demand, completions intensity, the
world economy, the availability of capital, government regulation, and global
stability, which together drive worldwide drilling and completions activity.
Additionally, many of our customers in North America have shifted their strategy
from production growth to operating within cash flow and generating returns.
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.

Traditionally, the North America market recovers from downturns in the industry
quicker than the international markets. We have started to see this play out as
rig counts have recovered faster in 2021 in North America than internationally.
We would expect to continue to see this dynamic in 2022.

The table below shows the average oil and natural gas prices for WTI, UK Brent crude oil and Henri hub natural gas.

                                                             Three Months Ended             Year Ended
                                                                September 30               December 31
                                                            2021              2020             2020
Oil price - WTI (1)                                  $       70.62       $      40.89    $       39.23
Oil price - Brent (1)                                        73.47              42.96            41.76
Natural gas price - Henry Hub (2)                             4.36               2.00             2.04

(1) Oil price measured in dollars per barrel. (2) Natural gas price measured in dollars per million British thermal units (Btu), or MMBtu.


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                                                      Part I. Item 2 | 

Business environment and results of

  Table of Contents                                                                             Operations


The average number of historical platforms is based on the Baker Hugues the data on the number of platforms were as follows:

                    Three Months Ended       Nine Months Ended      Year Ended
                       September 30            September 30        December 31
                     2021        2020        2021        2020          2020
U.S. Land            485         242         435         460           418
U.S. Offshore         11          12          15          16            15
Canada               151          47         122          90            89
North America        647         301         572         566           522
International        772         731         735         880           825
Worldwide total    1,419       1,032       1,307       1,446         1,347




Business outlook
In the United States Energy Information Administration (EIA) October 2021 "Short
Term Energy Outlook," the EIA projects WTI prices to average $78 per barrel in
the fourth quarter of 2021, and $68 per barrel for the full year 2021 and 2022.
The EIA's report projects Brent oil prices to average $81 per barrel in the
fourth quarter of 2021, with a full year 2021 average of $71 per barrel, a rise
of approximately $29 per barrel as compared to the full year 2020. The EIA's
full year projection for 2022 is that Brent oil prices will average $72 per
barrel.

The Henry Hub natural gas price averaged $4.36 per MMBtu in the third quarter of
2021 as compared to $2.00 per MMBtu in the third quarter of 2020, an increase of
$2.36 per MMBtu. The EIA October 2021 "Short Term Energy Outlook" projects Henry
Hub natural gas prices to average $4.17 per MMBtu for the full year 2021, and
$4.01 per MMBtu in 2022.

The International Energy Agency's (IEA) October 2021 "Oil Market Report"
forecasts global oil demand to reach 96.1 million barrels per day in 2021, an
increase of 5.2 million barrels per day from 2020 and to rise by an additional
3.2 million barrels in 2022. The EIA projects crude oil production in the United
States will average 11.0 million barrels per day in 2021, approximately a 3%
decrease from 2020, and to average 11.7 million barrels per day in 2022, a 6%
increase from 2021, as tight oil production rises in the United States. The EIA
anticipates that production will grow in 2022 as a result of operators
increasing rig counts, which are expected to more than offset production decline
rates.

In spite of COVID-19 interruptions from mobility restrictions and daily
precautions continuing to remain in place, business activity around the world
has adjusted and continues to improve. We expect the balancing of global supply
and demand to continue to tighten, resulting in a strong commodity price
environment. In the international markets, activity increases continued in the
third quarter of 2021 and we believe activity will accelerate into year-end. In
North America, the bifurcation between publicly traded and private exploration
and production (E&Ps) company activity continued in the third quarter of 2021.
Publicly traded E&Ps generally remain committed to their spending plans for
2021, while private E&Ps, which operate about 60% of the U.S. land rig count,
are generally increasing activity in an effort to continue to take advantage of
a stronger commodity price environment. Drilled but uncompleted well counts
(DUCs) in North America reached the lowest level since 2013, as operators
depleted the surplus of DUCs accumulated in 2020. Next year we expect North
America E&Ps to drill and complete more new wells to offset steep base decline
rates and deliver production into the market. In North America, we expect
moderate pricing and activity improvements in drilling and completions to drive
further growth in the fourth quarter of 2021.

In 2022, we expect international activity momentum to accelerate and
international pricing to move higher in certain geographies as a result of
higher activity. While large tenders remain competitive, we are already seeing
modest price increases on discrete work in underserved markets. In North
America, we expect E&P spending to increase, including net pricing gains for not
only our low-emissions equipment but also the rest of our fracturing fleet and
for our drilling, cementing, drill bits, and artificial lift businesses.
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                                             Part I. Item 2 | Results of 

Operations in 2021 Compared to

  Table of Contents                                                                          2020 (QTD)


OPERATING RESULTS IN 2021 COMPARED TO 2020

Three Months Ended September 30, 2021 Compared with Three Months Ended
September 30, 2020

                                     Three Months Ended
     Revenue:                           September 30           Favorable      Percentage
     Millions of dollars               2021         2020     (Unfavorable)      Change
     Completion and Production   $    2,136       $ 1,574   $          562          36  %
     Drilling and Evaluation          1,724         1,401              323          23
     Total revenue               $    3,860       $ 2,975   $          885          30  %

     By geographic region:
     North America               $    1,615       $   984   $          631          64  %
     Latin America                      624           380              244          64
     Europe/Africa/CIS                  676           649               27           4
     Middle East/Asia                   945           962              (17)         (2)
     Total revenue               $    3,860       $ 2,975   $          885          30  %


                                       Three Months Ended
  Operating income:                       September 30            Favorable      Percentage
  Millions of dollars                     2021          2020    (Unfavorable)      Change
  Completion and Production       $      322           $ 212   $          110          52  %
  Drilling and Evaluation                186             105               81          77
  Total                                  508             317              191          60
  Corporate and other                    (50)            (42)              (8)        (19)
  Impairments and other charges          (12)           (133)             121            n/m
  Total operating income          $      446           $ 142   $          304           214%
  n/m = not meaningful



Consolidated revenue was $3.9 billion in the third quarter of 2021, an increase
of $885 million, or 30%, as compared to the third quarter of 2020. Consolidated
operating income was $446 million during the third quarter of 2021, a $304
million increase from operating income of $142 million during the third quarter
of 2020. The increase in revenue was primarily driven by higher activity and
pricing for pressure pumping services and increases across multiple other
product service lines in North America land and Latin America, as well as
additional artificial lift activity in North America land. The Middle East/Asia
region grew drilling-related services and project management activity, the
Europe/Africa/CIS region improved cementing activity, wireline activity, testing
services, and well intervention, while pipeline services increased in China and
Russia. Partially offsetting these increases were lower completion tool sales in
the Eastern Hemisphere, less stimulation activity in the Middle East/Asia, and
decreased completion tool sales and stimulation activity in Canada. The increase
in operating income was due in part to the negative impact on third quarter 2020
operating income from $133 million of impairments and other charges that were
included in the results of that quarter, while the third quarter of 2021
benefited from higher commodity prices driving increased activity, higher
utilization, and improved operating leverage from the structural cost reductions
we implemented during 2020. Revenue from North America was 42% of consolidated
revenue in the third quarter of 2021 compared to 33% of consolidated revenue in
the third quarter of 2020.

Operating Segments

Completion and Production
Completion and Production revenue in the third quarter of 2021 was $2.1 billion,
an increase of $562 million, or 36%, when compared to the third quarter of 2020,
while operating income was $322 million, an increase of $110 million, or 52%.
These results were primarily due to an increase in pressure pumping services and
artificial lift activity in North America land, as well as multiple product
service lines in Latin America, and additional completion tool sales in the
Western Hemisphere. In addition, well intervention services increased globally,
pipeline services improved in China and Russia, and pressure pumping
                                                      HAL Q3 2021 FORM 10-Q | 20
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                                             Part I. Item 2 | Results of 

Operations in 2021 Compared to

  Table of Contents                                                                          2020 (QTD)


services increased in Europe/Africa/ CIS. The overall increase was partially offset by lower sales of finishing tools in the Eastern Hemisphere and
Canada, and lower stimulation activity in Middle East/Asia region and Canada.

Drilling and Evaluation
Drilling and Evaluation revenue in the third quarter of 2021 was $1.7 billion,
an increase of $323 million, or 23% when compared to the third quarter of 2020,
while operating income was $186 million, an increase of $81 million, or 77%.
These results were primarily driven by increases in drilling-related services,
wireline activity, project management activity, and testing services in the
Western Hemisphere, higher drilling-related services across the Middle East/Asia
region, the United Kingdom, and Nigeria, along with higher fluid services in
Russia. Also, project management activity rose in the Middle East, and testing
services and wireline activity increased in Europe/Africa/CIS. Partially
offsetting the increases were decreases in drilling-related services in Norway,
Saudi Arabia, and Asia, lower project management activity in India, lower
wireline activity in Saudi Arabia, the United Kingdom, and Australia, and less
drilling activity in the United Arab Emirates.

Geographical regions

North America
North America revenue in the third quarter of 2021 was $1.6 billion, a 64%
increase compared to the third quarter of 2020. This increase was primarily due
to increased activity across multiple product service lines in North America
land and the Gulf of Mexico, as well as increased drilling services in Canada.
Partially offsetting these increases were lower pressure pumping services and
completion tool sales in Canada, and lower stimulation activity in the Gulf of
Mexico.

Latin America
Latin America revenue in the third quarter of 2021 was $624 million, a 64%
increase compared to the third quarter of 2020, resulting from increased
activity across multiple product service lines in Argentina, Mexico, and Brazil,
additional fluid services and completion tool sales in Guyana, higher well
construction activity, well intervention services, and wireline activity in
Colombia, and improved project management and well construction activity in
Ecuador. Partially offsetting these increases were reduced completion tool sales
in Trinidad.

Europe/Africa/ CIS

Europe/Africa/CIS revenue in the third quarter of 2021 was $676 million, a 4%
increase compared to the third quarter of 2020, resulting primarily from
increased activity across multiple product service lines in West Africa, Angola,
and Mozambique, additional fluid activity and pipeline services in Russia,
improved well construction activity in the United Kingdom, and higher well
intervention services across the region. Partially offsetting these increases
were lower drilling-related services in Norway, decreases in multiple product
service lines in Azerbaijan, and lower completion tool sales in the United
Kingdom, Algeria and Russia.

Middle East/Asia
Middle East/Asia revenue in the third quarter of 2021 was $945 million, a 2%
decrease compared to the third quarter of 2020, largely resulting from a decline
in completion tool sales across the region, lower activity across multiple
product service lines in the United Arab Emirates, India, Saudi Arabia, Kuwait,
and Indonesia, and declines in stimulation and wireline activity in Australia.
Partially offsetting these declines were higher project management activity in
Oman, Saudi Arabia, and Iraq, increased well construction activity in Australia,
additional fluids activity in the Middle East, and improved pipeline services in
China.

Other Operating Items

Impairments and other charges. During the three months ended September 30, 2021,
we recognized $12 million of special charges. This includes $36 million of
depreciation catch-up expense related to assets previously classified as held
for sale related to our Pipeline and Process Services business, $15 million of
severance costs, and $35 million of other items, partially offset by a $74
million gain related to the closing of the structured transaction for our North
America real estate assets. During the three months ended September 30, 2020, we
recognized $133 million of severance costs and other charges to further adjust
our cost structure to market conditions. See Note 2 to the condensed
consolidated financial statements for further discussion on the third quarter of
2021 charges.

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                                             Part I. Item 2 | Results of 

Operations in 2021 Compared to

  Table of Contents                                                                          2020 (QTD)


Nonoperating Items

Effective tax rate. During the three months ended September 30, 2021, we
recorded a total income tax provision of $76 million on a pre-tax income of $316
million, resulting in an effective tax rate of 24% for the quarter. During the
three months ended September 30, 2020, we recorded a total income tax provision
of $18 million on a pre-tax loss of $1 million, resulting in an unusually high
negative effective tax rate for the quarter.
                                                      HAL Q3 2021 FORM 10-Q | 22
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                                             Part I. Item 2 | Results of 

Operations in 2021 Compared to

  Table of Contents                                                                          2020 (YTD)



Nine Months Ended September 30, 2021 Compared with Nine Months Ended
September 30, 2020
                                     Nine Months Ended
       Revenue:                         September 30         Favorable      Percentage
       Millions of dollars            2021        2020     (Unfavorable)      Change
       Completion and Production   $   6,054   $  6,029   $           25           -  %
       Drilling and Evaluation         4,964      5,179             (215)         (4)
       Total revenue               $  11,018   $ 11,208   $         (190)         (2) %

       By geographic region:
       North America               $   4,588   $  4,493   $           95           2  %
       Latin America                   1,693      1,242              451          36
       Europe/Africa/CIS               1,989      2,171             (182)         (8)
       Middle East/Asia                2,748      3,302             (554)        (17)
       Total revenue               $  11,018   $ 11,208   $         (190)         (2) %


                                       Nine Months Ended
     Operating income (loss):             September 30         Favorable      Percentage
     Millions of dollars                2021        2020     (Unfavorable)      Change
     Completion and Production       $     891   $    713   $          178          25  %
     Drilling and Evaluation               532        452               80          18
     Total                               1,423      1,165              258          22
     Corporate and other                  (161)      (152)              (9)         (6)
     Impairments and other charges         (12)    (3,353)           3,341            n/m
     Total operating income (loss)   $   1,250   $ (2,340)  $        3,590         153  %
     n/m = not meaningful



Consolidated revenue was $11.0 billion in the first nine months of 2021, a
decrease of $190 million, or 2%, as compared to the first nine months of 2020.
We reported operating income of $1.3 billion in the first nine months of 2021
compared to an operating loss of $2.3 billion during the first nine months of
2020. The decrease in revenue was primarily driven by lower activity associated
with completion tool sales globally, except in Latin America, drilling-related
services, project management activity, wireline activity, and testing services
in the Eastern Hemisphere, and pressure pumping services in Middle East/Asia.
Partially offsetting the decreases were increases in stimulation and artificial
lift activity in the Western Hemisphere, improved activity across multiple
product service lines in Latin America, and higher pipeline services in Asia and
the United Kingdom. Operating results in the first nine months of 2020 included
$3.4 billion of impairments and other charges while the first nine months of
2021 benefited from higher commodity pricing driving increased activity, higher
utilization, and operating leverage from 2020 structural cost reductions.
Revenue from North America was 42% of consolidated revenue in the first nine
months of 2021, compared to 40% of consolidated revenue in the first nine months
of 2020.

Operating Segments

Completion and Production
Completion and Production revenue in the first nine months of 2021 was $6.1
billion, an increase of $25 million compared to the first nine months of 2020.
This increase was primarily driven by a rise in stimulation and artificial lift
activity in the Western Hemisphere, higher pipeline services in China and the
United Kingdom, and well intervention services in Latin America. Partially
offsetting these increases were decreased pressure pumping services in Middle
East/Asia and lower completion tool sales globally. Operating income in the
first nine months of 2021 was $891 million, an increase of $178 million, or 25%,
compared to the first nine months of 2020, mainly driven by higher utilization
for pressure pumping in North America land and Latin America, increased well
intervention services in Latin America and Middle East/Asia, and improved
artificial lift activity in North America land. Partially offsetting these
increases to operating income were lower completion tool sales in the Eastern
Hemisphere, the Gulf of Mexico, and Canada.

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                                             Part I. Item 2 | Results of 

Operations in 2021 Compared to

  Table of Contents                                                                          2020 (YTD)


Drilling and Evaluation
Drilling and Evaluation revenue in the first nine months of 2021 was $5.0
billion, a decrease of $215 million, or 4%, compared to the first nine months of
2020, primarily related to reduced drilling-related services in the Eastern
Hemisphere, wireline activity in the Eastern Hemisphere and North America land,
and decreased project management activity in Iraq, India, and Europe/Africa/CIS.
Also, testing services were reduced in Saudi Arabia and software sales declined
globally. Partially offsetting these decreases were increased fluid services in
North America land and Latin America, improved drilling services in Canada and
Brazil, and increased wireline activity in Argentina. Operating income in the
first nine months of 2021 was $532 million, an increase of $80 million, or 18%,
compared to the first nine months of 2020 based in part on improved margins
related to project management activity in India and Saudi Arabia, as well as
higher drilling-related services in the Western Hemisphere and wireline activity
in Latin America. Offsetting these operating income improvements was a global
reduction of software sales.

Geographic Regions

North America
North America revenue in the first nine months of 2021 was $4.6 billion, a 2%
increase compared to the first nine months of 2020, driven by higher activity
and pricing across the region, primarily associated with stimulation activity
and drilling-related services. Artificial lift activity improved in North
America land and project management activity increased in the Gulf of Mexico.
These increases were partially offset by lower completion tool sales across the
region, along with reduced cementing and wireline activity.

Latin America
Latin America revenue in the first nine months of 2021 was $1.7 billion, a 36%
increase compared to the first nine months of 2020, resulting primarily from an
increase across multiple product service lines in Argentina, increased fluid
services in Brazil and the Caribbean, along with improved stimulation activity,
completion tool sales, testing services, and project management activity in
Mexico, additional drilling services in Brazil, and increased well intervention
services in Brazil and Colombia. Partially offsetting these increases were lower
completion tool sales in the Caribbean and lower software sales in Brazil.

Europe/Africa/ CIS

Europe/Africa/CIS revenue in the first nine months of 2021 was $2.0 billion, an
8% decrease from the first nine months of 2020, driven by a decrease across
multiple product service lines in Russia, the North Sea, Azerbaijan, and
Nigeria. These declines were partially offset by an increase in completion tool
sales in Norway and increased pipeline services in the the United Kingdom and
Russia, testing services in Algeria, and a slight improvement in stimulation
activity across the region.

Middle East/Asia
Middle East/Asia revenue in the first nine months of 2021 was $2.7 billion, a
17% decrease from the first nine months of 2020, resulting primarily from
reduced activity across multiple product service lines in Saudi Arabia and
United Arab Emirates, lower pressure pumping services, drilling-related
services, and completion tool sales across the region, reduced project
management activity in Iraq and India, and decreases in wireline activity in
Malaysia. Partially offsetting these decreases were improved pipeline services
in China and drilling services in Australia.

Other operating elements

Impairments and other charges. During the nine months ended September 30, 2021,
we recognized $12 million of special items. This includes $36 million of
depreciation catch-up expense related to assets previously classified as held
for sale related to our Pipeline and Process Services business, $15 million of
severance costs, and $35 million of other items, partially offset by a $74
million gain related to the closing of the structured transaction for our North
America real estate assets. This compares to $3.4 billion of impairments and
other charges in the nine months ended September 30, 2020 to further adjust our
cost structure to market conditions. These charges consisted primarily of asset
impairments, mostly associated with pressure pumping equipment and real estate
facilities, as well as inventory write-offs, severance costs, and other charges.
See Note 2 to the condensed consolidated financial statements for further
discussion on the third quarter of 2021 charges.

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                                             Part I. Item 2 | Results of 

Operations in 2021 Compared to

  Table of Contents                                                                          2020 (YTD)


Nonoperating Items

Effective tax rate. During the nine months ended September 30, 2021, we recorded
a total income tax provision of $193 million on a pre-tax income of $834
million, resulting in an effective tax rate of 23.2%. During the nine months
ended September 30, 2020, we recorded a total income tax benefit of $265 million
on pre-tax loss of $3.0 billion, resulting in an effective tax rate of 8.9%. The
unusual rate for the nine months ended September 30, 2020 was largely the result
of recording a valuation allowance against certain deferred tax assets in the
first quarter of 2020, primarily due to the unprecedented disruption in the oil
and gas industry.
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  Table of Contents           Part I. Item 2 | Forward-Looking Information


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.

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