# Halliburton (HAL) Financial Model Free Excel 3-statement financial model and company analysis for Halliburton. - Canonical: https://finamodel.com/companies/halliburton - Industry: Oil and Gas - Downloadable model: Yes - Excel download: https://finamodel.com/company-models/HAL.xlsx ## Model Purpose This financial model projects Halliburton's future earnings, cash flow generation, and equity valuation to help an equity research analyst determine a target price and investment recommendation based on global upstream oil and gas capital expenditure cycles. ## Company Overview Halliburton is one of the world's largest providers of products and services to the energy industry, assisting exploration and production companies throughout the lifecycle of the reservoir. The company operates through two primary business segments: Completion and Production (approximately 58% of revenue) and Drilling and Evaluation (approximately 42% of revenue). Geographically, the business is split between North America (roughly 42% of revenue) and International markets including Latin America, Europe/Africa/CIS, and Middle East/Asia. The business model is an asset-heavy oilfield services operation requiring significant investment in pressure pumping equipment and drilling tools, though management has increasingly focused on capital efficiency and digital solutions. Halliburton holds a leading competitive position globally, ranking as the top provider in North American hydraulic fracturing, competing primarily against SLB and Baker Hughes. Recently, the company navigated a softer North American market in 2025, recording $831 million in impairments, but maintained strong cash generation by returning 85% of free cash flow to shareholders. ## Revenue Deep Dive ### Completion and Production (C&P) - **Segment name**: Completion and Production - **Revenue driver formula**: "Active Frac Spreads x Revenue per Spread" (North America) and "Well Count x Completion Intensity" (International) - **Historical growth rate**: Fluctuates with commodity cycles; recently flat to slightly down (down 3% consolidated in 2025) due to North American capital discipline. - **Key growth levers and headwinds**: Driven by lateral lengths, frac stages, pumping intensity, and international offshore completion tool sales. Headwinds include E&P consolidation and strict capital discipline in US shale. - **Pricing dynamics**: Highly competitive spot pricing in US land; longer-term contractual pricing for international and offshore projects. - **Revenue recognition notes**: Recognised over time as services are rendered or upon delivery of consumable products (e.g., proppant, cement). - **Seasonality**: Q1 is typically weaker due to winter weather in North America; Q4 often sees a bump from year-end completion tool sales. ### Drilling and Evaluation (D&E) - **Segment name**: Drilling and Evaluation - **Revenue driver formula**: "Global Rig Count x Revenue per Rig" and "Software Licenses x Pricing" - **Historical growth rate**: Low to mid single-digit growth driven by international and offshore upcycles. - **Key growth levers and headwinds**: Driven by offshore exploration activity, complex well construction, wireline evaluation, and digital/software adoption (Landmark). - **Pricing dynamics**: Contractual, often tied to multi-year offshore drilling campaigns. - **Revenue recognition notes**: Service revenue is recognised as performed; software licenses are recognised upfront or over the subscription term. - **Seasonality**: Less seasonal than C&P, though Q4 can benefit from year-end software sales. ## Cost Structure ### Variable Costs / COGS - **Line-by-line breakdown**: Includes field labour, materials (proppant, chemicals, cement), equipment maintenance, and fuel. - **Gross margin range**: Typically ranges from 18% to 22% over the last 5 years. - **Key input costs**: Sand/proppant, specialty chemicals, steel, and diesel/electricity for fleets. - **How COGS scales**: Scales directly with field activity, though equipment reactivation or stacking introduces step-function costs. ### Operating Expenses - **R&D**: Typically 1.5% to 2.0% of revenue, focused on digital technologies, AI, and advanced completion tools. - **SG&A**: General corporate overhead, sales, and administrative headcount. - **Depreciation & Amortisation**: Significant due to the asset-heavy nature of pressure pumping and drilling equipment; typically 5% to 7% of revenue. - **Stock-Based Compensation**: Modest, typically around 0.5% to 1.0% of revenue. - **Restructuring / one-time charges**: Frequent during cyclical downturns; the company recorded $831 million in impairments and other charges in 2025. ### Margin Profile - **Gross margin**: 18% to 22%. - **EBITDA margin**: 19% to 22%. - **Operating margin**: Consolidated adjusted operating margin typically runs 13% to 15%. - **Segment margins**: C&P operating margin was 17% in 2025; D&E operating margin was 15% in 2025. ## Balance Sheet Structure - **Total assets**: Approximately $23 billion to $25 billion. - **Key asset categories**: Property, Plant, and Equipment (PP&E) is the largest component, representing the fleet of pressure pumping equipment, drilling rigs, and manufacturing facilities. - **Goodwill & intangibles**: Moderate, representing roughly 10% to 15% of assets, historically driven by older acquisitions. - **Working capital profile**: - **Days Sales Outstanding (DSO)**: 65 to 75 days. - **Days Inventory Outstanding (DIO)**: 45 to 55 days. - **Days Payable Outstanding (DPO)**: 50 to 60 days. - **Net working capital**: Typically positive and consumes cash during revenue upcycles (working capital build). - **PP&E**: Heavy maintenance capex is required to replace fluid ends and overhaul pumps. Useful lives range from 3 to 10 years for field equipment. - **Right-of-use assets**: Operating leases are present for real estate and some field equipment but are not the primary driver of the asset base. ## Capital Expenditure & Investment - **Capex as % of revenue**: Strictly managed to approximately 6% of revenue ($1.25 billion in 2025). - **Maintenance vs growth capex**: Heavily weighted towards maintenance and modernisation (e.g., upgrading fleets to electric or dual-fuel frac fleets) rather than capacity expansion. - **Major capex programmes**: Fleet electrification and automation technologies. - **Capitalised software**: Present for internal use and Landmark software development, but secondary to physical equipment. - **M&A pattern**: Primarily organic growth with occasional small bolt-on technology or specialty chemical acquisitions. ## Debt & Capital Structure - **Total debt**: Approximately $7.5 billion, with net debt around $6.1 billion. - **Debt/EBITDA ratio**: Very healthy at approximately 1.1x to 1.2x. - **Credit rating**: BBB+ (S&P), recently affirmed with a positive outlook. - **Key debt instruments**: Primarily unsecured senior notes. - **Maturity profile**: Well-laddered; the company retired $382 million of 3.8% notes due in November 2025. - **Interest rate profile**: Predominantly fixed-rate bonds. - **Share repurchase programme**: Highly active; repurchased $1.0 billion in shares in 2025. - **Dividend policy**: $0.17 per quarter ($0.68 annually), yielding roughly 2.0% to 2.5%. The target is to return at least 50% of free cash flow to shareholders. ## Cash Flow Characteristics - **Operating cash flow conversion**: Strong, with OCF typically exceeding Net Income due to high D&A and non-cash impairment add-backs. OCF was $2.9 billion in 2025. - **Free cash flow margin**: 8% to 11% of revenue ($1.85 billion FCF in 2025). - **Major non-cash items**: D&A, stock-based compensation, and periodic asset impairments. - **Working capital cash flow impact**: A use of cash during periods of international growth, but a source of cash when North American activity contracts. - **Capex intensity**: High absolute dollars but strictly capped at roughly 6% of revenue. ## Sheet Structure 1. **Summary**: Dashboard with target price, DCF output, key charts, and summary financials. 2. **Assumptions**: Hardcoded inputs for macro drivers (rig count, frac spreads), segment growth, margins, and capital allocation. 3. **Revenue_Build**: Revenue projected by segment (Completion and Production, Drilling and Evaluation) and cross-referenced by geography (North America, Latin America, Europe/Africa/CIS, Middle East/Asia). 4. **Income_Statement**: Consolidated GAAP income statement down to Net Income and EPS. 5. **Segment_Financials**: Operating income and margin schedules for C&P and D&E, reconciling to consolidated operating income. 6. **Balance_Sheet**: Assets, liabilities, and shareholders' equity. 7. **Working_Capital**: Schedules for receivables, inventory, and payables based on days outstanding. 8. **PP&E_and_Capex**: Waterfall for capital expenditures, depreciation, and net PP&E balance. 9. **Debt_Schedule**: Tranche-by-tranche debt balances, interest expense calculation, and maturity schedule. 10. **Cash_Flow**: Operating, investing, and financing cash flows, calculating Free Cash Flow. 11. **DCF_Valuation**: WACC calculation, terminal value, and implied share price. 12. **Returns_Analysis**: Dividend payments, share repurchases, and FCF payout ratio tracking. ## Key Financial Relationships 1. C&P Revenue = Prior Year C&P Revenue x (1 + C&P Growth Rate) 2. D&E Revenue = Prior Year D&E Revenue x (1 + D&E Growth Rate) 3. Total Revenue = C&P Revenue + D&E Revenue 4. C&P Operating Income = C&P Revenue x C&P Operating Margin 5. D&E Operating Income = D&E Revenue x D&E Operating Margin 6. Total Segment Operating Income = C&P Operating Income + D&E Operating Income 7. Consolidated Operating Income = Total Segment Operating Income - Corporate and Other Expenses - Impairments 8. Depreciation Expense = Beginning PP&E x Depreciation Rate 9. Capital Expenditures = Total Revenue x Capex % of Revenue 10. Free Cash Flow = Cash Flow from Operations - Capital Expenditures + Proceeds from Sales of PP&E 11. Share Repurchases = IF(FCF Payout Target > Dividend Paid, FCF Payout Target - Dividend Paid, 0) 12. Ending Shares Outstanding = Beginning Shares Outstanding - (Share Repurchases / Average Share Price) ## Cross-Sheet Dependencies - **Assumptions** feeds **Revenue_Build**, **Segment_Financials**, and **Working_Capital**. - **Revenue_Build** feeds the top line of the **Income_Statement** and drives **Working_Capital** balances. - **Segment_Financials** feeds operating income on the **Income_Statement**. - **PP&E_and_Capex** feeds D&A on the **Income_Statement** and **Cash_Flow**, and PP&E on the **Balance_Sheet**. - **Debt_Schedule** feeds interest expense on the **Income_Statement** and debt balances on the **Balance_Sheet**. Circularity risk exists here as interest expense impacts net income, which impacts cash flow, which dictates debt paydown, which in turn impacts interest expense. - **Cash_Flow** feeds the cash balance on the **Balance_Sheet** and provides the FCF figure for the **DCF_Valuation** and **Returns_Analysis**. ## Sign Convention - Revenue and income items are positive. - Expenses (COGS, SG&A, Interest Expense, Taxes) are entered as positive numbers and subtracted in subtotals. - Assets are positive; Liabilities and Equity are positive. - On the Cash Flow statement, cash inflows are positive, and cash outflows (capex, dividends, debt repayment) are negative. - Contra-asset accounts (Accumulated Depreciation) are positive and subtracted from gross assets. ## Things Most Likely to Go Wrong 1. Overestimating North American growth: The US land market is highly mature and E&P operators are strictly disciplined; the model should not assume a return to 2014-era growth rates. 2. Ignoring impairment charges: Halliburton frequently takes large non-cash charges (e.g., $831 million in 2025) which distort GAAP operating income. The model must separate adjusted operating income from GAAP. 3. Miscalculating Free Cash Flow: Halliburton defines FCF as Operating Cash Flow less Capex plus Proceeds from Sales of PP&E. Ensure the asset sale proceeds are included. 4. Capex intensity drift: Management strictly targets capex at approximately 6% of revenue. Allowing this to drift higher will incorrectly penalise FCF. 5. Circularity in share repurchases: The company targets returning 50%+ of FCF. If repurchases are modelled as a dynamic percentage of FCF, it creates a circular reference with EPS and share count. 6. Segment margin assumptions: C&P margins (historically 16-18%) and D&E margins (14-16%) behave differently depending on the cycle. Do not apply a single consolidated margin. 7. Working capital swings: NWC is a major driver of cash flow variance during inflection points in international activity. Ensure DSO and DIO are accurately linked to revenue. 8. Tariff and geopolitical impacts: The company noted $89 million in incremental tariff expenses in 2025. Models must account for geopolitical friction in international margins. ## Validation Checks 1. Consolidated Revenue Growth should align with global upstream E&P capex growth estimates. 2. C&P Operating Margin must stay within the 15% to 20% historical band. 3. D&E Operating Margin must stay within the 13% to 17% historical band. 4. Capex as a % of Revenue should equal approximately 6.0%. 5. Net Debt / EBITDA should remain between 1.0x and 1.5x. 6. Free Cash Flow conversion (FCF / Net Income) should be >100% due to high depreciation and non-cash charges. 7. Total Capital Returned to Shareholders (Dividends + Buybacks) should be >= 50% of Free Cash Flow. 8. Balance Sheet Check: Total Assets minus (Total Liabilities + Total Equity) must equal exactly zero. ## Key Assumptions (Default Values) | Assumption | Default Value | Unit | Rationale | |---|---|---|---| | C&P Revenue Growth | -2.0 | % | Reflects continued capital discipline in North American US land market | | D&E Revenue Growth | 2.0 | % | Reflects modest growth in international and offshore markets | | C&P Operating Margin | 17.0 | % | Aligns with actual reported 2025 C&P margin | | D&E Operating Margin | 15.0 | % | Aligns with actual reported 2025 D&E margin | | Corporate & Other Expense | 1.5 | % of Rev | Historical run-rate for unallocated corporate overhead | | Effective Tax Rate | 22.0 | % | Standard global effective tax rate for the company | | Capex as % of Revenue | 6.0 | % | Management's stated target and actual 2025 result | | Days Sales Outstanding (DSO) | 70 | Days | Based on historical receivables turnover | | Days Inventory Outstanding (DIO) | 50 | Days | Based on historical inventory management | | Days Payable Outstanding (DPO) | 55 | Days | Based on historical supplier payment terms | | Dividend per Share | 0.68 | $ | Annualised based on $0.17 quarterly dividend in late 2025 | | Share Repurchase Target | 60.0 | % of FCF | Aligns with recent policy of returning >50% of FCF to shareholders | | Cost of Debt | 5.5 | % | Weighted average interest rate on unsecured notes | | WACC | 10.5 | % | Typical discount rate for oilfield services sector | | Terminal Growth Rate | 1.5 | % | Long-term GDP growth, tempered by energy transition risks | ## Data Sources & Benchmarks - **SEC EDGAR**: Halliburton 10-K and 10-Q filings. - **Investor Relations**: Halliburton Q4 2025 Earnings Presentation and Annual Sustainability Report. - **Peers for benchmarking**: SLB (Schlumberger), BKR (Baker Hughes), WHD (Cactus), CHX (ChampionX). - **Industry Data**: Baker Hughes Rig Count, Primary Vision Frac Spread Count, Westwood Energy offshore EPC reports. - **Consensus Estimates**: FactSet or Bloomberg for forward revenue and EBITDA estimates. ## Sources - Halliburton Q4 2025 Earnings Release (January 21, 2026) - Halliburton 2025 Investor Presentation - S&P Global Ratings: Halliburton Co. 'BBB+' Rating Affirmed (February 2025) - Seeking Alpha: Halliburton Stock Analysis (March 2025) - StockTitan: Halliburton 2025 Revenue and Proxy Outlines --- ## Frequently asked questions ### What does Halliburton do in the energy industry? Halliburton is one of the world's largest providers of products and services to the energy industry, assisting exploration and production companies throughout the lifecycle of the reservoir. The company operates through two primary business segments: Completion and Production, and Drilling and Evaluation. ### What are Halliburton's main revenue sources? Halliburton generates revenue primarily from its Completion and Production segment, which accounts for approximately 58% of its total revenue, and its Drilling and Evaluation segment, contributing about 42%. Geographically, revenue is split between North America and various international markets. ### How does Halliburton manage its capital expenditures? Halliburton strictly manages its capital expenditures to approximately 6% of revenue, which was $1.25 billion in 2025. These investments are heavily weighted towards maintenance and modernization, such as upgrading fleets to electric or dual-fuel frac fleets, rather than capacity expansion. ### What are the key assumptions in Halliburton's financial model? Key assumptions in Halliburton's financial model include a revenue growth rate of approximately 0.67% and COGS as 55% of revenue. Other significant assumptions are R&D at 1.9% of revenue, SGA at 1.15% of revenue, and a tax rate of about 14.35%. The model also considers Capex at 5.61% of revenue and Net Working Capital at 27.5% of revenue. ### What is the purpose of Halliburton's financial model? The financial model projects Halliburton's future earnings, cash flow generation, and equity valuation. Its primary purpose is to help an equity research analyst determine a target price and investment recommendation based on global upstream oil and gas capital expenditure cycles. ### Where can I download a financial model for Halliburton? A downloadable Excel financial model for Halliburton is available, projecting financials from FY2026 to FY2030. This general corporate model can be used to analyze the company's performance and valuation, incorporating key assumptions about its operations. [Interactive forecast calculator](https://finamodel.com/companies/halliburton/forecast)