Large
accelerated
Filer X
|
Accelerated
filer
|
Non-accelerated
filer
|
Page
No.
|
||
PART
I.
|
FINANCIAL
INFORMATION
|
|
Item
1.
|
Financial
Statements
|
3-5
|
- Condensed
Consolidated Statements of Operations
|
3
|
|
- Condensed
Consolidated Balance Sheets
|
4
|
|
- Condensed
Consolidated Statements of Cash Flows
|
5
|
|
- Notes
to Condensed Consolidated Financial Statements
|
6-19
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and
|
|
Results
of Operations
|
20-44
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
45
|
Item
4.
|
Controls
and Procedures
|
45
|
PART
II.
|
OTHER
INFORMATION
|
|
Item
1.
|
Legal
Proceedings
|
46
|
Item
1(a).
|
Risk
Factors
|
46
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
46
|
Item
3.
|
Defaults
Upon Senior Securities
|
46
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
47-48
|
Item
5.
|
Other
Information
|
48
|
Item
6.
|
Exhibits
|
48
|
Signatures
|
49
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June
30
|
June
30
|
|||||||||||||||
Millions
of dollars and shares except per share data
|
2007
|
2006
|
2007
|
2006
|
||||||||||||
Revenue:
|
||||||||||||||||
Services
|
$ |
2,744
|
$ |
2,312
|
$ |
5,266
|
$ |
4,507
|
||||||||
Product
sales
|
991
|
804
|
1,891
|
1,547
|
||||||||||||
Total
revenue
|
3,735
|
3,116
|
7,157
|
6,054
|
||||||||||||
Operating
costs and expenses:
|
||||||||||||||||
Cost
of services
|
1,980
|
1,630
|
3,797
|
3,187
|
||||||||||||
Cost
of sales
|
829
|
654
|
1,578
|
1,267
|
||||||||||||
General
and administrative
|
82
|
73
|
151
|
159
|
||||||||||||
Gain
on sale of business assets, net
|
(49 | ) | (1 | ) | (50 | ) | (11 | ) | ||||||||
Total
operating costs and expenses
|
2,842
|
2,356
|
5,476
|
4,602
|
||||||||||||
Operating
income
|
893
|
760
|
1,681
|
1,452
|
||||||||||||
Interest
expense
|
(41 | ) | (42 | ) | (79 | ) | (84 | ) | ||||||||
Interest
income
|
36
|
35
|
74
|
58
|
||||||||||||
Other,
net
|
(2 | ) | (1 | ) | (5 | ) |
1
|
|||||||||
Income
from continuing operations before income taxes
|
||||||||||||||||
and
minority
interest
|
886
|
752
|
1,671
|
1,427
|
||||||||||||
Provision
for income taxes
|
(284 | ) | (245 | ) | (543 | ) | (468 | ) | ||||||||
Minority
interest in net income of subsidiaries
|
(7 | ) | (9 | ) | (4 | ) | (12 | ) | ||||||||
Income
from continuing operations
|
595
|
498
|
1,124
|
947
|
||||||||||||
Income
from discontinued operations, net of income tax
|
||||||||||||||||
(provision)
benefit of $19,
$(27), $(11), and $(62)
|
935
|
93
|
958
|
132
|
||||||||||||
Net
income
|
$ |
1,530
|
$ |
591
|
$ |
2,082
|
$ |
1,079
|
||||||||
Basic
income per share:
|
||||||||||||||||
Income
from continuing operations
|
$ |
0.66
|
$ |
0.49
|
$ |
1.18
|
$ |
0.92
|
||||||||
Income
from discontinued operations, net
|
1.03
|
0.09
|
1.01
|
0.13
|
||||||||||||
Net
income per share
|
$ |
1.69
|
$ |
0.58
|
$ |
2.19
|
$ |
1.05
|
||||||||
Diluted
income per share:
|
||||||||||||||||
Income
from continuing operations
|
$ |
0.63
|
$ |
0.47
|
$ |
1.14
|
$ |
0.89
|
||||||||
Income
from discontinued operations, net
|
0.99
|
0.08
|
0.98
|
0.12
|
||||||||||||
Net
income per share
|
$ |
1.62
|
$ |
0.55
|
$ |
2.12
|
$ |
1.01
|
||||||||
Cash
dividends per share
|
$ |
0.09
|
$ |
0.075
|
$ |
0.165
|
$ |
0.15
|
||||||||
Basic
weighted average common shares outstanding
|
905
|
1,026
|
949
|
1,025
|
||||||||||||
Diluted
weighted average common shares outstanding
|
942
|
1,070
|
983
|
1,069
|
June
30,
|
December
31,
|
|||||||
Millions
of dollars and shares except per share data
|
2007
|
2006
|
||||||
Assets
|
||||||||
Current
assets:
|
||||||||
Cash
and equivalents
|
$ |
1,348
|
$ |
2,918
|
||||
Receivables
(less allowance for bad debts of $51 and $40)
|
2,948
|
2,629
|
||||||
Inventories
|
1,500
|
1,235
|
||||||
Investments
in marketable securities
|
875
|
20
|
||||||
Current
deferred income taxes
|
217
|
205
|
||||||
Current
assets of discontinued operations
|
–
|
3,898
|
||||||
Other
current assets
|
384
|
285
|
||||||
Total
current assets
|
7,272
|
11,190
|
||||||
Property,
plant, and equipment, net of accumulated depreciation of $3,910 and
$3,793
|
2,988
|
2,557
|
||||||
Goodwill
|
594
|
486
|
||||||
Noncurrent
deferred income taxes
|
430
|
448
|
||||||
Noncurrent
assets of discontinued operations
|
–
|
1,497
|
||||||
Other
assets
|
705
|
682
|
||||||
Total
assets
|
$ |
11,989
|
$ |
16,860
|
||||
Liabilities
and Shareholders’ Equity
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$ |
856
|
$ |
655
|
||||
Accrued
employee compensation and benefits
|
447
|
496
|
||||||
Income
tax payable
|
215
|
146
|
||||||
Deferred
revenue
|
198
|
171
|
||||||
Current
maturities of long-term debt
|
11
|
26
|
||||||
Current
liabilities of discontinued operations
|
–
|
2,831
|
||||||
Other
current liabilities
|
439
|
409
|
||||||
Total
current liabilities
|
2,166
|
4,734
|
||||||
Long-term
debt
|
2,784
|
2,783
|
||||||
Employee
compensation and benefits
|
491
|
474
|
||||||
Noncurrent
liabilities of discontinued operations
|
–
|
981
|
||||||
Other
liabilities
|
619
|
443
|
||||||
Total
liabilities
|
6,060
|
9,415
|
||||||
Minority
interest in consolidated subsidiaries
|
71
|
69
|
||||||
Shareholders’
equity:
|
||||||||
Common
shares, par value $2.50 per share – authorized 2,000 shares, issued 1,061
and 1,060
|
||||||||
shares
|
2,653
|
2,650
|
||||||
Paid-in
capital in excess of par value
|
1,662
|
1,689
|
||||||
Accumulated
other comprehensive income (loss)
|
(178 | ) | (437 | ) | ||||
Retained
earnings
|
6,942
|
5,051
|
||||||
11,079
|
8,953
|
|||||||
Less
171 and 62 shares of treasury stock, at cost
|
5,221
|
1,577
|
||||||
Total
shareholders’ equity
|
5,858
|
7,376
|
||||||
Total
liabilities and shareholders’ equity
|
$ |
11,989
|
$ |
16,860
|
Six
Months Ended
|
||||||||
June
30
|
||||||||
Millions
of dollars
|
2007
|
2006
|
||||||
Cash
flows from operating activities:
|
||||||||
Net
income
|
$ |
2,082
|
$ |
1,079
|
||||
Adjustments
to reconcile net income to net cash from operations:
|
||||||||
Income
from discontinued operations
|
(958 | ) | (132 | ) | ||||
Depreciation,
depletion, and amortization
|
271
|
234
|
||||||
Provision
(benefit) for deferred income taxes, including $(15) and $(4) related
to
discontinued
|
||||||||
operations
|
(5 | ) |
371
|
|||||
Gain
on sale of assets
|
(50 | ) | (20 | ) | ||||
Other
changes:
|
||||||||
Receivables
|
(225 | ) | (187 | ) | ||||
Inventories
|
(263 | ) | (164 | ) | ||||
Accounts
payable
|
158
|
36
|
||||||
Contributions
to pension plans
|
(22 | ) | (49 | ) | ||||
Other
|
93
|
(97 | ) | |||||
Cash
flows from continuing operations
|
1,081
|
1,071
|
||||||
Cash
flows from discontinued operations
|
(56 | ) | (5 | ) | ||||
Total
cash flows from operating activities
|
1,025
|
1,066
|
||||||
Cash
flows from investing activities:
|
||||||||
Capital
expenditures
|
(682 | ) | (339 | ) | ||||
Sales
of property, plant, and equipment
|
84
|
64
|
||||||
Dispositions
(acquisitions) of business assets, net of cash acquired or
disposed
|
(125 | ) |
7
|
|||||
Sales
(purchases) of short-term investments in marketable securities,
net
|
(842 | ) |
–
|
|||||
Investments
– restricted cash
|
49
|
–
|
||||||
Other
investing activities
|
(13 | ) | (6 | ) | ||||
Cash
flows from continuing operations
|
(1,529 | ) | (274 | ) | ||||
Cash
flows from discontinued operations
|
(13 | ) |
238
|
|||||
Total
cash flows from investing activities
|
(1,542 | ) | (36 | ) | ||||
Cash
flows from financing activities:
|
||||||||
Proceeds
from exercises of stock options
|
53
|
117
|
||||||
Payments
to reacquire common stock
|
(926 | ) | (190 | ) | ||||
Borrowings
(repayments) of short-term debt, net
|
(1 | ) | (10 | ) | ||||
Payments
of long-term debt
|
(2 | ) | (48 | ) | ||||
Payments
of dividends to shareholders
|
(157 | ) | (155 | ) | ||||
Tax
benefit from exercise of options and restricted stock
|
15
|
–
|
||||||
Other
financing activities
|
(1 | ) | (2 | ) | ||||
Cash
flows from continuing operations
|
(1,019 | ) | (288 | ) | ||||
Cash
flows from discontinued operations
|
(18 | ) |
9
|
|||||
Total
cash flows from financing activities
|
(1,037 | ) | (279 | ) | ||||
Effect
of exchange rate changes on cash
|
(16 | ) | (9 | ) | ||||
Increase
(decrease) in cash and equivalents
|
(1,570 | ) |
742
|
|||||
Cash
and equivalents at beginning of period
|
2,918
|
2,001
|
||||||
Cash
and equivalents at end of period
|
$ |
1,348
|
$ |
2,743
|
||||
Supplemental
disclosure of cash flow information:
|
||||||||
Cash
payments during the period for:
|
||||||||
Interest
from continuing operations
|
$ |
72
|
$ |
84
|
||||
Income
taxes from continuing operations
|
$ |
528
|
$ |
127
|
|
-
|
the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements;
and
|
|
-
|
the
reported amounts of revenue and expenses during the reporting
period.
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June
30
|
June
30
|
|||||||||||||||
Millions
of dollars
|
2007
|
2006
|
2007
|
2006
|
||||||||||||
Revenue
|
$ |
-
|
$ |
2,429
|
$ |
2,250
|
$ |
4,675
|
||||||||
Operating
income
|
$ |
-
|
$ | (40 | ) | $ |
62
|
$ |
22
|
|||||||
Net
income
|
$ |
-
|
$ |
94
|
$ | 23 | (a) | $ |
131
|
|
(a)
|
Net
income for the six months ended June 30, 2007 represents our 81%
share of
KBR, Inc.’s results.
|
|
-
|
fines
or other monetary penalties or direct monetary damages, including
disgorgement, as a result of a claim made or assessed by a governmental
authority in the United States, the United Kingdom, France, Nigeria,
Switzerland, and/or Algeria, or a settlement thereof, related to
alleged
or actual violations occurring prior to November 20, 2006 of the
United
States Foreign Corrupt Practices Act (FCPA) or particular, analogous
applicable foreign statutes, laws, rules, and regulations in connection
with investigations pending as of that date, including with respect
to the
construction and subsequent expansion by TSKJ of a natural gas
liquefaction complex and related facilities at Bonny Island in Rivers
State, Nigeria; and
|
|
-
|
all
out-of-pocket cash costs and expenses, or cash settlements or cash
arbitration awards in lieu thereof, KBR may incur after the effective
date
of the master separation agreement as a result of the replacement
of the
subsea flowline bolts installed in connection with the Barracuda-Caratinga
project. See Note 10 for further discussion of these
matters.
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June
30
|
June
30
|
|||||||||||||||
Millions
of dollars
|
2007
|
2006
|
2007
|
2006
|
||||||||||||
Revenue:
|
||||||||||||||||
Production
Optimization
|
$ |
1,533
|
$ |
1,292
|
$ |
2,870
|
$ |
2,488
|
||||||||
Fluid
Systems
|
1,045
|
870
|
2,038
|
1,706
|
||||||||||||
Drilling
and Formation Evaluation
|
953
|
774
|
1,870
|
1,499
|
||||||||||||
Digital
and Consulting Solutions
|
204
|
180
|
379
|
361
|
||||||||||||
Total
revenue
|
$ |
3,735
|
$ |
3,116
|
$ |
7,157
|
$ |
6,054
|
||||||||
Operating
income (loss):
|
||||||||||||||||
Production
Optimization
|
$ |
403
|
$ |
368
|
$ |
728
|
$ |
701
|
||||||||
Fluid
Systems
|
200
|
201
|
414
|
390
|
||||||||||||
Drilling
and Formation Evaluation
|
235
|
194
|
491
|
373
|
||||||||||||
Digital
and Consulting Solutions
|
117
|
51
|
167
|
101
|
||||||||||||
General
corporate
|
(62 | ) | (54 | ) | (119 | ) | (113 | ) | ||||||||
Total
operating income
|
$ |
893
|
$ |
760
|
$ |
1,681
|
$ |
1,452
|
June
30,
|
December
31,
|
|||||||
Millions
of dollars
|
2007
|
2006
|
||||||
Finished
products and parts
|
$ |
987
|
$ |
883
|
||||
Raw
materials and supplies
|
396
|
256
|
||||||
Work
in process
|
117
|
96
|
||||||
Total
|
$ |
1,500
|
$ |
1,235
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June
30
|
June
30
|
|||||||||||||||
Millions
of dollars
|
2007
|
2006
|
2007
|
2006
|
||||||||||||
Net
income
|
$ |
1,530
|
$ |
591
|
$ |
2,082
|
$ |
1,079
|
||||||||
Cumulative
translation adjustments
|
1
|
43
|
–
|
37
|
||||||||||||
Realization
of (gains) losses included in net income
|
(24 | ) | (19 | ) | (24 | ) | (16 | ) | ||||||||
Net
cumulative translation adjustments
|
(23 | ) |
24
|
(24 | ) |
21
|
||||||||||
Realized
pension liability adjustments
|
271
|
–
|
282
|
–
|
||||||||||||
Unrealized
net gains (losses) on investments
|
||||||||||||||||
and
derivatives
|
–
|
15
|
1
|
21
|
||||||||||||
Realization
of (gains) losses on investments and
|
||||||||||||||||
derivatives
included in net
income
|
–
|
(2 | ) |
–
|
–
|
|||||||||||
Net
unrealized gains (losses) on investments
|
||||||||||||||||
and
derivatives
|
–
|
13
|
1
|
21
|
||||||||||||
Total
comprehensive income
|
$ |
1,778
|
$ |
628
|
$ |
2,341
|
$ |
1,121
|
June
30,
|
December
31,
|
|||||||
Millions
of dollars
|
2007
|
2006
|
||||||
Cumulative
translation adjustments
|
$ | (62 | ) | $ | (38 | ) | ||
Pension
liability adjustments
|
(118 | ) | (400 | ) | ||||
Unrealized
gains (losses) on investments and derivatives
|
2
|
1
|
||||||
Total
accumulated other comprehensive income
|
$ | (178 | ) | $ | (437 | ) |
|
-
|
the
Comprehensive Environmental Response, Compensation, and Liability
Act;
|
|
-
|
the
Resources Conservation and Recovery
Act;
|
|
-
|
the
Clean Air Act;
|
|
-
|
the
Federal Water Pollution Control Act;
and
|
|
-
|
the
Toxic Substances Control Act.
|
Three
Months
|
Six
Months
|
|||||||||||||||
Ended
|
Ended
|
|||||||||||||||
June
30
|
June
30
|
|||||||||||||||
Millions
of shares
|
2007
|
2006
|
2007
|
2006
|
||||||||||||
Basic
weighted average common shares outstanding
|
905
|
1,026
|
949
|
1,025
|
||||||||||||
Dilutive
effect of:
|
||||||||||||||||
Convertible
senior notes
premium
|
29
|
32
|
26
|
31
|
||||||||||||
Stock
options
|
6
|
9
|
6
|
10
|
||||||||||||
Restricted
stock
|
2
|
3
|
2
|
3
|
||||||||||||
Diluted
weighted average common shares outstanding
|
942
|
1,070
|
983
|
1,069
|
Unrecognized
|
Interest
|
|||||||
Millions
of dollars
|
Tax
Benefits
|
and
Penalties
|
||||||
Balance
at January 1, 2007
|
$ |
266
|
$ |
47
|
||||
Increase
(decrease) in prior year tax positions
|
(8 | ) |
1
|
|||||
Reclassification
to discontinued operations
|
(24 | ) | (13 | ) | ||||
Balance
at June 30, 2007
|
$ |
234
|
$ |
35
|
Three
Months Ended June 30
|
||||||||||||||||
2007
|
2006
|
|||||||||||||||
Millions
of dollars
|
United
States
|
International
|
United
States
|
International
|
||||||||||||
Components
of net periodic
|
||||||||||||||||
benefit
cost:
|
||||||||||||||||
Service
cost
|
$ |
-
|
$ |
6
|
$ |
-
|
$ |
6
|
||||||||
Interest
cost
|
1
|
10
|
1
|
8
|
||||||||||||
Expected
return on plan assets
|
(1 | ) | (9 | ) | (1 | ) | (7 | ) | ||||||||
Recognized
actuarial loss (gain)
|
2
|
2
|
1
|
2
|
||||||||||||
Net
periodic benefit cost
|
$ |
2
|
$ |
9
|
$ |
1
|
$ |
9
|
Six
Months Ended June 30
|
||||||||||||||||
2007
|
2006
|
|||||||||||||||
Millions
of dollars
|
United
States
|
International
|
United
States
|
International
|
||||||||||||
Components
of net periodic
|
||||||||||||||||
benefit
cost:
|
||||||||||||||||
Service
cost
|
$ |
-
|
$ |
12
|
$ |
-
|
$ |
11
|
||||||||
Interest
cost
|
3
|
21
|
3
|
17
|
||||||||||||
Expected
return on plan assets
|
(3 | ) | (18 | ) | (3 | ) | (14 | ) | ||||||||
Settlement/curtailments
|
-
|
(1 | ) |
-
|
-
|
|||||||||||
Recognized
actuarial loss (gain)
|
3
|
4
|
3
|
4
|
||||||||||||
Net
periodic benefit cost
|
$ |
3
|
$ |
18
|
$ |
3
|
$ |
18
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June
30
|
June
30
|
|||||||||||||||
Millions
of dollars
|
2007
|
2006
|
2007
|
2006
|
||||||||||||
Components
of net periodic
|
||||||||||||||||
benefit
cost:
|
||||||||||||||||
Service
cost
|
$ |
-
|
$ |
1
|
$ |
-
|
$ |
1
|
||||||||
Interest
cost
|
2
|
2
|
4
|
4
|
||||||||||||
Net
periodic benefit cost
|
$ |
2
|
$ |
3
|
$ |
4
|
$ |
5
|
|
-
|
fines
or other monetary penalties or direct monetary damages, including
disgorgement, as a result of a claim made or assessed by a governmental
authority in the United States, the United Kingdom, France, Nigeria,
Switzerland, and/or Algeria, or a settlement thereof, related to
alleged
or actual violations occurring prior to November 20, 2006 of the
United
States Foreign Corrupt Practices Act (FCPA) or particular, analogous
applicable foreign statutes, laws, rules, and regulations in connection
with investigations pending as of that date, including with respect
to the
construction and subsequent expansion by TSKJ of a natural gas
liquefaction complex and related facilities at Bonny Island in Rivers
State, Nigeria; and
|
|
-
|
all
out-of-pocket cash costs and expenses, or cash settlements or cash
arbitration awards in lieu thereof, KBR may incur after the effective
date
of the master separation agreement as a result of the replacement
of the
subsea flowline bolts installed in connection with the Barracuda-Caratinga
project. See Note 10 to our condensed consolidated financial
statements for further discussion of these
matters.
|
|
-
|
maintaining
optimal utilization of our equipment and
resources;
|
|
-
|
managing
pricing, as the market allows, for our services and
products;
|
|
-
|
leveraging
our technologies to provide our customers with the ability to more
efficiently drill and complete their wells and to increase their
productivity. To that end,
we have
plans for three international research and development centers with
global
technology and training missions;
|
|
-
|
expanding
our manufacturing capability and capacity with new manufacturing
plants,
such as the one in Monterrey, Mexico that opened in the second quarter
of
2007 and three others in Brazil, Malaysia, and Singapore expected
to open
later this year;
|
|
-
|
hiring
and training additional personnel to meet the increased demand for
our
services;
|
|
-
|
pursuing
strategic acquisitions in line with our core products and services
to
expand our portfolio in key geographic areas. Consistent with
this objective:
|
|
-
|
in
July 2007, we entered into a definitive agreement to purchase the
entire
share capital of OOO Burservice, a leading provider of directional
drilling services in Russia;
|
|
-
|
in
May 2007, we acquired the intellectual property, assets, and existing
business associated with Vector Magnetics LLC’s active ranging technology
for steam-assisted gravity drainage
applications;
|
|
-
|
in
April 2007, we entered into a definitive agreement to purchase the
United
Kingdom-based PSL Energy Services Limited, a leading eastern hemisphere
provider of process, pipeline, and well intervention
services. We expect to close on this acquisition in the third
quarter of 2007; and
|
|
-
|
in
January 2007, we acquired Ultraline Services Corporation, a provider
of
wireline services in Canada;
|
|
-
|
increasing
capital spending, primarily directed toward eastern hemisphere operations
for service equipment additions and infrastructure related to recent
project wins.
|
Millions
of dollars
|
||||
July
1 through December 31, 2007
|
$ |
23
|
||
2008
|
67
|
|||
2009
|
132
|
|||
2010
|
16
|
|||
Total
|
$ |
238
|
Three
Months Ended
|
Year
Ended
|
|||||||||||
June
30
|
December
31
|
|||||||||||
Average
Oil Prices (dollars per barrel)
|
2007
|
2006
|
2006
|
|||||||||
West
Texas Intermediate
|
$ |
64.59
|
$ |
70.52
|
$ |
66.17
|
||||||
United
Kingdom Brent
|
68.63
|
69.58
|
65.35
|
|||||||||
Average
United States Gas Prices (dollars per million
British
|
||||||||||||
thermal
units, or
mmBtu)
|
||||||||||||
Henry
Hub
|
$ |
7.65
|
$ |
6.59
|
$ |
6.81
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June
30
|
June
30
|
|||||||||||||||
Land
vs. Offshore
|
2007
|
2006
|
2007
|
2006
|
||||||||||||
United
States:
|
||||||||||||||||
Land
|
1,679
|
1,536
|
1,665
|
1,487
|
||||||||||||
Offshore
|
77
|
97
|
80
|
89
|
||||||||||||
Total
|
1,756
|
1,633
|
1,745
|
1,576
|
||||||||||||
Canada:
|
||||||||||||||||
Land
|
136
|
279
|
333
|
471
|
||||||||||||
Offshore
|
3
|
3
|
3
|
3
|
||||||||||||
Total
|
139
|
282
|
336
|
474
|
||||||||||||
International
(excluding Canada):
|
||||||||||||||||
Land
|
710
|
643
|
705
|
636
|
||||||||||||
Offshore
|
292
|
270
|
287
|
269
|
||||||||||||
Total
|
1,002
|
913
|
992
|
905
|
||||||||||||
Worldwide
total
|
2,897
|
2,828
|
3,073
|
2,955
|
||||||||||||
Land
total
|
2,525
|
2,458
|
2,703
|
2,594
|
||||||||||||
Offshore
total
|
372
|
370
|
370
|
361
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June
30
|
June
30
|
|||||||||||||||
Oil
vs. Gas
|
2007
|
2006
|
2007
|
2006
|
||||||||||||
United
States:
|
||||||||||||||||
Oil
|
284
|
268
|
279
|
250
|
||||||||||||
Gas
|
1,472
|
1,365
|
1,466
|
1,326
|
||||||||||||
Total
|
1,756
|
1,633
|
1,745
|
1,576
|
||||||||||||
Canada:
|
||||||||||||||||
Oil
|
65
|
65
|
130
|
95
|
||||||||||||
Gas
|
74
|
217
|
206
|
379
|
||||||||||||
Total
|
139
|
282
|
336
|
474
|
||||||||||||
International
(excluding Canada):
|
||||||||||||||||
Oil
|
781
|
698
|
772
|
694
|
||||||||||||
Gas
|
221
|
215
|
220
|
211
|
||||||||||||
Total
|
1,002
|
913
|
992
|
905
|
||||||||||||
Worldwide
total
|
2,897
|
2,828
|
3,073
|
2,955
|
||||||||||||
Oil
total
|
1,130
|
1,031
|
1,181
|
1,039
|
||||||||||||
Gas
total
|
1,767
|
1,797
|
1,892
|
1,916
|
|
-
|
continued
growth in worldwide petroleum demand, despite high oil
prices;
|
|
-
|
projected
production growth in non-Organization of Petroleum Exporting Countries
(non-OPEC) supplies is not expected to accommodate world wide demand
growth;
|
|
-
|
OPEC’s
commitment to control production;
|
|
-
|
modest
increases in OPEC’s current and forecasted production capacity;
and
|
|
-
|
geopolitical
tensions in major oil-exporting
nations.
|
|
-
|
we
have opened a corporate office in Dubai, United Arab Emirates, allowing
us
to focus more attention on customer relationships in that part of
the
world, particularly with national oil
companies;
|
|
-
|
in
order to continue to supply our customers with leading-edge services
and
products, we plan to increase our technology spending by approximately
34%
during 2007 as compared to the prior year. We have plans for
three new international research and development centers with global
technology and training missions. The first will open in Pune,
India in the third quarter of 2007, and the second facility, which
will be
in Singapore, is expected to open during the first half of
2008. The location of the third facility is currently being
determined;
|
|
-
|
we
are expanding our manufacturing capability and capacity during 2007
to
meet the increasing demands for our services and products. In
the second quarter of 2007, we opened a manufacturing plant in Mexico,
and
later this year we plan to open additional plants in Brazil, Singapore,
and Malaysia. Having manufacturing facilities closer to our
worksites will allow us to more efficiently deploy equipment to our
field
operations, as well as increase our use of local people and
materials;
|
|
-
|
as
our workforce becomes more global, the need for regional training
centers
increases. To meet the increasing need for technical training,
we opened a new training center in Tyumen, Russia during the first
quarter
of 2007. We have also recently expanded training centers in
Malaysia, Egypt, and Mexico;
|
|
-
|
part
of our growth strategy includes select acquisitions that will enhance
or
augment our current portfolio of products and services, including
those
with unique technologies or distribution networks in areas where
we do not
already have large operations;
|
|
-
|
in
January 2007, we acquired Ultraline Services Company, a provider
of
wireline services in Canada. Prior to this acquisition, we did
not have meaningful wireline and perforating operations in
Canada;
|
|
-
|
in
April 2007, we entered into a definitive agreement to purchase PSL
Energy
Services Limited, a leading eastern hemisphere provider of process,
pipeline, and well intervention services. This acquisition will
increase our eastern hemisphere production enhancement operations
significantly, putting us in a strong position in pipeline processing
services both in the eastern hemisphere and
globally;
|
|
-
|
in
May 2007, we acquired the intellectual property, assets, and existing
business associated with Vector Magnetics LLC’s active ranging technology
for steam-assisted gravity drainage applications;
and
|
|
-
|
in
July 2007, we entered into a definitive agreement to purchase the
entire
share capital of OOO Burservice, a leading provider of directional
drilling services in Russia.
|
|
-
|
the
Khurais project in Saudi Arabia, which was awarded in
mid-2006. This large contract is progressing well, and we now
believe the project will reach its peak during the first quarter
of
2008;
|
|
-
|
a
contract to provide hydraulic fracturing services on the Right Bank
of the
Priobskye field in Siberia. The scope of work includes
providing services for 327 wells;
|
|
-
|
a
multiservices contract for work in the Tyumen region of
Russia. We will be providing drilling fluids, waste management,
cementing, drill bits, directional drilling, and logging-while-drilling
services;
|
|
-
|
a
contract to provide acidizing, acid fracturing, water control, and
nitrogen stimulation services for a customer in the Bay of Campeche,
Mexico;
|
|
-
|
a
contract to provide deepwater sand control completion technology
in two
offshore fields of India;
|
|
-
|
a
contract to provide completion products and services to a group of
energy
companies for operations throughout Malaysia for a term of five
years;
|
|
-
|
a
contract to provide exploration and development testing services
in high
pressure, high temperature environments in Latin America;
and
|
|
-
|
a
five-year contract for sand control completions for over 200 wells
in
offshore China.
|
Three
Months Ended
|
||||||||||||||||
REVENUE:
|
June
30
|
Increase
|
Percentage
|
|||||||||||||
Millions
of dollars
|
2007
|
2006
|
(Decrease)
|
Change
|
||||||||||||
Production
Optimization
|
$ |
1,533
|
$ |
1,292
|
$ |
241
|
19 | % | ||||||||
Fluid
Systems
|
1,045
|
870
|
175
|
20
|
||||||||||||
Drilling
and Formation Evaluation
|
953
|
774
|
179
|
23
|
||||||||||||
Digital
and Consulting Solutions
|
204
|
180
|
24
|
13
|
||||||||||||
Total
revenue
|
$ |
3,735
|
$ |
3,116
|
$ |
619
|
20 | % |
By
geographic region:
|
||||||||||||||||
Production
Optimization:
|
||||||||||||||||
North
America
|
$ |
877
|
$ |
771
|
$ |
106
|
14 | % | ||||||||
Latin
America
|
131
|
95
|
36
|
38
|
||||||||||||
Europe/Africa/CIS
|
324
|
255
|
69
|
27
|
||||||||||||
Middle
East/Asia
|
201
|
171
|
30
|
18
|
||||||||||||
Total
|
1,533
|
1,292
|
241
|
19
|
||||||||||||
Fluid
Systems:
|
||||||||||||||||
North
America
|
504
|
450
|
54
|
12
|
||||||||||||
Latin
America
|
130
|
100
|
30
|
30
|
||||||||||||
Europe/Africa/CIS
|
291
|
216
|
75
|
35
|
||||||||||||
Middle
East/Asia
|
120
|
104
|
16
|
15
|
||||||||||||
Total
|
1,045
|
870
|
175
|
20
|
||||||||||||
Drilling
and Formation Evaluation:
|
||||||||||||||||
North
America
|
299
|
260
|
39
|
15
|
||||||||||||
Latin
America
|
139
|
114
|
25
|
22
|
||||||||||||
Europe/Africa/CIS
|
255
|
179
|
76
|
42
|
||||||||||||
Middle
East/Asia
|
260
|
221
|
39
|
18
|
||||||||||||
Total
|
953
|
774
|
179
|
23
|
||||||||||||
Digital
and Consulting Solutions:
|
||||||||||||||||
North
America
|
66
|
60
|
6
|
10
|
||||||||||||
Latin
America
|
48
|
46
|
2
|
4
|
||||||||||||
Europe/Africa/CIS
|
56
|
44
|
12
|
27
|
||||||||||||
Middle
East/Asia
|
34
|
30
|
4
|
13
|
||||||||||||
Total
|
204
|
180
|
24
|
13
|
||||||||||||
Total
revenue by region:
|
||||||||||||||||
North
America
|
1,746
|
1,541
|
205
|
13
|
||||||||||||
Latin
America
|
448
|
355
|
93
|
26
|
||||||||||||
Europe/Africa/CIS
|
926
|
694
|
232
|
33
|
||||||||||||
Middle
East/Asia
|
615
|
526
|
89
|
17
|
Three
Months Ended
|
||||||||||||||||
OPERATING
INCOME (LOSS):
|
June
30
|
Increase
|
Percentage
|
|||||||||||||
Millions
of dollars
|
2007
|
2006
|
(Decrease)
|
Change
|
||||||||||||
Production
Optimization
|
$ |
403
|
$ |
368
|
$ |
35
|
10 | % | ||||||||
Fluid
Systems
|
200
|
201
|
(1 | ) | (1 | ) | ||||||||||
Drilling
and Formation Evaluation
|
235
|
194
|
41
|
21
|
||||||||||||
Digital
and Consulting Solutions
|
117
|
51
|
66
|
129
|
||||||||||||
General
corporate
|
(62 | ) | (54 | ) | (8 | ) | (15 | ) | ||||||||
Total
operating income
|
$ |
893
|
$ |
760
|
$ |
133
|
18 | % |
By
geographic region:
|
||||||||||||||||
Production
Optimization:
|
||||||||||||||||
North
America
|
$ |
265
|
$ |
260
|
$ |
5
|
2 | % | ||||||||
Latin
America
|
32
|
20
|
12
|
60
|
||||||||||||
Europe/Africa/CIS
|
51
|
45
|
6
|
13
|
||||||||||||
Middle
East/Asia
|
55
|
43
|
12
|
28
|
||||||||||||
Total
|
403
|
368
|
35
|
10
|
||||||||||||
Fluid
Systems:
|
||||||||||||||||
North
America
|
116
|
123
|
(7 | ) | (6 | ) | ||||||||||
Latin
America
|
19
|
19
|
–
|
–
|
||||||||||||
Europe/Africa/CIS
|
47
|
38
|
9
|
24
|
||||||||||||
Middle
East/Asia
|
18
|
21
|
(3 | ) | (14 | ) | ||||||||||
Total
|
200
|
201
|
(1 | ) | (1 | ) | ||||||||||
Drilling
and Formation Evaluation:
|
||||||||||||||||
North
America
|
65
|
71
|
(6 | ) | (8 | ) | ||||||||||
Latin
America
|
30
|
22
|
8
|
36
|
||||||||||||
Europe/Africa/CIS
|
68
|
41
|
27
|
66
|
||||||||||||
Middle
East/Asia
|
72
|
60
|
12
|
20
|
||||||||||||
Total
|
235
|
194
|
41
|
21
|
||||||||||||
Digital
and Consulting Solutions:
|
||||||||||||||||
North
America
|
80
|
27
|
53
|
196
|
||||||||||||
Latin
America
|
13
|
7
|
6
|
86
|
||||||||||||
Europe/Africa/CIS
|
15
|
11
|
4
|
36
|
||||||||||||
Middle
East/Asia
|
9
|
6
|
3
|
50
|
||||||||||||
Total
|
117
|
51
|
66
|
129
|
||||||||||||
Total
operating income by region:
|
||||||||||||||||
North
America
|
526
|
481
|
45
|
9
|
||||||||||||
Latin
America
|
94
|
68
|
26
|
38
|
||||||||||||
Europe/Africa/CIS
|
181
|
135
|
46
|
34
|
||||||||||||
Middle
East/Asia
|
154
|
130
|
24
|
18
|
|
Note
1
|
–
|
All
periods presented reflect the reclassification of certain indirect
expenses that were previously allocated to the segments and are now
included as general corporate
expenses.
|
Six
Months Ended
|
||||||||||||||||
REVENUE:
|
June
30
|
Increase
|
Percentage
|
|||||||||||||
Millions
of dollars
|
2007
|
2006
|
(Decrease)
|
Change
|
||||||||||||
Production
Optimization
|
$ |
2,870
|
$ |
2,488
|
$ |
382
|
15 | % | ||||||||
Fluid
Systems
|
2,038
|
1,706
|
332
|
19
|
||||||||||||
Drilling
and Formation Evaluation
|
1,870
|
1,499
|
371
|
25
|
||||||||||||
Digital
and Consulting Solutions
|
379
|
361
|
18
|
5
|
||||||||||||
Total
revenue
|
$ |
7,157
|
$ |
6,054
|
$ |
1,103
|
18 | % |
By
geographic region:
|
||||||||||||||||
Production
Optimization:
|
||||||||||||||||
North
America
|
$ |
1,671
|
$ |
1,505
|
$ |
166
|
11 | % | ||||||||
Latin
America
|
244
|
189
|
55
|
29
|
||||||||||||
Europe/Africa/CIS
|
587
|
472
|
115
|
24
|
||||||||||||
Middle
East/Asia
|
368
|
322
|
46
|
14
|
||||||||||||
Total
|
2,870
|
2,488
|
382
|
15
|
||||||||||||
Fluid
Systems:
|
||||||||||||||||
North
America
|
990
|
897
|
93
|
10
|
||||||||||||
Latin
America
|
255
|
194
|
61
|
31
|
||||||||||||
Europe/Africa/CIS
|
551
|
408
|
143
|
35
|
||||||||||||
Middle
East/Asia
|
242
|
207
|
35
|
17
|
||||||||||||
Total
|
2,038
|
1,706
|
332
|
19
|
||||||||||||
Drilling
and Formation Evaluation:
|
||||||||||||||||
North
America
|
625
|
533
|
92
|
17
|
||||||||||||
Latin
America
|
273
|
222
|
51
|
23
|
||||||||||||
Europe/Africa/CIS
|
469
|
337
|
132
|
39
|
||||||||||||
Middle
East/Asia
|
503
|
407
|
96
|
24
|
||||||||||||
Total
|
1,870
|
1,499
|
371
|
25
|
||||||||||||
Digital
and Consulting Solutions:
|
||||||||||||||||
North
America
|
132
|
119
|
13
|
11
|
||||||||||||
Latin
America
|
80
|
101
|
(21 | ) | (21 | ) | ||||||||||
Europe/Africa/CIS
|
102
|
84
|
18
|
21
|
||||||||||||
Middle
East/Asia
|
65
|
57
|
8
|
14
|
||||||||||||
Total
|
379
|
361
|
18
|
5
|
||||||||||||
Total
revenue by region:
|
||||||||||||||||
North
America
|
3,418
|
3,054
|
364
|
12
|
||||||||||||
Latin
America
|
852
|
706
|
146
|
21
|
||||||||||||
Europe/Africa/CIS
|
1,709
|
1,301
|
408
|
31
|
||||||||||||
Middle
East/Asia
|
1,178
|
993
|
185
|
19
|
Six
Months Ended
|
||||||||||||||||
OPERATING
INCOME (LOSS):
|
June
30
|
Increase
|
Percentage
|
|||||||||||||
Millions
of dollars
|
2007
|
2006
|
(Decrease)
|
Change
|
||||||||||||
Production
Optimization
|
$ |
728
|
$ |
701
|
$ |
27
|
4 | % | ||||||||
Fluid
Systems
|
414
|
390
|
24
|
6
|
||||||||||||
Drilling
and Formation Evaluation
|
491
|
373
|
118
|
32
|
||||||||||||
Digital
and Consulting Solutions
|
167
|
101
|
66
|
65
|
||||||||||||
General
corporate
|
(119 | ) | (113 | ) | (6 | ) | (5 | ) | ||||||||
Total
operating income
|
$ |
1,681
|
$ |
1,452
|
$ |
229
|
16 | % |
By
geographic region:
|
||||||||||||||||
Production
Optimization:
|
||||||||||||||||
North
America
|
$ |
494
|
$ |
509
|
$ | (15 | ) | (3 | )% | |||||||
Latin
America
|
55
|
36
|
19
|
53
|
||||||||||||
Europe/Africa/CIS
|
93
|
80
|
13
|
16
|
||||||||||||
Middle
East/Asia
|
86
|
76
|
10
|
13
|
||||||||||||
Total
|
728
|
701
|
27
|
4
|
||||||||||||
Fluid
Systems:
|
||||||||||||||||
North
America
|
239
|
247
|
(8 | ) | (3 | ) | ||||||||||
Latin
America
|
41
|
34
|
7
|
21
|
||||||||||||
Europe/Africa/CIS
|
95
|
68
|
27
|
40
|
||||||||||||
Middle
East/Asia
|
39
|
41
|
(2 | ) | (5 | ) | ||||||||||
Total
|
414
|
390
|
24
|
6
|
||||||||||||
Drilling
and Formation Evaluation:
|
||||||||||||||||
North
America
|
173
|
155
|
18
|
12
|
||||||||||||
Latin
America
|
58
|
40
|
18
|
45
|
||||||||||||
Europe/Africa/CIS
|
118
|
70
|
48
|
69
|
||||||||||||
Middle
East/Asia
|
142
|
108
|
34
|
31
|
||||||||||||
Total
|
491
|
373
|
118
|
32
|
||||||||||||
Digital
and Consulting Solutions:
|
||||||||||||||||
North
America
|
114
|
63
|
51
|
81
|
||||||||||||
Latin
America
|
15
|
13
|
2
|
15
|
||||||||||||
Europe/Africa/CIS
|
24
|
17
|
7
|
41
|
||||||||||||
Middle
East/Asia
|
14
|
8
|
6
|
75
|
||||||||||||
Total
|
167
|
101
|
66
|
65
|
||||||||||||
Total
operating income by region:
|
||||||||||||||||
North
America
|
1,020
|
974
|
46
|
5
|
||||||||||||
Latin
America
|
169
|
123
|
46
|
37
|
||||||||||||
Europe/Africa/CIS
|
330
|
235
|
95
|
40
|
||||||||||||
Middle
East/Asia
|
281
|
233
|
48
|
21
|
|
Note
1
|
–
|
All
periods presented reflect the reclassification of certain indirect
expenses that were previously allocated to the segments and are now
included as general corporate
expenses.
|
|
-
|
the
Comprehensive Environmental Response, Compensation, and Liability
Act;
|
|
-
|
the
Resources Conservation and Recovery
Act;
|
|
-
|
the
Clean Air Act;
|
|
-
|
the
Federal Water Pollution Control Act;
and
|
|
-
|
the
Toxic Substances Control Act.
|
|
-
|
the
containment and disposal of hazardous substances, oilfield waste,
and
other waste materials;
|
|
-
|
the
importation and use of radioactive
materials;
|
|
-
|
the
use of underground storage tanks;
and
|
|
-
|
the
use of underground injection wells.
|
|
-
|
administrative,
civil, and criminal penalties;
|
|
-
|
revocation
of permits to conduct business; and
|
|
-
|
corrective
action orders, including orders to investigate and/or clean up
contamination.
|
|
-
|
volatility
of the currency rates;
|
|
-
|
time
horizon of the derivative
instruments;
|
|
-
|
market
cycles; and
|
|
-
|
the
type of derivative instruments
used.
|
Total
Number of
|
|||
Shares
Purchased
|
|||
as
Part of Publicly
|
|||
Total
Number of
|
Average
Price
|
Announced Plans
|
|
Period
|
Shares
Purchased (a)
|
Paid
per Share
|
or
Programs (b)
|
April
1-30
|
112,276
|
$ 32.55
|
–
|
May
1-31
|
10,999,803
|
$ 35.14
|
10,968,468
|
June
1-30
|
14,874,941
|
$ 35.52
|
14,777,204
|
Total
|
25,987,020
|
$ 35.35
|
25,745,672
|
(a)
|
Of
the 25,987,020 shares purchased during the three-month period ended
June
30, 2007, 241,348 shares were acquired from employees in connection
with
the settlement of income tax and related benefit withholding obligations
arising from vesting in restricted stock grants. These shares
were not part of a publicly announced program to purchase common
shares.
|
(b)
|
In
February 2006, our Board of Directors approved a share repurchase
program
of up to $1.0 billion. In September 2006, our Board of
Directors approved an increase to our existing common share repurchase
program of up to an additional $2.0 billion. In July 2007, our
Board of Directors approved an additional increase to our existing
common
share repurchase program of up to $2.0 billion, bringing the entire
authorization to $5.0 billion. This additional authorization
may be used for open market share purchases or to settle the conversion
premium on our 3.125% convertible senior notes, should they be
redeemed. From the inception of this program, we have
repurchased approximately 66 million shares of our common stock for
approximately $2.2 billion at an average price per share of
$33.88. These numbers include the repurchases of approximately
26 million shares of our common stock for approximately $911 million
at an
average price per share of $35.37 during the first six months of
2007. As of July 23, 2007, $2.8 billion remained available
under this program.
|
(1)
|
the
election of Directors for the ensuing
year;
|
(2)
|
a
proposal to ratify the appointment of KPMG LLP as independent accountants
to examine the financial statements and books and records of Halliburton
for the year 2007;
|
(3)
|
a
stockholder proposal regarding a human rights
review;
|
(4)
|
a
stockholder proposal regarding political contributions;
and
|
(5)
|
a
stockholder proposal regarding stockholder rights
plans.
|
Name
of Nominee
|
Votes
For
|
Votes
Against
|
Votes
Abstain
|
Kathleen
M. Bader
|
815,811,965
|
8,735,113
|
7,521,797
|
Alan
M. Bennett
|
816,799,117
|
7,712,385
|
7,557,373
|
James
R. Boyd
|
815,837,656
|
8,697,422
|
7,533,797
|
Milton
Carroll
|
809,351,263
|
15,307,991
|
7,409,621
|
Robert
L. Crandall
|
811,548,202
|
13,048,582
|
7,472,091
|
Kenneth
T. Derr
|
815,263,737
|
9,458,111
|
7,347,027
|
S.
Malcolm Gillis
|
803,439,106
|
20,750,516
|
7,879,253
|
W.
R. Howell
|
804,525,903
|
19,998,389
|
7,544,583
|
David
J. Lesar
|
812,464,375
|
11,743,698
|
7,860,802
|
J.
Landis Martin
|
816,536,375
|
7,998,678
|
7,533,822
|
Jay
A. Precourt
|
816,094,603
|
8,442,934
|
7,531,338
|
Debra
L. Reed
|
816,001,036
|
8,721,721
|
7,346,118
|
(2)
|
Proposal
for ratification of the selection of
auditors:
|
Number
of Votes For
|
813,223,629
|
Number
of Votes Against
|
11,903,458
|
Number
of Votes Abstain
|
6,941,788
|
(3)
|
Stockholder
proposal regarding a human rights
review:
|
Number
of Votes For
|
132,302,253
|
Number
of Votes Against
|
410,515,296
|
Number
of Votes Abstain
|
104,202,582
|
Number
of Broker Non-Votes
|
185,048,744
|
(4)
|
Stockholder
proposal regarding political
contributions:
|
Number
of Votes For
|
128,436,555
|
Number
of Votes Against
|
409,874,146
|
Number
of Votes Abstain
|
108,709,426
|
Number
of Broker Non-Votes
|
185,048,748
|
(5)
|
Stockholder
proposal regarding a stockholder rights
plan:
|
Number
of Votes For
|
136,072,355
|
Number
of Votes Against
|
497,098,194
|
Number
of Votes Abstain
|
13,849,574
|
Number
of Broker Non-Votes
|
185,048,752
|
10.1
|
Five
Year Revolving Credit Agreement among Halliburton, as Borrower, the
Banks
party
|
thereto,
and Citicorp North America, Inc., as Administrative Agent (incorporated
by
|
|
reference
to Exhibit 10.1 to Halliburton’s Form 8-K filed July 13, 2007, File No.
1-3492).
|
|
* 31.1
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act
|
of
2002.
|
|
* 31.2
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act
|
of
2002.
|
|
** 32.1
|
Certification
of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
Act
|
of
2002.
|
|
**
32.2
|
Certification
of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
Act
|
of
2002.
|
|
*
|
Filed
with this Form 10-Q
|
**
|
Furnished
with this Form 10-Q
|
/s/ C.
Christopher Gaut
|
/s/ Mark
A. McCollum
|
C.
Christopher Gaut
|
Mark
A. McCollum
|
Executive
Vice President and
|
Senior
Vice President and
|
Chief
Financial Officer
|
Chief
Accounting Officer
|