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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______to_______
Commission File Number 001-03492
HALLIBURTON COMPANY
(Exact name of registrant as specified in its charter)
Delaware75-2677995
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
3000 North Sam Houston Parkway East,Houston,Texas77032
(Address of principal executive offices)(Zip Code)
(281) 871-2699
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, par value $2.50 per shareHALNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.                     Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).                                 Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 Large Accelerated FilerAccelerated Filer
 Non-accelerated FilerSmaller Reporting Company
Emerging Growth Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes No
As of October 15, 2021, there were 895,116,136 shares of Halliburton Company common stock, $2.50 par value per share, outstanding.



HALLIBURTON COMPANY

Index
  Page No.
   
 
 
 
 
 
   
   
   
   
 



PART I. FINANCIAL INFORMATION
Item 1. Financial Statements

HALLIBURTON COMPANY
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended
September 30
Nine Months Ended
September 30
Millions of dollars and shares except per share data2021202020212020
Revenue:    
Services$2,802 $2,068 $7,948 $7,940 
Product sales1,058 907 3,070 3,268 
Total revenue3,860 2,975 11,018 11,208 
Operating costs and expenses:    
Cost of services2,467 1,904 7,088 7,394 
Cost of sales889 755 2,523 2,663 
Impairments and other charges12 133 12 3,353 
General and administrative46 41 145 138 
Total operating costs and expenses3,414 2,833 9,768 13,548 
Operating income (loss)446 142 1,250 (2,340)
Interest expense, net of interest income of $15, $11, $39, and $28
(116)(122)(361)(380)
Loss on early extinguishment of debt   (168)
Other, net(14)(21)(55)(92)
Income (loss) before income taxes316 (1)834 (2,980)
Income tax benefit (provision)(76)(18)(193)265 
Net income (loss)$240 $(19)$641 $(2,715)
Net (income) loss attributable to noncontrolling interest(4)2 (8)5 
Net income (loss) attributable to company$236 $(17)$633 $(2,710)
Basic and diluted net income (loss) per share$0.26 $(0.02)$0.71 $(3.08)
Basic and diluted weighted average common shares outstanding894 882 891 879 
See notes to condensed consolidated financial statements.
HAL Q3 2021 FORM 10-Q | 1

HALLIBURTON COMPANY
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
Three Months Ended
September 30
Nine Months Ended
September 30
Millions of dollars2021202020212020
Net income (loss)$240 $(19)$641 $(2,715)
Other comprehensive income, net of income taxes 2 2 22 
Comprehensive income (loss)$240 $(17)$643 $(2,693)
Comprehensive (income) loss attributable to noncontrolling interest(4)1 (8)4 
Comprehensive income (loss) attributable to company shareholders$236 $(16)$635 $(2,689)
See notes to condensed consolidated financial statements.

HAL Q3 2021 FORM 10-Q | 2

HALLIBURTON COMPANY
Condensed Consolidated Balance Sheets
(Unaudited)
Millions of dollars and shares except per share dataSeptember 30,
2021
December 31,
2020
Assets
Current assets:  
Cash and equivalents$2,632 $2,563 
Receivables (net of allowances for credit losses of $765 and $824)
3,525 3,071 
Inventories2,354 2,349 
Other current assets920 1,492 
Total current assets9,431 9,475 
Property, plant, and equipment (net of accumulated depreciation of $11,377 and $11,039)
4,235 4,325 
Goodwill2,841 2,804 
Deferred income taxes2,149 2,166 
Operating lease right-of-use assets984 786 
Other assets1,385 1,124 
Total assets$21,025 $20,680 
Liabilities and Shareholders’ Equity
Current liabilities:  
Accounts payable$2,011 $1,573 
Accrued employee compensation and benefits583 517 
Current portion of operating lease liabilities258 251 
Current maturities of long-term debt11 695 
Other current liabilities1,083 1,385 
Total current liabilities3,946 4,421 
Long-term debt9,125 9,132 
Operating lease liabilities907 758 
Employee compensation and benefits547 562 
Other liabilities807 824 
Total liabilities15,332 15,697 
Shareholders’ equity:  
Common stock, par value $2.50 per share (authorized 2,000 shares, issued 1,066 and 1,066 shares)
2,666 2,666 
Paid-in capital in excess of par value24  
Accumulated other comprehensive loss(360)(362)
Retained earnings8,927 8,691 
Treasury stock, at cost (172 and 181 shares)
(5,576)(6,021)
Company shareholders’ equity5,681 4,974 
Noncontrolling interest in consolidated subsidiaries12 9 
Total shareholders’ equity5,693 4,983 
Total liabilities and shareholders’ equity$21,025 $20,680 
See notes to condensed consolidated financial statements.

HAL Q3 2021 FORM 10-Q | 3

HALLIBURTON COMPANY
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
September 30
Millions of dollars20212020
Cash flows from operating activities:  
Net income (loss)$641 $(2,715)
Adjustments to reconcile net income (loss) to cash flows from operating activities:  
Depreciation, depletion, and amortization673 829 
Accrued employee benefits22 (494)
Impairments and other charges12 3,353 
Deferred income tax benefit11 (380)
Changes in assets and liabilities:  
Accounts payable448 (933)
Receivables(364)1,294 
Inventories(3)115 
Other operating activities(211)174 
Total cash flows provided by operating activities1,229 1,243 
Cash flows from investing activities:  
Capital expenditures(483)(510)
Proceeds from sales of property, plant, and equipment145 199 
Proceeds from a structured real estate transaction87  
Other investing activities(57)(33)
Total cash flows used in investing activities(308)(344)
Cash flows from financing activities:  
Payments on long-term borrowings(696)(1,653)
Dividends to shareholders(121)(238)
Proceeds from issuance of long-term debt, net 994 
Stock repurchase program (100)
Other financing activities7 25 
Total cash flows used in financing activities(810)(972)
Effect of exchange rate changes on cash(42)(80)
Increase (decrease) in cash and equivalents69 (153)
Cash and equivalents at beginning of period2,563 2,268 
Cash and equivalents at end of period$2,632 $2,115 
Supplemental disclosure of cash flow information:  
Cash payments during the period for:  
Interest$402 $396 
Income taxes$157 $256 
See notes to condensed consolidated financial statements.

HAL Q3 2021 FORM 10-Q | 4

Part I. Item 1 | Notes to Condensed Consolidated Financial Statements
HALLIBURTON COMPANY
Notes to Condensed Consolidated Financial Statements
(Unaudited)

Note 1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements were prepared using generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Regulation S-X. Accordingly, these financial statements do not include all information or notes required by generally accepted accounting principles for annual financial statements and should be read together with our 2020 Annual Report on Form 10-K.

Our accounting policies are in accordance with United States generally accepted accounting principles. The preparation of financial statements in conformity with these accounting principles requires us to make estimates and assumptions that affect:
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.

Ultimate results could differ from our estimates.

In our opinion, the condensed consolidated financial statements included herein contain all adjustments necessary to present fairly our financial position as of September 30, 2021 and the results of our operations for the three and nine months ended September 30, 2021 and 2020, and our cash flows for the nine months ended September 30, 2021 and 2020. Such adjustments are of a normal recurring nature. In addition, certain reclassifications of prior period balances have been made to conform to the current period presentation.

The results of our operations for the three and nine months ended September 30, 2021 may not be indicative of results for the full year.

Note 2. Impairments and Other Charges
    
The following table presents various pre-tax charges we recorded during the three and nine months ended September 30, 2021 and 2020, which are reflected within "Impairments and other charges" on our condensed consolidated statements of operations.
Three Months Ended
September 30
Nine Months Ended
September 30
Millions of dollars2021202020212020
Catch-up depreciation$36 $ $36 $ 
Severance costs15 83 15 356 
Long-lived asset impairments 31  2,299 
Inventory costs and write-downs 11  505 
Gain on real estate transaction(74) (74) 
Other35 8 35 193 
Total impairments and other charges$12 $133 $12 $3,353 

Of the $12 million net charges recorded during the three months ended September 30, 2021, a $42 million charge was attributable to our Completion and Production segment, a $9 million charge was attributable to our Drilling and Evaluation segment, and a $39 million net gain was attributable to Corporate and other.
HAL Q3 2021 FORM 10-Q | 5

Part I. Item 1 | Notes to Condensed Consolidated Financial Statements

In the third quarter of 2021, we decided to discontinue the proposed sale of our Pipeline and Process Services business and as a result recorded a $36 million charge for accumulated unrecognized depreciation and amortization expense during the period the associated assets were classified as held for sale. We have reclassified this business to assets held and used in the accompanying condensed consolidated balance sheet as of September 30, 2021. Beginning October 1, 2021, all depreciation and amortization expense associated with this business will be included in operating costs and expenses on our condensed consolidated statements of operations.

During the third quarter of 2021, we finalized a previously communicated structured transaction relating to most of our owned U.S. real estate. As a result of the transaction, we derecognized $358 million of assets previously held for sale included in Other current assets and recognized an investment in an unconsolidated subsidiary of $349 million included in Other Assets, which resulted in a gain of $74 million. We have elected to account for our investment under the fair value option using an income approach. We believe the election of the fair value option aligns the accounting treatment with our interest in the real estate held by the unconsolidated subsidiary. As part of the transaction, we completed the sale-leaseback of the same U.S. real estate which resulted in an increase of our operating right-of-use assets and operating lease liabilities of $276 million and we received gross cash proceeds of $87 million. Pursuant to a master lease agreement, the properties are subject to initial lease terms of either twelve or fifteen years and we have the option to extend the term on each property for two additional terms of five years each thereafter and the rent payments are subject to an annual rent escalator of 1.35%.

Note 3. Business Segment Information

We operate under two divisions, which form the basis for the two operating segments we report: the Completion and Production segment and the Drilling and Evaluation segment. Our equity in earnings and losses of unconsolidated affiliates that are accounted for using the equity method of accounting are included within cost of services and cost of sales on our statements of operations, which is part of operating income of the applicable segment.

The following table presents information on our business segments.
 Three Months Ended
September 30
Nine Months Ended
September 30
Millions of dollars2021202020212020
Revenue:  
Completion and Production$2,136 $1,574 $6,054 $6,029 
Drilling and Evaluation1,724 1,401 4,964 5,179 
Total revenue$3,860 $2,975 $11,018 $11,208 
Operating income (loss):
Completion and Production$322 $212 $891 $713 
Drilling and Evaluation186 105 532 452 
Total operations508 317 1,423 1,165 
Corporate and other (a)(50)(42)(161)(152)
Impairments and other charges (b)(12)(133)(12)(3,353)
Total operating income (loss)$446 $142 $1,250 $(2,340)
Interest expense, net of interest income(116)(122)(361)(380)
Loss on early extinguishment of debt (c)   (168)
Other, net(14)(21)(55)(92)
Income (loss) before income taxes$316 $(1)$834 $(2,980)
(a)Includes certain expenses not attributable to a business segment, such as costs related to support functions and corporate executives, and also includes amortization expense associated with intangible assets recorded as a result of acquisitions.
(b)
For the three and nine months ended September 30, 2021, amount includes a $42 million charge attributable to Completions and Production, a $9 million charge attributable to Drilling and Evaluation, and a $39 million net gain attributable to Corporate and other. For the three and nine months ended September 30, 2020, amount includes $90 million and $2.1 billion attributable to Completion and Production, $40 million and $1.2 billion attributable to Drilling and Evaluation, and $3 million and $44 million attributable to Corporate and other, respectively.
(c)
For the nine months ended September 30, 2020, amount includes a $168 million loss on extinguishment of debt related to the early repurchase of senior notes.

HAL Q3 2021 FORM 10-Q | 6

Part I. Item 1 | Notes to Condensed Consolidated Financial Statements
Note 4. Revenue

Revenue is recognized based on the transfer of control or our customers' ability to benefit from our services and products in an amount that reflects the consideration we expect to receive in exchange for those services and products. Most of our service and product contracts are short-term in nature. In recognizing revenue for our services and products, we determine the transaction price of purchase orders or contracts with our customers, which may consist of fixed and variable consideration. We also assess our customers' ability and intention to pay, which is based on a variety of factors, including our historical payment experience with, and the financial condition of, our customers. Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 20 to 60 days. Other judgments involved in recognizing revenue include an assessment of progress towards completion of performance obligations for certain long-term contracts, which involve estimating total costs to determine our progress towards contract completion and calculating the corresponding amount of revenue to recognize.

Disaggregation of revenue
We disaggregate revenue from contracts with customers into types of services or products, consistent with our two reportable segments, in addition to geographical area. Based on the location of services provided and products sold, 40% and 38% of our consolidated revenue was from the United States for the nine months ended September 30, 2021 and 2020, respectively. No other country accounted for more than 10% of our revenue.

The following table presents information on our disaggregated revenue.
Millions of dollarsThree Months Ended
September 30
Nine Months Ended
September 30
Revenue by segment:2021202020212020
Completion and Production$2,136 $1,574 $6,054 $6,029 
Drilling and Evaluation1,724 1,401 4,964 5,179 
Total revenue$3,860 $2,975 $11,018 $11,208 
Revenue by geographic region:
North America$1,615 $984 $4,588 $4,493 
Latin America624 380 1,693 1,242 
Europe/Africa/CIS676 649 1,989 2,171 
Middle East/Asia945 962 2,748 3,302 
Total revenue$3,860 $2,975 $11,018 $11,208 

Contract balances
We perform our obligations under contracts with our customers by transferring services and products in exchange for consideration. The timing of our performance often differs from the timing of our customer’s payment, which results in the recognition of receivables and deferred revenue. Deferred revenue represents advance consideration received from customers for contracts where revenue is recognized on future performance of service. Deferred revenue, as well as revenue recognized during the period relating to amounts included as deferred revenue at the beginning of the period, were not material to our condensed consolidated financial statements.

Transaction price allocated to remaining performance obligations
Remaining performance obligations represent firm contracts for which work has not been performed and future revenue recognition is expected. We have elected the practical expedient permitting the exclusion of disclosing remaining performance obligations for contracts that have an original expected duration of one year or less. We have some long-term contracts related to software and integrated project management services such as lump sum turnkey contracts. For software contracts, revenue is generally recognized over time throughout the license period when the software is considered to be a right to access our intellectual property. For lump sum turnkey projects, we recognize revenue over time using an input method, which requires us to exercise judgment. Revenue allocated to remaining performance obligations for these long-term contracts is not material.

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Part I. Item 1 | Notes to Condensed Consolidated Financial Statements
Receivables
As of September 30, 2021, 27% of total receivables were from customers in the United States. As of December 31, 2020, 32% of total receivables were from customers in the United States. 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. No other country or single customer accounted for more than 10% of our receivables at those dates.

Although the market environment has been improving, we continue to have risk of delayed customer payments and payment defaults associated with customer liquidity issues and bankruptcies. We routinely monitor the financial stability of our customers and employ an extensive process to evaluate the collectability of outstanding receivables. This process, which involves a high degree of judgment utilizing significant assumptions, includes analysis of our customers’ historical time to pay, financial condition and various financial metrics, debt structure, credit agency ratings, and production profile, as well as political and economic factors in countries of operations and other customer-specific factors.

Note 5. Inventories

Inventories consisted of the following:
Millions of dollarsSeptember 30,
2021
December 31,
2020
Finished products and parts$1,398 $1,330 
Raw materials and supplies870 952 
Work in process86 67 
Total$2,354 $2,349 
Note 6. Debt

We repaid the $185 million principal balance of our 8.75% senior debentures when they matured in February of 2021. In August of 2021, we redeemed the entire $500 million aggregate principal amount outstanding of our 3.25% senior notes at par. The redemption price for the notes consisted of 100% of the principal amount of the notes outstanding, plus accrued and unpaid interest on the notes. We used cash on hand to fund the redemption of the debentures and notes.

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Part I. Item 1 | Notes to Condensed Consolidated Financial Statements
Note 7. Shareholders’ Equity

The following tables summarize our shareholders’ equity activity for the three and nine months ended September 30, 2021 and September 30, 2020, respectively:
Millions of dollarsCommon StockPaid-in Capital in Excess of Par ValueTreasury StockRetained EarningsAccumulated Other Comprehensive Income (Loss)Noncontrolling Interest in Consolidated SubsidiariesTotal
Balance at December 31, 2020$2,666 $ $(6,021)$8,691 $(362)$9 $4,983 
Comprehensive income (loss):
Net income   170  1 171 
Cash dividends ($0.045 per share)
   (40)  (40)
Stock plans (a) 34 144 (112)  66 
Other     (1)(1)
Balance at March 31, 2021$2,666 $34 $(5,877)$8,709 $(362)$9 $5,179 
Comprehensive income (loss):
Net income   227  3 230 
Other comprehensive income    2  2 
Cash dividends ($0.045 per share)
   (40)  (40)
Stock plans (8)69    61 
Other     (3)(3)
Balance at June 30, 2021$2,666 $26 $(5,808)$8,896 $(360)$9 $5,429 
Comprehensive income (loss):
Net income   236  4 240 
Cash dividends ($0.045 per share)
   (41)  (41)
Stock plans (a) (2)232 (164)  66 
Other     (1)(1)
Balance at September 30, 2021$2,666 $24 $(5,576)$8,927 $(360)$12 $5,693 
(a)
In January and July of 2021, we issued common stock from treasury shares for the employee stock purchase plan and for restricted stock grants. As a result, additional paid in capital in January and July of 2021 were reduced below zero, which resulted in a reduction of retained earnings by $112 million and $164 million, respectively. Additional issuances from treasury shares could similarly impact additional paid in capital and retained earnings.
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Part I. Item 1 | Notes to Condensed Consolidated Financial Statements
Millions of dollarsCommon StockPaid-in Capital in Excess of Par ValueTreasury StockRetained EarningsAccumulated Other Comprehensive Income (Loss)Noncontrolling Interest in Consolidated SubsidiariesTotal
Balance at December 31, 2019$2,669 $143 $(6,427)$11,989 $(362)$13 $8,025 
Comprehensive income (loss):
Net income (loss)   (1,017) 2 (1,015)
Other comprehensive income    11  11 
Cash dividends ($0.18 per share)
   (158)  (158)
Stock repurchase program  (100)   (100)
Stock plans (33)115    82 
Other     (2)(2)
Balance at March 31, 2020$2,669 $110 $(6,412)$10,814 $(351)$13 $6,843 
Comprehensive income (loss):
Net loss   (1,676) (5)(1,681)
Other comprehensive income    9  9 
Cash dividends ($0.045 per share)
   (40)  (40)
Stock plans(3)15 54    66 
Other     (1)(1)
Balance at June 30, 2020$2,666 $125 $(6,358)$9,098 $(342)$7 $5,196 
Comprehensive income (loss):
Net loss   (17) (2)(19)
Other comprehensive income    2  2 
Cash dividends ($0.045 per share)
   (40)  (40)
Stock plans (a) (102)222 (54)  66 
Other     (2)(2)
Balance at September 30, 2020$2,666 $23 $(6,136)$8,987 $(340)$3 $5,203 
(a)
In July of 2020, we issued common stock from treasury shares for the employee stock purchase plan and for restricted stock grants. As a result, additional paid in capital in July of 2020 was reduced below zero, which resulted in a reduction of retained earnings by $54 million. Additional issuances from treasury shares could similarly impact additional paid in capital and retained earnings.

Our Board of Directors has authorized a program to repurchase our common stock from time to time. There were no repurchases made under the program during the three and nine months ended September 30, 2021. Approximately $5.1 billion remained authorized for repurchases as of September 30, 2021. From the inception of this program in February of 2006 through September 30, 2021, we repurchased approximately 224 million shares of our common stock for a total cost of approximately $9.0 billion.

Accumulated other comprehensive loss consisted of the following:
Millions of dollarsSeptember 30,
2021
December 31,
2020
Defined benefit and other postretirement liability adjustments$(224)$(226)
Cumulative translation adjustments(85)(83)
Other(51)(53)
Total accumulated other comprehensive loss$(360)$(362)

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Part I. Item 1 | Notes to Condensed Consolidated Financial Statements
Note 8. Commitments and Contingencies

We are subject to various legal or governmental proceedings, claims or investigations, including personal injury, property damage, environmental, commercial, and tax-related matters, arising in the ordinary course of business, the resolution of which, in the opinion of management, will not have a material adverse effect on our consolidated results of operations or consolidated financial position. There is inherent risk in any litigation, claim or investigation, and no assurance can be given as to the outcome of these proceedings.

Guarantee arrangements
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. None of these off balance sheet arrangements either has, or is likely to have, a material effect on our condensed consolidated financial statements.

Note 9. Income per Share

Basic income or loss per share is based on the weighted average number of common shares outstanding during the period. Diluted income per share includes additional common shares that would have been outstanding if potential common shares with a dilutive effect had been issued. Antidilutive securities represent potentially dilutive securities which are excluded from the computation of diluted income or loss per share as their impact would be antidilutive.

A reconciliation of the number of shares used for the basic and diluted income per share computations is as follows:
Three Months Ended
September 30
Nine Months Ended
September 30
Millions of shares2021202020212020
Basic weighted average common shares outstanding894 882 891 879 
Dilutive effect of awards granted under our stock incentive plans    
Diluted weighted average common shares outstanding894 882 891 879 
Antidilutive shares:
Options with exercise price greater than the average market price21 26 22 27 
Options which are antidilutive due to net loss position 1  1 
     Total antidilutive shares21 27 22 28 

Note 10. Fair Value of Financial Instruments

    The carrying amount of cash and equivalents, receivables, and accounts payable, as reflected in the condensed consolidated balance sheets, approximates fair value due to the short maturities of these instruments.

The carrying amount and fair value of our total debt, including short-term borrowings and current maturities of long-term debt, is as follows:
September 30, 2021December 31, 2020
Millions of dollarsLevel 1Level 2Total fair valueCarrying valueLevel 1Level 2Total fair valueCarrying value
Total debt$10,896 $147 $11,043 $9,136 $10,856 $700 $11,556 $9,827 

In the first nine months of 2021, the fair value of our debt decreased as a result of repayment of senior debentures and notes, the effect of which was partially offset by lower debt yields. The carrying value of our debt decreased as a result of the repayment of senior debentures and notes. See Note 6 for further information.

Our debt categorized within level 1 on the fair value hierarchy is calculated using quoted prices in active markets for identical liabilities with transactions occurring on the last two days of period-end. Our debt categorized within level 2 on the fair value hierarchy is calculated using significant observable inputs for similar liabilities where estimated values are determined from observable data points on our other bonds and on other similarly rated corporate debt or from observable data points of transactions occurring prior to two days from period-end and adjusting for changes in market conditions. Differences
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Part I. Item 1 | Notes to Condensed Consolidated Financial Statements
between the periods presented in our level 1 and level 2 classification of our long-term debt relate to the timing of when third party market transactions on our debt are executed. We have no debt categorized within level 3 on the fair value hierarchy.

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Part I. Item 2 | Executive Overview
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

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 "Item 1. Financial Statements" contained herein.

EXECUTIVE OVERVIEW
Organization
We are one of the world's largest providers of products and services to the energy industry. We help our customers maximize 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 depict revenue split between our two operating segments and our four primary geographic regions for the quarter ended September 30, 2021.
hal-20210930_g1.jpghal-20210930_g2.jpg
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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.

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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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 operating performance and liquidity are described in more detail in "Liquidity and Capital Resources" and “Business Environment and Results of Operations.”
HAL Q3 2021 FORM 10-Q | 15

Part I. Item 2 | Liquidity and Capital Resources
LIQUIDITY AND CAPITAL RESOURCES

As of both September 30, 2021 and December 31, 2020, we had $2.6 billion of 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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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 Operations
BUSINESS ENVIRONMENT AND RESULTS OF OPERATIONS

We operate in more than 70 countries throughout the world to provide a comprehensive range of services and products to the energy industry. Our revenue is generated from the sale of services and products to major, national, and independent oil and natural gas companies worldwide. The industry we serve is highly competitive with many substantial competitors in each segment of our business. During the first 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, United Kingdom Brent crude oil, and Henry Hub natural gas.
Three Months Ended
September 30
Year Ended
December 31
2021