HALLIBURTON CO (HAL)

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 should be read in

conjunction with the condensed consolidated financial statements included in Item 1. Financial Statements contained herein.

EXECUTIVE OVERVIEW

Organization

We are one of the world’s largest providers of products and services to the energy industry. We help our customers

maximize asset value throughout the lifecycle of the reservoir from locating hydrocarbons and managing geological data, to

drilling and formation evaluation, well construction and completion, and optimizing production throughout the life of the asset.

Activity levels within our operations are significantly impacted by spending on upstream exploration, development, and

production programs by major, national, and independent oil and natural gas companies. We report our results under two

segments, the Completion and Production segment and the Drilling and Evaluation segment.

•Completion and Production delivers cementing, stimulation, specialty chemicals, intervention, pressure control,

artificial lift, and completion products and services. The segment consists of Artificial Lift, Cementing, Completion

Tools, Pipeline and Process Services, Production Enhancement, and Production Solutions. During the second

quarter of 2026, we completed the sale of a portion of our chemical business.

•Drilling and Evaluation provides field and reservoir modeling, drilling, fluids, evaluation, and precise wellbore

placement solutions that enable customers to model, measure, drill, and optimize their well construction activities.

The segment consists of Baroid, Drill Bits and Services, Halliburton Project Management, Landmark Software and

Services, Sperry Drilling, Testing and Subsea, and Wireline and Perforating.

The business operations of our segments are organized around four primary geographic regions: North America, Latin

America, Europe/Africa/CIS, and Middle East/Asia. We have manufacturing operations in various locations, the most

significant of which are in the United States, Malaysia, Singapore, and the United Kingdom. With over 46,000 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 strive to

achieve strong cash flows and returns for our shareholders by delivering technology and services that improve efficiency,

increase recovery, and maximize production for our customers. Our strategic priorities are to:

- International: Consistently increase international growth in our directional drilling, unconventionals, well

intervention, and artificial lift businesses. Develop behind-the-meter power generation, independently or through

collaboration with Voltagrid.

- North America: Maximize value by, among other things, utilizing our Zeus IQ electric fracturing platform, our

iCruise rotary steerable systems and LOGIX automation.

- Digital: Continue to drive differentiation and efficiencies through the deployment of digital and automation

technologies, both internally and for our customers.

- Capital efficiency: Maintain our capital expenditures at about $1.1 billion, while leveraging technology and targeted

process improvements to enhance utilization of existing capital.

- Shareholder returns: Return over 50% of annual free cash flow to shareholders through dividends and share

repurchases.

- Advance a Sustainable Energy Future: Continue to develop technologies and solutions to help lower our customers’

and our emissions intensity, grow our low carbon energy business, and support Halliburton Labs early-stage

company participants.

HAL Q2 2026 FORM 10-Q | 15

The following charts depict the revenue split between our two operating segments and our four primary geographic

regions for the three months ended June 30, 2026.

Market conditions

During the second quarter of 2026, market conditions were impacted by the ongoing geopolitical conflict in the Middle

East, which disrupted activity levels in certain markets and affected operations across both of our segments.

Oil prices increased in the second quarter of 2026 compared to the first quarter of 2026. The West Texas Intermediate

(WTI) crude oil price averaged approximately $96 per barrel during the second quarter of 2026, compared to approximately

$72 per barrel during the first quarter of 2026, or a 33% increase. The Brent crude oil price averaged approximately $103 per

barrel during the second quarter of 2026, compared to approximately $80 per barrel during the first quarter, or a 29% increase.

Higher commodity prices generally support customer activity and capital spending in the markets we serve, as operator

investment decisions are often influenced by expectations regarding future commodity prices.

Trade tensions and tariffs continue to influence the global demand outlook, with varying impacts across end markets.

We continue to monitor and evaluate the effects of these on goods imported into the United States. During the second quarter of

2026, we recognized a gain of approximately $57 million related to a government refund recovery, which is included in

“Impairments and other charges (credits)” on the Condensed Consolidated Statements of Operations. We continue to monitor

developments related to trade policy and evaluate the potential effects of future tariff actions on our business, financial position,

results of operations and cash flows.

Globally, we continue to be impacted by inflationary cost increases, primarily related to logistics, chemicals, and

cement. We manage these pressures through global procurement strategies, technology modifications, and sourcing efficiencies.

As a standard practice, we generally seek to pass a portion of these cost increases on to our customers and believe we have

effective solutions in place to minimize their operational impact.

Customers remained focused on capital discipline, production optimization, operating efficiency, and expected returns

on investment. Customer activity and spending decisions were influenced by the geopolitical conflict in the Middle East, higher

commodity prices, uncertainty related to global trade policies and tariffs, and inflationary cost pressures. As a result, customers

continued to evaluate investment opportunities while balancing growth objectives, operating priorities, and return expectations.

HAL Q2 2026 FORM 10-Q | 16

Financial results

The following graph illustrates our revenue and operating margins for each operating segment for the second quarter of

2025 and 2026.

During the second quarter of 2026, we generated total company revenue of $5.7 billion, a 4% increase as compared to

the second quarter of 2025. We reported operating income of $778 million, including a pre-tax credit on impairments and other

credits of $95 million, in the second quarter of 2026, as compared to operating income of $727 million in the second quarter of

2025.

Our Completion and Production segment revenue was relatively flat in the second quarter of 2026 as compared to the

second quarter of 2025. Revenue improvements were primarily driven by increased stimulation activity and improved artificial

lift activity in Latin America, higher completion tool sales in Europe/Africa, and improved pressure pumping services in Africa.

Offsetting these increases were lower activity across multiple product service lines in the Middle East, and decreased

stimulation activity and lower specialty chemicals activity resulting from the completed sale of a portion of our chemical

business in North America. Operating income was further adversely impacted by activity mix and reduced pricing for

stimulation services in US Land and Latin America.

Our Drilling and Evaluation segment revenue increased 7% in the second quarter of 2026 as compared to the second

quarter of 2025. These results were primarily driven by higher drilling-related services in North America, Europe/Africa, and

Asia, and higher activity across multiple product service lines in Latin America. Partially offsetting these increases were lower

drilling-related services and decreased wireline activity in the Middle East.

Our North America revenue was relatively flat in the second quarter of 2026 as compared to the second quarter of

2025. These results were primarily driven by improved well construction activity and increased stimulation activity in US Land.

Partially offsetting these increases were lower stimulation activity in the Gulf of America and Canada, and a decrease in well

intervention services and lower specialty chemicals activity resulting from the completed sale of a portion of our chemical

business in US Land.

Internationally, revenue increased 6% in the second quarter of 2026 as compared to the second quarter of 2025, largely

driven by improved stimulation services and higher project management activity in Latin America, increased well construction

activity and higher project management activity in Africa, and higher completion tool sales in Europe/Africa. Partially

offsetting these increases was lower activity across multiple product service lines in the Middle East due to conflict-related

disruptions.

Our operating performance and liquidity are described in more detail in “Liquidity and Capital Resources” and

“Business Environment and Results of Operations.”

HAL Q2 2026 FORM 10-Q | 17

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2026, we had $2.0 billion of cash and equivalents, compared to $2.2 billion of cash and equivalents at

December 31, 2025.

Significant sources and uses of cash during the first six months of 2026

Sources of cash:

•Cash flows from operating activities were $1.1 billion. Working capital, which consists of receivables, inventories,

and accounts payable, had a negative impact of $187 million.

Uses of cash:

•Capital expenditures were $427 million.

•We repurchased 7.9 million shares of our common stock for $308 million, which includes the excise tax payment

for prior year share repurchases.

•We paid $285 million of dividends to our shareholders.

•We paid $101 million primarily in connection with an equity investment.

Future sources and uses of cash

We manufacture most of our own equipment, which provides us with some flexibility to increase or decrease our

capital expenditures based on market conditions. We currently expect capital spending for 2026 to be approximately $1.1

billion. We believe this level of spending will enable continued investment in our core strategic technologies and businesses,

including the international expansion of our artificial lift, well intervention, unconventionals, and drilling technologies. We will

continue to maintain capital discipline and monitor the rapidly changing market dynamics, and we may adjust our capital

spending accordingly.

While we maintain focus on liquidity and debt reduction, we are also focused on providing cash returns to our

shareholders. Our quarterly dividend rate is $0.17 per common share, or approximately $143 million. In 2023, our Board

approved a capital return framework with a goal of returning at least 50% of our annual free cash flow to shareholders through

dividends and share repurchases, and we expect our returns to shareholders will be in line with our capital return framework for

2026.

We may utilize share repurchases as part of our capital return framework. Our Board of Director

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Item 7. 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 consolidated and combined financial statements included in Item 8. Financial Statements and

Supplementary Data contained herein.

EXECUTIVE OVERVIEW

Market conditions

In 2025, global oil and natural gas markets remained impacted by non-OPEC supply growth, slower demand recovery

in certain areas around the globe, OPEC+ production, ongoing geopolitical tensions in the Middle East, and the continued

impacts of the Russia-Ukraine conflict. In the U.S., oil and natural gas production in 2025 remained elevated, despite a

generally declining rig count, as a result of the industry's focus on efficiencies and higher service intensity. Lower commodity

pricing and U.S. land rig counts generally contributed to softness in the market for energy products and services in North

America. The international rig count decreased compared to 2024.

The West Texas Intermediate (WTI) crude oil price averaged approximately $60 per barrel during the fourth quarter of

2025 and approximately $65 per barrel for the full year of 2025. The Brent crude oil price averaged approximately $64 per

barrel during the fourth quarter of 2025 and approximately $69 per barrel for the full year of 2025.

Trade tensions and tariffs continue to shape the demand outlook amid varying market responses. We continue to

monitor and assess the impact of tariffs on goods being imported into the United States. Our global supply chain organization

continuously monitors market trends and works to mitigate those and other cost increases through economies of scale in global

procurement, technology modifications, and efficient sourcing practices. Globally, we continue to be impacted by extended

supply chain lead times for the supply of select raw materials. Also, while we have been impacted by inflationary cost

increases, primarily related to chemicals, cement, and logistics costs, we generally try to pass much of those increases on to our

customers and we believe we have effective solutions to minimize their operational impact.

Financial results

The following graph illustrates our revenue and operating margins for each operating segment over the past three

years.

During 2025, we generated total company revenue of $22.2 billion, a 3% decrease from the $22.9 billion of revenue

generated in 2024 with our Completion and Production (C&P) segment revenue decreasing by 4% and our Drilling and

Evaluation (D&E) segment revenue decreasing by 3%. Total company operating income was $2.3 billion, including

impairments and other charges of $831 million, in 2025, compared to $3.8 billion, including impairment and other charges of

$116 million, in 2024. Due to new tariffs imposed during 2025 by the United States, the incremental expense was

approximately $89 million.

Driven in large part by a decrease in the average North America rig count in 2025 as compared to 2024, our North

America revenue decreased 6% in 2025, resulting from lower activity across multiple product service lines in U.S. Land and

lower completion tool sales in the Gulf of America. Partially offsetting these decreases were improved stimulation activity and

increased fluids services in the Gulf of America, increased drilling activity in U.S. Land, and higher completion tool sales in

Canada.

HAL 2025 FORM 10-K | 24

Internationally, revenue decreased by 2% in 2025 compared to 2024, due to a decline in the international average rig

count and decreased activity across multiple product service lines in Mexico and Saudi Arabia. Partially offsetting these

decreases were higher activity across multiple services lines in Norway and Brazil, improved fluid services in the Middle East,

Argentina, and the Caribbean, and increased stimulation activity in Middle East/Asia and Africa.

Our operating performance and liquidity are described in more detail in “Liquidity and Capital Resources” and

“Business Environment and Results of Operations.”

HAL 2025 FORM 10-K | 25

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2025, we had $2.2 billion of cash and equivalents, compared to $2.6 billion of cash and

equivalents at December 31, 2024.

Significant sources and uses of cash in 2025

Sources of cash:

•Cash flows from operating activities were $2.9 billion. Working capital, which consists of receivables, inventories,

and accounts payable, collectively had a positive impact of $196 million.

•We received $444 million on the sale of investment securities.

•We received $185 million on the sale of property, plant, and equipment.

•We received $120 million on the sale of an equity investment.

Uses of cash:

•Capital expenditures were $1.3 billion.

•We repurchased 42.4 million shares of our common stock for $1.0 billion, which includes excise tax payment due

on 2024 share repurchases.

•We paid $579 million of dividends to our shareholders.

•We retired $382 million of our 3.8% senior notes due November 2025.

•We paid $363 million related to a purchase of an equity investment.

•We purchased $202 million of investment securities.

•We paid $185 million to acquire businesses.

Future sources and uses of cash

We manufacture most of our own equipment, which provides us with some flexibility to increase or decrease our

capital expenditures based on market conditions. We currently expect capital spending for 2026 to be approximately $1.1

billion. Despite this reduction from 2025, we believe this level of spending will enable continued investment in our core

strategic technologies and businesses, including the international expansion of our artificial lift, well intervention,

unconventionals, and drilling technologies. We will continue to maintain capital discipline and monitor the rapidly changing

market dynamics, and we may adjust our capital spend accordingly.

In 2026, we expect to pay approximately $505 million for contractual purchase obligations, with another $315 million

due through 2028, $378 million of interest on debt, and $418 million under our leasing arrangements. Payments for interest on

our debt are expected to remain relatively flat for the foreseeable future. See Notes to Consolidated Financial Statements, Note

6 and Note 10 for additional information on expected future payments under our leasing arrangements and debt maturities.

We are not able to reasonably estimate the timing of cash outflows associated with our uncertain tax positions, in part

because we are unable to predict the timing of potential tax settlements with applicable taxing authorities. As of December 31,

2025, we had $170 million of gross unrecognized tax benefits, excluding penalties and interest, of which we estimate $155

million may require us to make a cash payment. We estimate that approximately $131 million of the cash payment will not be

settled within the next 12 months.

While we maintain focus on liquidity, we are also focused on providing cash returns to our shareholders. In 2023, our

Board approved a capital return framework with a goal of returning at least 50% of our annual free cash flow to shareholders

through dividends and share repurchases. We returned $1.6 billion of capital to shareholders in 2025 through dividends and

share repurchases. During 2025, our quarterly dividend rate was $0.17 per common share, or approximately $145 million in

aggregate.

We may utilize share repurchases as part of our capital return framework. Our Board of Directors has authorized a

program to repurchase our common stock from time to time. We repurchased 42.4 million shares of common stock during the

year ended December 31, 2025 under this program. Approximately $2.0 billion remained authorized for repurchases as of

December 31, 2025 and may be used for open market and other share purchases.

HAL 2025 FORM 10-K | 26

During 2023, we began our migration to SAP S4 which we expect to complete in the fourth quarter of 2026. During

the year ended December 31, 2025, we incurred $154 million in expense on our SAP S4 migration. Due to the extension of the

project we announced in the second quarter of 2025, we expect the estimated total cost will be approximately $45 million per

quarter going forward. We believe the new system will provide important efficiency benefits, cost savings, enhanced visibility

to our operations, and advanced analytics that will benefit us and our customers.

We may, from time to time, redeem, repurchase, or otherwise acquire our outstanding debt through privately

negotiated transactions, open market purchases, redemptions, tender offers or otherwise, but we are under no obligation to do

so.

Other factors affecting liquidity

Financial condition in current market. As of December 31, 2025, we had $2.2 billion of cash and equivalents and $3.5

billion of available committed bank credit under a new revolving credit facility executed on August 18, 2025, with an

expiration date of August 16, 2030. We believe we have a manageable debt maturity profile, with approximately $90 million

due February 2027. Furthermore, we have no financial covenants or material adverse change provisions in our bank

agreements, and our debt maturities extend over a long period of time. We believe our cash on hand, cash flows generated from

operations, and our available credit facility will provide sufficient liquidity to address the challenges and opportunities of the

current market and our expected global cash needs, including capital expenditures, working capital investments, shareholder

returns, if any, debt repurchases, if any, and scheduled interest and principal payments, in the short term and long term.

Guarantee agreements. In the normal course of business, we have agreements with financial institutions under which

approximately $3.1 billion of letters of credit, bank guarantees, or surety bonds were outstanding as of December 31, 2025.

Some of the outstanding letters of credit have triggering events that would entitle a bank to require cash collateralization;

however, none of these triggering events have occurred. As of December 31, 2025, we had no material off-balance sheet

liabilities and were not required to make any material cash distributions to our unconsolidated subsidiaries.

We have entered into credit default swaps (CDSs) with third-party financial institutions that have an aggregate

notional amount outstanding as of December 31, 2025 of $592 million, compared to an aggregate notional amount outstanding

as of December 31, 2024 of $739 million, related to borrowings provided by the financial institutions to one of our primary

customers in Mexico, of which portions of the proceeds were utilized by this customer to pay certain of our outstanding

receivables. Approximately $455 million of the outstanding amount of the CDSs reduces monthly over its remaining 9-month

term and $75 million reduces monthly over its remaining 6-month term. The remaining $62 million outstanding amount reduces

monthly over its remaining 2-month term.

Credit ratings. Our credit ratings with Standard & Poor’s remain BBB+ for our long-term debt and A-2 for our short-

term debt, with a stable outlook. Our credit ratings with Moody's Investors Service remain A3 for our long-term debt and P-2

for our short-term debt, with a stable outlook.

Customer receivables. In line with industry practice, we bill our customers for our services in arrears and are,

therefore, subject to our customers delaying or failing to pay our inv

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