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Published on 10/27/2022 in the Prospect News Bank Loan Daily, Prospect News Investment Grade Daily.

Halliburton leverage is 2x; demand, pricing stay high, supply is low

By Devika Patel

Knoxville, Tenn., Oct. 27 – Halliburton Co. retired debt last quarter, driving its gross debt-to-EBITDA leverage ratio down to 2x.

During the third quarter, Halliburton redeemed the entire $600 million of its 3.5% senior notes due 2023 using cash on hand.

The company has retired $1.2 billion of debt thus far this year and $2.4 billion since 2020.

“With the latest payment of $600 million, we have now retired $2.4 billion of debt since 2020, $1.2 billion retired this year alone,” executive vice president and chief financial officer Eric Carre said on the company’s third quarter ended Sept. 30 earnings conference call on Tuesday.

“We are quickly approaching our near-term leverage target of 2x gross debt-to-EBITDA,” Carre said.

The company’s outlook is strong and pricing is increasing.

“Our outlook today is strong,” chairman, president and chief executive officer Jeff Miller said on the call.

“Oil and gas supply remains tight for the foreseeable future.

“International market activity is accelerating and North America service capacity continues to further tighten.

“As a result, pricing is moving up in both markets,” Miller said.

Supply remains low due to low inventory and production but demand remains high.

“Oil and gas supply remains fundamentally tight due to multiple years of underinvestment,” Miller said.

“This tightness is apparent in historically low inventory levels, production levels well below expectations and temporary actions such as the largest ever SPR release.

“Against tight supply, demand for oil and gas is strong and we believe it will remain so,” Miller said.

“While broader market volatility is clear, what we see in our business is strong and growing demand for equipment and services.

“There is no immediate solution to balance the world’s demand for secure and reliable oil and gas against its limited supply.

“I expect progress towards increased supply will be measured in years, not months as behavior of both operators and service companies have changed.

Revenues have risen as a result of the higher pricing and increased demand.

“Our revenue grew 9% sequentially and is up 63% over the third quarter last year,” Miller said.

In the last quarter, Halliburton generated $543 million of free cash flow.

“We generated $753 million of cash from operations and $543 million of free cash flow during the third quarter,” Carre said.

“We expect full year free cash flow to be in the range of last year’s free cash flow,” Carre said.

Cash and cash equivalents were $1,977,000,000 as of Sept. 30, 2022, compared to $3,044,000,000 as of Dec. 31, 2021.

Long-term debt was $7,927,000,000 as of Sept. 30, 2022, compared to $9,127,000,000 as of Dec. 31, 2021.

On Aug. 26, the Houston-based oil field services company reported that it would redeem all $600,061,000 of its 3.5% senior notes due 2023 on Sept. 25 at a make-whole premium of Treasuries plus 15 basis points. Accrued interest to the redemption date, if any, was also to be paid.


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