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Investing.com -- S&P Global Ratings has revised Halliburton Co (NYSE:HAL).’s outlook to stable from positive while affirming its ’BBB+’ issuer credit rating.
The revision reflects expectations that Halliburton’s credit measures will decline this year with only modest improvement in 2026, keeping average funds from operations (FFO) to debt below 60%.
The oilfield services company saw revenues decline 6% year over year in the first half of 2025, as customers reduced drilling and completion activity due to lower oil prices, improved operating efficiencies, and evaluation of newly acquired assets following recent mergers and acquisitions.
North American revenues dropped 11% year over year while international revenues fell 3%, with lower activity in Mexico and Saudi Arabia offsetting growth in Brazil and Norway.
Halliburton’s adjusted EBITDA margins declined more than 400 basis points year over year to approximately 20% in the first half of 2025, attributed to lower pricing, start-up costs for international projects, and tariff impacts.
For 2026, S&P assumes revenues will remain flat with 2025, with a weak first half followed by an uptick in the second half. Margins are expected to improve modestly due to the absence of start-up expenses, completion of SAP conversion in 2025, and management’s cost reduction efforts.
The rating agency expects FFO to debt to be 45%-50% in 2025, improving to 50%-55% in 2026, and estimates it would remain in the 40%-45% range under midcycle commodity price assumptions.
As the leading oilfield services provider in the U.S., Halliburton’s high exposure to North America (42% of revenues in 2024) poses greater risk to revenue and margin estimates compared to its diversified peers. The company’s main service line, hydraulic fracturing, is highly price sensitive amid fierce competition.
Halliburton has been converting its fleet to more efficient electric equipment, with 50% of its fleet expected to be electric by year-end 2025. However, the company has been stacking its diesel equipment recently due to lower pricing.
Despite weaker outlook for the second half of 2025, management reaffirmed its intent to distribute $1.6 billion to shareholders via dividends and share repurchases this year, representing about 85% of company-defined free cash flow.
S&P could downgrade Halliburton if FFO to debt falls below 30% for a sustained period, while an upgrade would require average FFO to debt approaching 60% and average discretionary cash flow to debt at 10%-15% on a sustained basis.
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