FOR IMMEDIATE RELEASE Contact: Guy T. Marcus
December 21, 2000 Vice President-Investor Relations
214/978-2691
HALLIBURTON ANNOUNCES NEW STRUCTURE AND ENGINEERING AND CONSTRUCTION CHARGES
DALLAS, Texas -- In its third quarter earnings conference call,
Halliburton Company (NYSE:HAL) detailed its concerns regarding the poor near
term market outlook for the downstream engineering and construction business and
its decision to reorganize the engineering and construction business. A
consolidating customer base, difficult relationships with certain customers,
some financially stressed competitors and a fiercely competitive environment are
all factors influencing the reorganization decision and affecting productivity
and profitability. By way of contrast, Halliburton Company continues to
experience very strong markets in its upstream energy services businesses,
especially in North America.
Halliburton Company will operate two business segments in the future:
the Halliburton Energy Services Group and the Engineering and Construction
Group.
The Halliburton Energy Services Group will include Halliburton Energy
Services, Landmark Graphics, large integrated projects that include both surface
and sub-surface components, and the following businesses that were formally part
of Brown & Root Energy Services - Halliburton Subsea, Wellstream, Production
Services, Granherne, Bredero-Shaw joint venture and the EMC joint venture.
All engineering and construction activities will be consolidated under
the Engineering and Construction Group. The upstream oil and gas engineering and
construction, fabrication capabilities as well as the traditional engineering
and construction business will be under Kellogg Brown & Root management.
Individual brand identities will be maintained.
Current business conditions require us to focus on our core engineering
and construction competencies of serving the energy, civil and government
markets. Our goal is to deliver consistent, predictable, and profitable results.
This will result in recording approximately $120 million after tax charges in
the fourth quarter related to restructuring and charges on projects of the
engineering and construction businesses.
-more-
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Both Brown & Root Energy Services and Kellogg Brown & Root are impacted by the
charges and reorganization.
The portion of the charges related to reorganization costs is expected
to be approximately $25 million after tax and primarily relate to severance
costs associated with a reduction in the number of senior management positions
and costs to exit several facilities no longer required, while the remaining
charges primarily relate to project specific matters.
During the quarter, several large fixed fee engineering and
construction projects, including two projects where Kellogg Brown & Root
participates as a member of a construction joint venture, incurred significant
additional costs related to projected completion of the projects. Much of the
additional costs relate to labor disturbances in Venezuela and West Africa that
have significantly affected productivity on the projects. While claims will be
made for a large portion of the additional costs, management does not believe
that all the claims will be recovered. In addition, negotiations with customers
regarding cost increases on seven other projects have not resulted in resolution
of certain claims as originally anticipated.
Our goal for the engineering and construction business is to earn a 3
percent margin in 2001 and between 3-5 percent margin in the longer term given
the expected market conditions. We believe this new structure will allow us to
meet that goal. Our total backlog at the end of November 2000 was $9.7 billion.
Approximately $6.5 billion relates to the backlog in the new Engineering and
Construction Group businesses and we expect that backlog to be stronger at the
end of 2001. We anticipate working off about sixty to sixty-five percent of that
level of backlog during 2001.
Due to the ongoing strength of our upstream energy services businesses,
fourth quarter 2000 earnings per share are expected to be between $0.25 and
$0.27 per diluted share, including discontinued operations but excluding the
items discussed above. "
Dave Lesar, Halliburton's chairman of the board, president and chief
executive officer, said, "We are very disappointed that the high price oil and
gas environment has not yet translated to increased spending by our customers on
engineering and construction projects. The overwhelming majority of our projects
are executed efficiently and profitably. We continue to identify ways to
mitigate increased costs and aggressively negotiate claims resolution with our
customers. This new structure will allow us to leverage our businesses more
effectively as additional oil and gas engineering and construction project
opportunities are planned by our customers.
"On a more positive note, we are very pleased with the continuing
strong performance at Halliburton Energy Services, Landmark and Dresser
-more-
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Equipment Group. Our efforts on selling the Dresser Equipment Group are
proceeding with bids due this week. We plan to be in negotiations with leading
bidders by early in January," Lesar concluded.
The Company also announced that it has now purchased in excess of
twenty million shares of its stock under the previously announced stock
repurchase plan.
Halliburton Company, founded in 1919, is the world's largest provider
of products and services to the petroleum and energy industries. The company
serves its customers with a broad range of products and services through its
Energy Services Group and Engineering and Construction Group business segments.
The company's web site can be accessed at www.halliburton.com.
NOTE: In accordance with the Safe Harbor provisions of the Private Securities
Litigation Reform Act of 1995, Halliburton Company cautions that statements in
this press release which are forward looking and which provide other than
historical information involve risks and uncertainties that may impact the
company's actual results of operations. Please see Halliburton's Form 10-Q for
the quarter ended September 30, 2000 for a more complete discussion of such risk
factors.
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