Halliburton (HAL) 10-Q2024 Q3 Quarterly report

The accompanying unaudited condensed consolidated financial statements were prepared using United States generally accepted accounting principles (U.S. GAAP) 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 U.S. GAAP for annual financial statements and should be read together with our 2023 Annual Report on Form 10-K.

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, 2024, the results of our operations for the three and nine months ended September 30, 2024 and 2023, and our cash flows for the nine months ended September 30, 2024 and 2023. 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, 2024 may not be indicative of results for the full year.

The following table presents various pre-tax charges we recorded during the three and nine months ended September 30, 2024, which are reflected within “Impairments and other charges” on our condensed consolidated statements of operations.

During the three and nine months ended September 30, 2023, there were no amounts recorded in impairments and other charges.

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.

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.

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, 41% and 45% of our consolidated revenue was from the United States for the nine months ended September 30, 2024 and 2023, respectively. No other country accounted for more than 10% of our revenue for those periods.

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 customers’ 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, was not material to our condensed consolidated financial statements.

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 the duration of the contract 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.

As of September 30, 2024, 30% of our net trade receivables was from customers in the United States and 12% was from customers in Mexico. As of December 31, 2023, 33% of our net trade receivables was from customers in the United States and 9% was from customers in Mexico. Receivables from our primary customer in Mexico accounted for approximately 10% and 6% of our total receivables as of September 30, 2024 and December 31, 2023, respectively. While we have experienced payment delays from our primary customer in Mexico, the 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 country other than the United States and Mexico or single customer accounted for more than 10% of our net trade receivables at those dates.

We have risk of delayed customer payments and payment defaults associated with customer liquidity issues. 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 judgment and estimates, includes analysis of our customers’ historical time to pay, financial condition and various financial metrics, debt structure, credit ratings, and production profile, as well as political and economic factors in countries of operations and other customer-specific factors.

Effective January 1, 2023, we adopted new supplier finance program disclosure requirements contained in guidance issued by the Financial Accounting Standards Board (ASU 2022-04, “Disclosure of Supplier Finance Program Obligations”). The standards update also includes a prospective annual requirement to disclose a rollforward of the amount of the supplier finance program obligations during the annual reporting period. We will include the rollforward disclosure in our Annual Report on Form 10-K for the year ending December 31, 2024, as required.

We have agreements with third parties that allow our participating suppliers to finance payment obligations from us with designated third-party financial institutions who act as our paying agent. We have generally extended our payment terms with suppliers to 90 days. A participating supplier may request a participating financial institution to finance one or more of our payment obligations to such supplier prior to the scheduled due date thereof at a discounted price. We are not required to provide collateral to the financial institutions.

Our obligations to participating suppliers, including amounts due and scheduled payment dates, are not impacted by the suppliers’ decisions to finance amounts due under these financing arrangements. Our outstanding payment obligations under these agreements were $321 million as of September 30, 2024, and $322 million as of December 31, 2023, and are included in accounts payable on the condensed consolidated balance sheets.

During the three months ended September 30, 2024, we recorded a total income tax provision of $154 million, which included a partial release of a valuation allowance on our deferred tax assets in the amount of $41 million, on a pre-tax income of $734 million, resulting in an effective tax rate of 21.0% for the quarter. During the three months ended September 30, 2023, we recorded a total income tax provision of $192 million on a pre-tax income of $916 million, resulting in an effective tax rate of 21.0% for the quarter.

During the nine months ended September 30, 2024, we recorded a total income tax provision of $539 million, which included a partial release of a valuation allowance on our deferred tax assets in the amount of $41 million, on a pre-tax income of $2.4 billion, resulting in an effective tax rate of 22.1% for the period. During the nine months ended September 30, 2023, we recorded a total income tax provision of $533 million on a pre-tax income of $2.5 billion, resulting in an effective tax rate of 21.1% for the period.

Our tax returns are subject to review by the taxing authorities in the jurisdictions where we file tax returns. In most cases we are no longer subject to examination by tax authorities for years before 2012. The only significant operating jurisdiction that has tax filings under review or subject to examination by the tax authorities is the United States. The United States federal income tax filings for tax years 2016 through 2023 are currently under review or remain open for review by the Internal Revenue Service (the IRS).

As of September 30, 2024, the primary unresolved issue for the IRS audit for 2016 relates to the classification of the $3.5 billion ordinary deduction that we claimed for the termination fee we paid to Baker Hughes in the second quarter of 2016 for which we received a Notice of Proposed Adjustment (NOPA) from the IRS on September 28, 2023. We regularly assess the likelihood of adverse outcomes resulting from tax examinations to determine the adequacy of our tax reserves, and we believe our income tax reserves are appropriately provided for all open tax years. We do not expect a final resolution of this issue in the next twelve months.

Based on the information currently available, we do not anticipate a significant increase or decrease to our tax contingencies within the next twelve months.

The Company is subject to various legal or governmental proceedings, claims or investigations, including personal injury, property damage, environmental, intellectual property, commercial, tax, and other 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 legal or governmental proceeding, claim or investigation, and no assurance can be given as to the outcome of these proceedings.

In the normal course of business, we have agreements with financial institutions under which approximately $2.6 billion of letters of credit, bank guarantees, or surety bonds were outstanding as of September 30, 2024. 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 September 30, 2024, we had no material off-balance sheet liabilities and were not required to make any material cash distributions to our unconsolidated subsidiaries.

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 was antidilutive.

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.

In the first nine months of 2024, the fair value of our total debt increased as a result of lower bond yields.

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 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.

During the fourth quarter of 2023, we entered into a credit default swap (CDS) with a third-party financial institution with an initial notional amount of $300 million. The CDS is related to a borrowing provided by the financial institution to one of our primary customers in Mexico, and a portion of the proceeds were utilized by this customer to pay certain of our outstanding receivables. The outstanding notional amount of the CDS, which was $217 million as of September 30, 2024, will continue to reduce on a monthly basis over its remaining 17-month term.

During the third quarter of 2024, we entered into a CDS with a different third-party financial institution with an initial notional amount of $256 million. The CDS is related to a borrowing provided by the financial institution to one of our primary customers in Mexico, and a portion of the proceeds were utilized by this customer to pay certain of our outstanding receivables. The outstanding notional amount of the CDS, which was $235 million as of September 30, 2024, will continue to reduce on a monthly basis over its remaining 21-month term.

The fair value of the derivative liabilities was not material to our financial condition as of September 30, 2024.

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.

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 48,000 employees, we operate in more than 70 countries around the world, and our corporate headquarters is in Houston, Texas.

The following charts depict the revenue split between our two operating segments and our four primary geographic regions for the three months ended September 30, 2024.

Oil prices declined in the third quarter of 2024 from the second quarter of 2024 as a result of demand concerns coupled with increased supply. While easing inflationary pressure has reduced macroeconomic uncertainty, risks associated with trade tensions and geopolitical unrest in the Middle East and the Russia-Ukraine conflict continue to be major sources of volatility for the oil and natural gas markets.

During the third quarter of 2024, the U.S. active rig count declined to its lowest level since the first quarter of 2022 as both oil and gas basins saw declines. The international rig count continued to decline in the third quarter of 2024 from the second quarter of 2024 driven by Asia-Pacific, Latin America, and Europe.

Globally, we continue to be impacted by extended supply chain lead times for the supply of select raw materials. We monitor market trends and work to mitigate cost impacts through economies of scale in global procurement, technology modifications, and efficient sourcing practices. 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.

The following graph illustrates our revenue and operating margins for each operating segment for the third quarter of 2023 and 2024.

During the third quarter of 2024, we generated total company revenue of $5.7 billion, a 2% decrease as compared to the third quarter of 2023. We reported operating income of $871 million, including impairments and other charges of $116 million, in the third quarter of 2024, a decrease of 16% when compared to the third quarter of 2023.

Our Completion and Production segment revenue decreased 5% in the third quarter of 2024 as compared to the third quarter of 2023. The decrease in revenue was largely driven by decreased stimulation activity in the Western Hemisphere and lower completion tool sales in the Gulf of Mexico, the Caspian Area and the North Sea. Partially offsetting these decreases were increased pressure pumping services in Canada, the Gulf of Mexico, and the Middle East, improved cementing activity in Latin America and Europe, and higher completion tool sales in Saudi Arabia.

Our Drilling and Evaluation segment revenue increased 3% in the third quarter of 2024 as compared to the third quarter of 2023, primarily due to increased drilling services in the Western Hemisphere and Middle East/Asia, improved project management activity in Ecuador, Mexico and Kuwait, and higher testing services in Middle East/Asia and Latin America. Partially offsetting these improvements were decreased fluid services in the Gulf of Mexico and Eastern Hemisphere, and lower wireline activity in the Gulf of Mexico and Africa.

Our North America revenue decreased 9% in the third quarter of 2024, as compared to the third quarter of 2023. This decline was primarily driven by lower pressure pumping services and decreased well intervention services in U.S. land. Additionally, there was decreased activity across multiple product services lines in the Gulf of Mexico partly due to the impacts from hurricanes. Partially offsetting these declines were improved pressure pumping services in Canada and the Gulf of Mexico, along with increased drilling services in the region.

Internationally, revenue increased 4% in the third quarter of 2024, as compared to the third quarter of 2023, largely driven by increased activity across multiple product service lines in Kuwait, improved well construction activity in Mexico and United Arab Emirates, and higher pressure pumping services and completion tool sales in the Middle East. Partially offsetting these improvements were decreased completion tool sales and lower stimulation activity in Latin America.

Our operating performance and liquidity are described in more detail in “Liquidity and Capital Resources” and “Business Environment and Results of Operations.”

In 2021, we announced our target to achieve a 40% reduction in our Scope 1 and 2 emissions by 2035 from the 2018 baseline. At the same time, we support our customers in their emissions reduction efforts by continuously developing and deploying goods and services that are accretive to their goals as well as ours. As the energy mix transition unfolds, we seek to apply our expertise and resources in growth sectors adjacent to our traditional oilfield services space, including carbon capture, utilization, and storage, hydrogen, and geothermal. Finally, we will continue to focus on accelerating the success of clean tech start-ups via Halliburton Labs, which also allows us to participate in the energy mix transition at relatively low risk by investing our expertise, resources, and team without a significant outlay of capital while we learn where we can strategically engage new markets. As of September 30, 2024, Halliburton Labs had 33 participating companies and alumni.

On August 21, 2024, we became aware that an unauthorized third party gained access to certain of our systems, as previously disclosed in our Form 8-Ks filed with the Securities and Exchange Commission on August 23, 2024 and September 3, 2024. The incident caused disruptions and limitation of access to portions of our business applications supporting aspects of our operations and corporate functions. As we previously disclosed, we know the unauthorized third party exfiltrated information from our systems. We will continue to incur certain expenses related to our response to and resolution of this incident. We believe the incident has not had, and is not reasonably likely to have, a material impact on the Company’s financial condition or results of operations.

As of September 30, 2024, we had $2.2 billion of cash and equivalents, compared to $2.3 billion of cash and equivalents at December 31, 2023.

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 2024 to be approximately 6% of revenue. We believe this level of spend will allow us to invest in our key strategic technologies, including the construction and deployment of our Zeus electric fracturing systems in North America, our iStar Intelligent Drilling and Logging Platform, and our iCruise Intelligent Rotary Steerable System. We will continue to maintain capital discipline and monitor the rapidly changing market dynamics, and we may adjust our capital spend 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 $150 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 2024.

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 6.2 million shares of common stock during the third quarter of 2024 under this program. Approximately $3.4 billion remained authorized for repurchases as of September 30, 2024 and may be used for open market and other share purchases.

We have entered into credit default swaps (CDSs) with third-party financial institutions that have an aggregate notional amount outstanding as of September 30, 2024 of $452 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. As of September 30, 2024, the notional amounts of these CDSs were approximately $217 million and $235 million, respectively, which these amounts will decline over the remaining terms of the instruments (17 months and 21 months, respectively). The fair value of the derivative liabilities was not material to our financial condition as of September 30, 2024.

Receivables from our primary customer in Mexico accounted for approximately 10% of our total receivables as of September 30, 2024. While we have experienced payment delays from our primary customer in Mexico, the 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.

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 2024, based on the location of the services provided and products sold, 41% of our consolidated revenue was from the United States, compared to 45% of our consolidated revenue from the United States in the first nine months of 2023. No other country accounted for more than 10% of our revenue for those periods.

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.

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, during the remainder of 2024, we generally expect that many of our customers in North America will continue their strategy of operating within their cash flows and generating returns rather than prioritizing production growth. 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.

As we consider the balance of 2024, we remain positive on the oil and natural gas markets and continue to see strength across our portfolio. We believe long-term demand growth will be driven by economic expansion, energy security concerns, and population growth. Oil and natural gas continue to demonstrate their critical roles in the global economy in meeting this long term demand, and necessitate sustained capital investment in existing and new sources of production. To meet this growing demand, production will be needed from conventional, unconventional, deep-water, shallow-water, and short and long-cycle projects. Capital discipline by major oil and natural gas producers continues to underpin a more durable and less volatile upstream spending cycle versus prior cycles.

As noted above, rig counts and, as a result, service activity in U.S. continued to decline in the third quarter of 2024. Consequently, we expect our revenues in North America to decline in 2024 as compared to 2023. Nevertheless, we expect our international business to deliver mid to high single digit revenue growth for the full year of 2024.

Completion and Production revenue in the third quarter of 2024 was $3.3 billion, a decrease of $188 million, or 5%, when compared to the third quarter of 2023. Operating income in the third quarter of 2024 was $669 million, a decrease of $77 million, or 10%, when compared to the third quarter of 2023. These results were largely driven by decreased stimulation activity in the Western Hemisphere and lower completion tool sales in the Gulf of Mexico, the Caspian Area and the North Sea. Partially offsetting these decreases were increased pressure pumping services in Canada, the Gulf of Mexico, and the Middle East, improved cementing activity in Latin America and Europe, and higher completion tool sales in Saudi Arabia.

Drilling and Evaluation revenue in the third quarter of 2024 was $2.4 billion, an increase of $81 million, or 3%, when compared to the third quarter of 2023. Operating income in the third quarter of 2024 was $406 million, an increase of $28 million, or 7%, when compared to the third quarter of 2023. These results were primarily driven by increased drilling services in the Western Hemisphere and Middle East/Asia, improved project management activity in Ecuador, Mexico and Kuwait, and higher testing services in Middle East/Asia and Latin America. Partially offsetting these improvements were decreased fluid services in the Gulf of Mexico and Eastern Hemisphere, and lower wireline activity in the Gulf of Mexico and Africa.

North America revenue in the third quarter of 2024 was $2.4 billion, a 9% decrease compared to the third quarter of 2023. This decline was primarily driven by lower pressure pumping services and decreased well intervention services in U.S. land. Additionally, there was decreased activity across multiple product services lines in the Gulf of Mexico partly due to the impacts from hurricanes. Partially offsetting these declines were improved pressure pumping services in Canada and the Gulf of Mexico, along with increased drilling services in the region.

Latin America revenue in the third quarter of 2024 was $1.1 billion, flat compared to the third quarter of 2023. Increased well construction activity and improved project management activity in Ecuador and Mexico were offset by decreased completion tool sales in Brazil, lower stimulation activity in Argentina and Brazil, and lower project management and well construction activity in Colombia.

Europe/Africa/CIS revenue in the third quarter of 2024 was $722 million, a 2% decrease compared to the third quarter of 2023. This decrease was primarily driven by lower drilling-related services in the North Sea, decreased completion tool sales in the Caspian Area and the North Sea, and declined wireline activity in Africa. Partially offsetting these declines were improved cementing and higher project management activity in the North Sea, along with increased well intervention services in the region.

Middle East/Asia revenue in the third quarter of 2024 was $1.5 billion, a 9% increase compared to the third quarter of 2023. This increase resulted from increased activity across multiple product service lines in Kuwait and Australia, improved pressure pumping services and higher completion tool sales in Saudi Arabia, higher well construction activity in United Arab Emirates, and increased testing services in the region. Partially offsetting these improvements were lower fluid services in Saudi Arabia and Indonesia.

On September 28, 2023, we received a NOPA from the IRS covering our 2016 U.S. tax return. The NOPA proposed an adjustment to reclassify approximately 95% of the $3.5 billion termination fee paid to Baker Hughes in 2016 from an ordinary expense deduction to a capital loss. The termination fee was paid to Baker Hughes under the merger agreement after antitrust regulators in multiple jurisdictions failed to approve our proposed merger. It is common commercial practice to include a termination fee in a merger agreement to compensate the target for damages incurred when the acquisition does not go forward. The IRS’s long-understood position at the time of the payment had been to treat such payments as an ordinary and necessary business expense. We strongly disagree with the proposed adjustment on both a factual and legal basis, and we plan to vigorously contest it.

We expect that resolving this dispute will take substantial time. In December 2023, we initiated the IRS administrative appeals process, which may take more than twelve months to complete. Failing a resolution through that process, the matter would ultimately be resolved by the United States federal courts.

We regularly assess the likelihood of adverse outcomes resulting from tax examinations to determine the adequacy of our tax reserves, and we believe our income tax reserves are appropriately provided for all open tax years. We cannot assure you that the matter will be determined in our favor or against us, and if the matter is ultimately determined unfavorably to us, it could have a material adverse impact on our results of operations and cash flows. Based on tax attributes currently available, we estimate that, should the IRS's position prevail through its appellate process and subsequent litigation, the proposed adjustment could result in cash taxes due of approximately $650 million (plus interest thereon in the case of amounts due for previous tax years). Our estimates are calculated under current tax law and on the bases of our assumptions regarding taxable income and loss and other tax attributes over the relevant period, which law could change and which assumptions could and likely will differ materially from actual results. In any event, no payment of any additional tax is currently required, nor do we anticipate that the proposed adjustment would materially and adversely impact our ability to meet our expected uses of cash, including future capital expenditures, working capital investments, and scheduled debt repayments, or our ability to return cash to shareholders, even if a final determination of the matter is reached that is adverse to us.

Completion and Production revenue in the first nine months of 2024 was $10.1 billion, a decrease of $299 million, or 3%, compared to the first nine months of 2023. Operating income for the segment in the first nine months of 2024 was $2.1 billion, a decrease of $39 million, or 2%, compared to the first nine months of 2023. These results were largely driven by lower pressure pumping services in U.S. land and declined well intervention services in North America. Partially offsetting these declines were increased pressure pumping services in Canada, the Gulf of Mexico, Argentina, Europe and the Middle East, higher completion tool sales in the Gulf of Mexico, Europe/Africa and Saudi Arabia, and improved artificial lift activity globally.

Drilling and Evaluation revenue in the first nine months of 2024 was $7.3 billion, an increase of $354 million, or 5%, compared to the first nine months of 2023. Operating income for the segment in the first nine months of 2024 was $1.2 billion, an increase of $84 million, or 7%, compared to the first nine months of 2023. These results were primarily driven by increased drilling services in the Western Hemisphere and the Middle East, improved activity across multiple product service lines in Mexico, increased testing services in Latin America and the Middle East, and higher project management activity in Kuwait. These improvements were partially offset by lower wireline activity in North America, reduced drilling services in Europe/Africa, and decreased fluid services in Brazil, Africa, and Asia.

North America revenue in the first nine months of 2024 was $7.4 billion, an 8% decrease compared to the first nine months of 2023, resulting primarily from lower pressure pumping services in U.S. land, decreased well intervention services and lower wireline activity in U.S. land and the Gulf of Mexico, and decreased fluid services in the region. Partially offsetting these declines were increased pressure pumping services in Canada and the Gulf of Mexico and improved drilling services and completion tool sales in the region.

Latin America revenue in the first nine months of 2024 was $3.3 billion, a 10% increase compared to the first nine months of 2023, resulting primarily from improved activity across multiple product service lines in Mexico, increased pressure pumping and drilling-related services in Argentina, improved project management activity in Ecuador, and higher testing services and wireline activity in the region. Partially offsetting these improvements were lower completion tool sales in Brazil and reduced project management activity in Colombia.

Europe/Africa/CIS revenue in the first nine months of 2024 was $2.2 billion, a 5% increase compared to the first nine months of 2023, resulting primarily from increased pressure pumping services and higher project management activity in Europe, improved completion tool sales in the region, and improved fluid services in the North Sea and the Caspian Area. Partially offsetting these increases were decreased activity across multiple product service lines in Africa, as well as lower drilling services in the region.

Middle East/Asia revenue in the first nine months of 2024 was $4.5 billion, a 7% increase compared to the first nine months of 2023, resulting primarily from increased drilling services, pressure pumping services, and testing services in the Middle East, higher completion tool sales in Saudi Arabia, and higher project management activity in Kuwait. These improvements were partially offset by lower project management and fluids activity in Saudi Arabia and Asia.

The Private Securities Litigation Reform Act of 1995 provides safe harbor provisions for forward-looking information. Forward-looking information is based on projections and estimates, not historical information. Some statements in this Form 10-Q are forward-looking and use words like “may,” “may not,” “believe,” “do not believe,” “plan,” “estimate,” “intend,” “expect,” “do not expect,” “anticipate,” “do not anticipate,” “should,” “likely,” and other expressions. We may also provide oral or written forward-looking information in our statements and other materials we release to the public. Forward-looking information involves risks and uncertainties and reflects our best judgment based on current information. Our results of operations can be affected by inaccurate assumptions we make or by known or unknown risks and uncertainties. In addition, other factors may affect the accuracy of our forward-looking information. As a result, no forward-looking information can be guaranteed. Actual events and the results of our operations may vary materially.

We do not assume any responsibility to publicly update any of our forward-looking statements regardless of whether factors change as a result of new information, future events, or for any other reason. You should review any additional disclosures we make in our press releases and Forms 10-K, 10-Q, and 8-K filed with or furnished to the SEC. We also suggest that you listen to our quarterly earnings release conference calls with financial analysts.

For quantitative and qualitative disclosures about market risk, see Part II, Item 7(a), “Quantitative and Qualitative Disclosures About Market Risk,” in our 2023 Annual Report on Form 10-K. Our exposure to market risk has not changed materially since December 31, 2023.

In accordance with the Securities Exchange Act of 1934 Rules 13a-15 and 15d-15, we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2024 to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Our disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

There has been no change in our internal control over financial reporting that occurred during the quarter ended September 30, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

The statements in this section describe the known material risks to our business and should be considered carefully. The risk factor below updates our risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

We are increasingly dependent on digital technologies and services to conduct our business. We use these technologies for internal and operational purposes, including data storage, processing, and transmissions, as well as in our interactions with customers and suppliers. Examples of these digital technologies include analytics, automation, and cloud services. Our digital technologies and services, and those of our customers and suppliers, are subject to the risk of cybersecurity incidents and, given the nature of such incidents, some can remain undetected for a period of time despite efforts to detect and respond to them in a timely manner. We routinely monitor our systems for cybersecurity threats and have processes in place to detect and remediate vulnerabilities. Nevertheless, we have experienced cybersecurity incidents and attempted breaches in the past, one of which resulted in an unauthorized third party gaining access to certain of our systems and exfiltrating information from those systems, which we previously disclosed in Form 8-Ks we filed with the Securities and Exchange Commission on August 23, 2024 and September 3, 2024. The incident caused disruptions and limitation of access to portions of our business applications supporting aspects of our operations and corporate functions, required us to incur significant costs, and required a significant amount of attention from management and our work force. We continue to face risks from potential litigation and regulatory actions related to this incident and may discover other impacts or new events, which may occur that could affect our business, reputation, consolidated results of operations, or consolidated financial condition.

Even if we successfully defend our own digital technologies and services, we also rely on our customers and suppliers, with whom we may share data and services, to protect their digital technologies and services from cybersecurity incidents.

If our systems, or our customers’ or suppliers’ systems, for protecting against cybersecurity incidents prove not to be sufficient, we could be adversely affected by, among other things: loss of or damage to intellectual property, proprietary or confidential information, or customer, supplier, or employee data; interruption of our business operations; and increased costs required to prevent, respond to, or mitigate cybersecurity incidents. These risks could harm our reputation and our relationships with our customers, employees, suppliers and other third parties, and may result in claims against us. In addition, laws and regulations governing cybersecurity incidents, data privacy, and the unauthorized disclosure of confidential or protected information pose increasingly complex compliance challenges, and failure to comply with these laws could result in penalties and legal liability. These risks could have a material adverse effect on our business, consolidated results of operations, and consolidated financial condition.

Our barite and bentonite mining operations, in support of our fluid services business, are subject to regulation by the U.S. Mine Safety and Health Administration under the Federal Mine Safety and Health Act of 1977. Information concerning mine safety violations or other regulatory matters required by section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 CFR 229.104) is included in Exhibit 95 to this quarterly report.