Halliburton Company Annual Report 2000

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FY2000 Annual Report · Halliburton Company

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Marc h 20, 2001

INNOVATIONS
2000

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0
2
0
0
1

230017

www.halliburton.com

comparative highlights

Millions of dollars and shares except per share data

2000

1999

1998

Diluted income (loss) per share from continuing operations
Diluted net income (loss) per share
Cash dividends per share
Shareholders’ equity per share
Revenues
Operating income
Income (loss) from continuing operations
Net income (loss)
Long-term debt (including current maturities)
Shareholders’ equity
Capital expenditures
Depreciation and amortization
Diluted average shares outstanding

N e t i n c o m e i n 2 0 0 0 i n c l u d e s a g a i n o n d i s p o s a l o f d i s c o n t i n u e d o p e r a t i o n s o f
$ 2 1 5 m i l l i o n o r $ 0 . 4 8 p e r d i l u t e d s h a r e . N e t i n c o m e i n 1 9 9 9 i n c l u d e s a g a i n o n
d i s p o s a l o f d i s c o n t i n u e d o p e r a t i o n s o f $ 1 5 9 m i l l i o n o r $ 0 . 3 6 p e r d i l u t e d s h a r e .

0.42
1.12
0.50
9.20
$ 11,944
462
188
501
$ 1,057
3,928
578
503
446

0.39
0.99
0.50
9.69
$ 12,313
401
174
438
$ 1,364
4,287
520
511
443

(0.27)
(0.03)
0.50
9.23
$ 14,504
170
(120)
(15)
$ 1,426
4,061
841
500
439

H A L L I B U R T O N

C O M P A N Y 2 0 0 0 A N N U A L

R E P O R T

I N N O V A T I O N S 2 0 0 0 & A N N U A L

R E P O R T

E D I T I O N

HALLIBURTON TODAY More than 90,000
professionals producing extraordinary
results for customers worldwide.

ENERGY SERVICES Through innovation
and technology, impacting every aspect
of the oil and gas asset.

ENGINEERING & CONSTRUCTION The
world’s most respected designer,
builder and facilitator of energy and
infrastructure projects.

nnovation is the theme of our Annual Report for the year 2000. It’s the story of the

changes, great and small, technical and organizational, that our more than 90,000 men

and women are delivering every day.

Halliburton Today

Letter to Shareholders

Energy Services Group

We take great pride in their contributions. Naturally, the decisions of senior management

Technology Flagships

are most often in the spotlight, because those decisions set the direction and the tone for

24 Engineering and Construction Group

the organization.

30 Health, Safety and Environment

But there is much more to our success – the extraordinary results produced by the

32 Financial Section

scientists and software developers, the sales people and the project managers, the

76 Board of Directors

roughnecks and field engineers.

Their results come from having the right people and the right environment – the culture

that helps them focus on the customer, on solving the most important problems, and on

delivering excellent service. Creating and nurturing this culture is our most important task.

We welcome this opportunity to show our shareholders and the public some of our impor-

tant and dramatic innovations, and to thank the extraordinary Halliburton people who are

bringing them about. H

Cover illustration by C.F.Payne

management
and corporate
information

CORPORATE OFFICERS
David J. Lesar Chairman of the Board, President and Chief Executive Officer,
Donald C. Vaughn Vice Chairman, Gary V. Morris Executive Vice President and Chief Financial
Officer, Lester L. Coleman Executive Vice President and General Counsel, John W. Kennedy
Executive Vice President - Global Business Development, Jerry H. Blurton Vice President
and Treasurer, Margaret Carriere Vice President – Human Resources, Robert F. Heinemann
Vice President and Chief Technology Officer, Arthur D. Huffman Vice President and Chief
Information Officer, Susan S. Keith Vice President, Secretary and Corporate Counsel,
Guy T. Marcus Vice President – Investor Relations, R. Charles Muchmore, Jr. Vice President

and Controller

ENERGY SERVICES GROUP
Edgar Ortiz President and Chief Executive Officer

ENGINEERING AND CONSTRUCTION GROUP
KELLOGG BROWN & ROOT
A. Jack Stanley Chairman, R. Randall Harl President and Chief Executive Officer

GO TO WWW.HALLIBURTON.COM
FOR A COMPLETE LISTING OF OFFICERS.

SHAREHOLDER INFORMATION
Corporate Office 3600 Lincoln Plaza, 500 North Akard Street, Dallas, Texas 75201-3391.
Shares Listed New York Stock Exchange Symbol: HAL, Swiss Exchange.
Transfer Agent and Registrar Mellon Investor Services, L.L.C., 85 Challenger Road, Overpeck
Centre, Ridgefield Park, New Jersey 07660-2104 • (800) 279-1227.
Form 10-K Report Shareholders can obtain a copy of the Company’s annual report to the Securities
and Exchange Commission, Form 10-K, by contacting: Vice President – Investor Relations,
Halliburton Company, 3600 Lincoln Plaza, 500 North Akard Street, Dallas, Texas 75201-3391.
For up-to-date information on Halliburton Company, shareholders may use the Company’s toll free
telephone-based information service, available 24 hours a day at: 1-888-669-3920 or contact the
Halliburton Company homepage on the Internet’s World Wide Web at http://www.halliburton.com

Click here for
innovation.

Go to www.halliburton.com and
you’ll find a wealth of information
about our innovative company.
You can click and find our latest
projects, most recent news
releases, or even job opportunities.
Halliburton.com. It’s an innovative
site, but that’s what you should
expect from a leader.

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

H A L L I B U R T O N

C O M P A N Y 2 0 0 0 A N N U A L

R E P O R T

Energy Services Group offers the broadest array of products and services to upstream oil and gas customers worldwide, stretching from

the manufacturing of drill bits and other downhole and completion tools and pressure pumping services to subsea engineering

and fabrication.

Engineering and Construction Group serves the energy industry by designing and building liquefied natural gas plants, refining and

processing plants, production facilities and pipelines both onshore and offshore. The non-energy business of the group meets the engin-

eering and construction needs of governments and civil infrastructure customers. H

HALLIBURTON COMPANY 2000 ANNUAL REPORT

A message
from
David J. Lesar,
Chairman of
the Board,
President and
Chief Executive
Officer
of Halliburton
Company

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

fellow

shareholders

alliburton

initiated

significant

five years Halliburton has grown from a

has been slower to accelerate. As

changes during 2000 as we

$5.7 billion company to its present $11.9

exploration and development increases

restructured the Company to profit from

billion size. At the same time, we have

overseas in 2001, we are in an excellent

growing opportunities in the worldwide

become a more closely knit organization

position to continue to grow our revenues

energy industry. These changes included

with a more focused and unified strategy.

and earnings in the upstream oil and gas

the decision to divest the Dresser

We’re grateful for Dick’s service and

sector. Overall, oil and gas company E&P

Equipment Group, and the formation of

commitment to Halliburton and wish him

spending was up by more than 18

our Energy Services and Engineering and

well in his new role in public life.

percent in 2000. Early estimates for 2001

Construction groups.

In 2000, the demand for energy services

are for additional spending growth of

Halliburton

also experienced

was particularly strong in the U.S., as both

around 20 percent.

transition in senior management. Dick

crude oil and natural gas prices rose

The demand for Engineering &

Cheney retired as our chairman in August

substantially, and oil and gas companies

Construction (E&C) projects, however,

to run for vice president of the United

increased

their

expenditures

for

did not mirror that for energy services. In

States, and I was elected chairman and

exploration and production

(E&P)

2000, higher prices for oil and gas had not

chief executive officer in addition to my

projects. However, historically two-thirds

yet translated to increased spending by

job as president.

of Halliburton’s energy services business

our customers on E & C projects in the

Dick’s tenure was marked by a period

comes from outside the U.S., and demand

liquefied natural gas (LNG), refining, and

of extraordinary growth for Halliburton. In

for energy services in international areas

petrochemical industries. This lack of

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

market opportunities, along with a

and $188 million

from continuing

The E&C group’s revenues were $4.0

consolidating customer base and a fiercely

operations. Earnings per diluted share

billion, compared to $5.3 billion in 1999,

competitive environment, contributed to

were $1.12, compared with $.99 per share

and operating income was $14 million,

my decision to restructure the E&C

for 1999. Discontinued operations are

compared to $203 million in 1999. This

group. This change will help us gain

those of the Dresser Equipment Group,

decline was a reflection of the lack of new

operating efficiencies and provide a

which is in the process of being sold.

downstream projects, and intense compe-

stronger platform for consistent profitability

The Energy Services Group includes

tition for the few available opportunities.

with improved operating margins. Current

our business units providing services and

Our third business segment, Dresser

and projected strength in the energy

products to the upstream oil and gas

Equipment Group, was reclassified as

services markets in the U.S. and overseas

business. The group’s 2000 revenues were

discontinued operations after we decided

should be

followed by

increased

$7.9 billion, compared to $7.0 billion in

to sell the business. The group is

spending in the E&C sector. We expect

1999, while operating income more than

performing well, but their lines of

this to begin in late 2001 and 2002.

doubled to $526 million

in 2000,

business do not closely fit our core business

Halliburton’s 2000 revenues from

compared to $222 million in 1999. This

and our long-term goals and objectives.

continuing operations were $11.9 billion.

dramatic

improvement came

from

This move will bring a sharper focus on

Net income for the year, including

stronger demand for energy services in

our core business activities.

discontinued operations, was $501 million,

North America.

The estimated $1.1 billion net proceeds

“

Our organization and

our technology strategy
…are designed to
position Halliburton to…
continue our worldwide
leadership in providing
discrete energy services.

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

”

the company, and a flatter, more

responsive, management structure in both

business segments. This organization will

both strengthen our individual discrete

product and service lines, and at the

same time give us a more effective

framework for developing integrated

technology products, and for pursuing

large integrated projects.

The most significant application for

integrated technologies over the next

several years is in deepwater exploration

and production projects. We estimate

there will be about $21 billion committed

annually to deepwater projects by 2004,

up from $8 billion in 2000.

Winning

these projects

requires

project management skills, the ability to

match the subsurface and surface work,

to perform and integrate services during

the project, and to develop new enabling

technologies – all Halliburton strengths.

And we’ve proven our ability to compete

by winning the engineering, procurement

and construction (EPC) contract for the

$2.5 billion Barracuda/Caratinga offshore

project in Brazil.

Our organization and our technology

will be used for working capital and to

In the Energy Services Group, this

strategy – the focus of this annual report

repay debt, which will leave us in an even

means a renewed focus on optimizing the

– are designed to position Halliburton to

stronger financial position to pursue

value of our individual product lines –

win large projects and continue our

strategic acquisitions and internal invest-

turning their brand name capital and

worldwide

leadership

in providing

ment opportunities. We expect a pretax

strong market position into higher profit

discrete energy services. I would like to

profit of about $500 million from the sale

margins. This will be the focus of the

thank all of our employees who are

and expect it to be completed in the sec-

energy services management in 2001.

executing the business strategies which

ond quarter of 2001. Halliburton will retain

At the same time, in order to make our

will drive future success for the Company

a 5 percent equity stake.

E&C organization flatter and simpler, I

and our shareholders. H

The changes in our Energy Services

combined all our engineering and

Sincerely,

and E&C groups have been driven by the

construction operations into one company.

same strategic goals: to improve the

All engineering, construction, fabrication,

competitive position of our product lines,

and project management are now part of

to bring a new intensity and focus to our

Kellogg Brown & Root (KBR).

commitment to the energy industry, and

The restructuring has achieved a

to improve profitability.

reduction in the number of executives in

David J. Lesar
Chairman of the Board,
President and Chief Executive Officer

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

ener

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

he Energy Services Group is the real-

time knowledge company serving upstream

petroleum industry customers worldwide.

The Group consists of the Halliburton

Energy Services and Landmark Graphics

Corporation business units, as well as large

integrated projects that include surface,

subsea and subsurface components. It also

includes the following businesses that were

formerly part of Brown & Root Energy

Services: Halliburton Subsea, Wellstream,

Production Services, Granherne, and two joint

ventures: Bredero-Shaw and EMC.

Halliburton Energy Services provides a

broad range of services for the exploration,

development, and production of oil and gas

wells. These services include formation

evaluation, well construction, production

enhancement and well maintenance for

either a single well or an entire field.

Landmark Graphics Corporation supplies

software and services that transform data into

computer models of hydrocarbon reserves

and enable customers to optimize their

exploration, development, and production

decisions as well as integrate their technical-

to-business processes.

This report focuses on the company’s tech-

nology strategy and the technological inno-

vations

for 2000. These cut across

business unit boundaries and unify the

diverse product and service lines. They

provide a framework for understanding how

Halliburton is creating value for customers

and shareholders, and how that process will be

enhanced in the future.

Technology is a very broad term that

embraces not only tools, processes, products,

and services, but also the know-how,

experience, and problem-solving ability of

Halliburton’s employees. In a very real sense,

it is this ability to apply specialized

knowledge and advanced techniques to the

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

unique needs of customers that is the true

important step in putting critical information

Locator to find the right people for the job –

source of value creation, and Halliburton’s

at the fingertips of decision makers.

the ones with the exact knowledge needed

true source of competitive advantage.

In addition, Halliburton acquired a 15%

at that moment, anywhere in the world.

Knowledge Management

share of Petroleum Place, an Internet mar-

On the level of individual products and

Many of Halliburton’s most important

ketplace serving the oil and gas property

services, Baroid Drilling Fluids launched

innovations are better ways to bring the right

acquisition and divestiture market. Landmark

Wellsight 2000,™ a central database built to

experts and the right experience to bear on

will provide online access to its software

contain all the drilling fluids experience on

the right problems at the right time. This is

through Petroleum Place, and participate in

all the company’s jobs worldwide. With

knowledge management, and it multiplies

the development of new software for

Wellsight 2000, engineers can cross-refer-

the value of individual technologies and the

Internet-based property evaluations. This

ence conditions and solutions and call on the

expertise of Halliburton’s people. These

venture capitalizes on the fact that the

accumulated knowledge of the world’s lead-

innovations

include products,

services, and systems for our

customers as well as processes used

inside Halliburton

to deliver

better services and solutions. Both

allow the organization to use

its people and their skills and

knowledge more effectively.

Landmark Graphics is the leader

in helping customers integrate

knowledge within their organiza-

tions. In 2000, two major customers,

Texaco and Petrobras in Colombia,

signed contracts with Landmark to

improve their internal information

systems. Texaco will receive a broad

range of integrated solutions for explo-

ration and production that will create

a new electronic upstream environ-

ment, including development of new

workflows to help Texaco execute

KNOWLEDGE MANAGEMENT gives direction to a non-stop free
flow of innovative ideas.

ing team of drilling fluids experts.

Knowledge of the best approach

to any situation will be instantly

available to Baroid people on any

rig, anywhere in the world.

Finally, the company’s knowledge

management innovations blend into

our e-business strategy. The most

important use of the Internet, and

the one that will deliver the great-

est competitive advantage, is its use

as a venue for collaboration, knowl-

edge sharing and work sharing.

Practically all the company’s knowl-

edge management innovations use

the Internet.

Taking these ideas one step

farther, helping to bring about the

new world where sharing and inte-

grating knowledge is the main

source of value creation, Halliburton

faster and with lower risk. Petrobras will receive

majority of the world’s exploration and

founded GrandBasin. GrandBasin is a web-

services designed to integrate data, people and

production data already resides in Landmark’s

based unit of Landmark that will provide a

processes, improve risk assessment and speed

OpenWorks® digital format. Petroleum Place

virtual, integrated E&P workspace for

up decision-making.

will allow operators to use Landmark’s

upstream companies and professionals. It will

iDims,™ a Landmark knowledge manage-

interpretation and analysis tools to improve

be the Internet site where professionals work-

ment product launched in 2000, gives

their acquisition and divestiture processes.

ing on the same project – customers, contrac-

customers online intranet access to their

Landmark has also created an important

tors, subcontractors – can work together using

drilling and well services operations data. This

knowledge management

service

for

a secure high-performance network, techni-

access via a web browser will dramatically

Halliburton’s internal use – Lattix Locator, a

cal applications and computing power, a com-

reduce lead time for data acquisition and pro-

database of the skills and experience of the

munity portal and data

integration.

vide operators both current well data and

company’s staff for all disciplines and all areas

GrandBasin will market to the oil and gas

historical data from any location. This is an

of the business. Project managers use Lattix

industry as a whole the kind of integration and

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

opportunity for collaboration that has proven

1) Real-time

reservoir

solutions –

The flagships are built from excellence

so effective inside Halliburton.

building a complete, accurate, “picture” of

in discrete products and

services.

Technology Architecture

the reservoir from real-time data, which

Excellence in advanced well construction is

Halliburton’s energy services business can

provides the customer with the answers

built on Halliburton’s 80 years of

be viewed as consisting of two complemen-

needed to make the optimum development

leadership

pressure

pumping.

tary offerings: providing discrete, individual

decisions on a timely basis.

Excellence in gas monetization is built on

oilfield services on the one hand, and

2) Advanced well construction – services

Kellogg Brown & Root’s proprietary process

combining our technologies in a way to help

that allow operators to reduce the cost of

technologies. Continued excellence in

customers taking on large integrated field

drilling wells in the most challenging envi-

discrete services is essential to being the

development projects. The technology

ronments, and to tap reservoirs that were

leader in these five areas.

architecture is built on a foundation of discrete

previously uneconomical.

As a result, about 80% of Halliburton’s

technologies. These are some of Halliburton’s

3) Advanced well production – completion,

2000 investment in research and develop-

core competencies – materials sci-

ence, manufacturing, fabrication

and service delivery.

These technologies lead to the

development of new and better

discrete products and services,

from better pressure pumping

equipment to the new Anaconda

drilling system.

Halliburton’s Technology Flagships

These discrete products can be

grouped into flagship areas that

cut across traditional boundaries

and combine elements from

the Energy Services Group and

the Engineering and Construction

Group. A flagship is an integrated

technology area – a bundle of

technologies that meet a certain set

of customer needs.

TECHNOLOGY ARCHITECTURE The know-how involved in materials
science, manufacturing, fabrication and service delivery.

ment of $231 million went into

technologies aimed at improving

discrete products and services.

Investment decisions are based on

a combination of the needs of the

product/service

line and

its

contribution to the success of

the flagship.

It is important to recognize that

individual

technologies

and

products may have a primary

application to one flagship, but

may also contribute to other flag-

ships as well. For example, many

drilling innovations from Sperry-

Sun contribute

reservoir

evaluation as well as advanced

well

construction

systems.

There is no simple one-to-one

correspondence between products

Halliburton’s technology flagships are the

intervention, operation and maintenance

and flagships; there are often multiple

five areas that are most critical to Halliburton’s

technologies

that maximize hydro-

beneficial relationships.

customers, and the areas of excellence that

carbon flow, increase the percentage

Our technology architecture is dynamic.

are needed to succeed in the company’s sec-

of recoverable reserves, and compress

It will evolve as new technologies lead to

ond area of business – the integrated mega-

production time.

new products, and as the requirements for

projects that will take on an increasing

4) Deepwater technologies – the key

success in winning and executing mega-

importance in coming years. Halliburton is

products, services, and project management

projects develop over time. It does,

pursuing excellence in these five areas in part

skills needed to develop reservoirs in water

however, provide a conceptual framework

because together they provide the breadth of

depths greater than 1,500 feet.

for understanding how Halliburton’s many

capability needed to win the multibillion-dol-

5) Gas monetization – the ability to extract

facets work together and how they are being

lar integrated projects of the future.

natural gas and convert it into economically

managed to create value for customers and

Halliburton’s technology flagships are:

viable products, from LNG to fertilizer.

shareholders. H

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

eservoir evaluation is the business of

key decision points in the field life cycle –

Similarly, Landmark signed a multi-year

providing the customer with in-depth

from seismic exploration to the refinery

deal with 4th Wave Imaging Corporation

knowledge of the reservoir’s performance as

gate. DecisionSpace is the latest in

to jointly develop 4-D seismic solutions that

early as possible in the development

Landmark’s systems for technical-to-business

support reservoir evaluation. 4-D seismic

process. That knowledge is used to create

(T2B™) integration. It combines reservoir

technology uses multiple periodic 3-D

reservoir solutions – the most economical

evaluation with risk assessment to enable

seismic surveys to monitor changes of fluid

reservoir development plan, constantly

better analysis of alternative development

flow and pressure changes in reservoirs over

updated during development and produc-

strategies.

time. HES has a complementary agreement

tion to maximize hydrocarbon recovery.

Landmark and Halliburton Energy

with 4th Wave Imaging for reservoir

Excellence in reservoir solutions depends

Services (HES) have formed alliances with

monitoring through borehole seismic

on the technology to acquire real-time data

GeoMechanics International, Inc. (GMI) to

services. Reservoir monitoring helps

from the field, as well as information sys-

integrate GMI’s geomechanics analysis tools

identify bypassed reserves and increase

tems to model the reservoir and alternative

with Landmark’s simulation models and

hydrocarbon recoveries.

development scenarios.

HES’s wellsite services to address customers’

Reservoir monitoring – continuously cap-

Many groups within Halliburton con-

wellbore stability problems. This under-

turing real-time information and modeling

tribute to real-time reservoir solutions.

standing of geomechanical forces is critical

as the hydrocarbons are being extracted –

Landmark’s DecisionSpace,™ launched in

to efficient well planning and execution.

saw another significant advance in 2000.

2000, is the first of a modular suite of

Wellbore stability problems are estimated to

The RMT Elite™ is a pulsed neutron

software products that offers web-enabled

cost the industry upwards of $6 billion

carbon oxygen logging system that allows

project integration capabilities for all the

annually during drilling operations alone.

time-lapse performance evaluation of

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

REAL TIME RESERVOIR SOLUTIONS teams
and technologies enable Halliburton
experts and customers to literally “look
beneath the surface” in real time to make
better, faster reservoir decisions.

producing reservoirs without the costly step

of removing the tubing from the well.

Together with Halliburton’s Sperry-Sun,

Landmark released RESolution 3D,™ a

real-time 3-D drilling and reservoir

understanding

system

that enables

visualization and updating of earth models

in both rig and office settings. Now, drilling

information can be instantly shared,

allowing faster and better decisions both

for drilling the current well and in

planning future wells.

NUMAR, a division of HES, continued

its breakthroughs in the use of magnetic

resonance

imaging

logging (MRIL®).

NUMAR unveiled MRIL PrimeTime, a

significant enhancement to its MRIL-

Prime logging service. MRIL PrimeTime

while drilling, instead of later via a

A typical RTRS job may bring together

delivers answers in real time, as the tool is

wireline run, will allow operators to save

production enhancement engineers,

being run, providing in minutes the critical

costly rig time in challenging environments

completion products experts, log analysts

reservoir information that previously took

such as deepwater.

and customers, all looking at the same

days to process and interpret.

Reservoir evaluation and knowledge

real-time information from different loca-

An even greater advance was the devel-

management come together in Halliburton’s

tions and different perspectives. As the job

opment of MRIL-WD™ (MRIL While

Real Time Reservoir Solutions (RTRS).

unfolds, everyone can see exactly what’s

Drilling) by NUMAR and Sperry-Sun,

RTRS combines real-time data collection,

happening,

in real time, and make

which can provide total porosity, free fluid

Real Time Operations, reservoir modeling,

recommendations that can be acted upon

and bound fluid indices in the while-

and satellite communications to enable

instantly. Quick decisions plus access to

drilling and reconnaissance logging mode,

experts

in different

locations

Halliburton’s best minds make RTRS a

as well as other MRIL information in the

participate in controlling jobs in real time.

large contributor to customers’ success in

wiping and evaluation logging mode. Being

RTRS brings the people with the right

difficult environments. In 2000, Halliburton

able to collect this reservoir description data

knowledge to bear at the critical time.

performed 1,675 real-time jobs. H

SHERRI ROGERS

Sherri Rogers coordinates service delivery for Halliburton’s Real Time Operations, the

visualization rooms where specialists and customers monitor and control jobs taking place

anywhere in the world. “We’re bringing the field into the office, erasing the boundaries. We even

have a Webcam, so people in the control rooms can see the actual conditions at the job site. At the

same time, our field people are seeing the interplay between different disciplines, becoming more

empowered to innovate and find new ways to add value. Knowledge sharing and cross-fertilization

is happening at every level. And many workers are drawn to the idea of drilling wells by remote

control, so it’s helping our recruiting. The cultural changes are enormous.”

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

ADVANCED WELL CONSTRUCTION is
comprised of breakthrough technologies
and tools that place the well in precisely
the right location and dramatically cut
well costs.

range of economical wells. Enventure

expands the diameter of steel casings by as

much as 25% after they are placed. This

allows operators to work with smaller

hole sizes, enabling them to drill deeper to

reservoirs that were previously inaccessible.

This capability is becoming increasingly

important in deepwater developments.

A premiere breakthrough in this area

for 2000

the Anaconda Well

Construction System. Anaconda will

change the way wells are drilled, and pro-

vide operators with a new capability to find

and develop isolated pockets of oil and gas.

Anaconda is an innovative drilling

system using carbon-fiber composite

spoolable tubing, called SmartPipe.™ It

includes

conductors

for

two-way

communication,

and

downhole

Advanced Drilling, Evaluation and

Propulsion Tool (ADEPT) assembly.

ADEPT sends enormous amounts of real-

time information up the SmartPipe to the

operators on the surface, who are then able

to remotely direct the path of the well,

allowing precise placement of the well

bore within a given hydrocarbon zone.

Anaconda wells will be guided using

real-time updates of the earth model.

They will bring together formation evalu-

ation experts, drilling engineers, reservoir

engineers, geologists and geophysicists to

make instant drilling decisions. Anaconda

can practically turn on a dime to probe for

additional reserves or to access multiple

reservoirs. The first commercial de-

ployment is in the Gulf of Mexico, to be

followed by work with Statoil

the North Sea. Statoil has been a

partner in developing Anaconda over the

last three years. H

Minimum hole spiraling in turn improves

hole cleaning, logging, and the quality of

the cement jobs. Geo-Pilot enables

precise, economical drilling of difficult

well paths and will help push the limits

of extended-reach drilling.

Cementing and zonal isolation, a

Halliburton strength since its founding,

saw the release of the third version of

OptiCem™ simulation system for design-

ing optimum cementing operations, and

OptiCem RT™ (Real Time), that allows

onsite specialists to monitor a job

in progress and make adjustments

immediately. In addition, two new

advanced pressure pumping units were

introduced: Halliburton Precision,™ a

single pump unit, and Halliburton Elite,™

a twin pump cementing trailer. These

new units feature the RCM® IIE mixing

system that ensures accurate mixing over

a broad range of conditions, and ADC,™

the system that automatically controls

ell construction is the heart of the

developed jointly with Japan National Oil

slurry density throughout the job.

traditional

energy

services

Corporation, as the industry’s first true

Expandable tubing, a product of

business. It encompasses drill bits,

point-the-bit rotary steerable drilling tool.

Halliburton’s Enventure partnership

drilling, drilling fluids, cementing and

The system produces clean, straight and

with Shell Technology Ventures, is an

formation evaluation. Advanced well

smooth wellbores with less vibration.

important technology that is extending the

construction includes the breakthrough

technologies that will enable radically less

expensive and more productive wells in

environments such as deepwater.

Halliburton’s Security DBS revolution-

ized its production process in 2000 for

roller cone bits. Onsite engineers were

empowered to modify standard designs

to meet unique conditions and take the

design directly to prototyping and manu-

facturing. The result is custom-designed

bits in a third the time required by

traditional methods.

Besides the RESolution 3-D system

already mentioned, Sperry-Sun introduced

Geo-Pilot™ rotary steering system,

DIAMOND HEADED
DRILL BITS are
used in a variety
of scenarios to
achieve a lower
cost per foot. These
revolutionary bits
also can achieve
greater drilling
rates than roller
cone bits, resulting
in fewer trips.

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

LANDMARK
is developing 4-D
seismic technology,
which uses multiple
periodic 3-D survey
solutions to continually
monitor fluid and
pressure changes in
reservoirs.

he goals of well production technolo-

when Halliburton received a patent for a

gies are to maximize the rate of hydro-

neural network method of controlling

carbon production, increase the recovery

reservoir development. Developed jointly

rate from the reservoir, and reduce produc-

with BioComp Systems, Inc., of Redmond,

tion costs. Included in this flagship are com-

Washington, and using their self-optimiz-

pletions, multilaterals,

stimulation

ing neural network technologies, this system

technologies, and intervention systems.

will provide better ways to determine the opti-

Some of the new technologies discussed

mum method of completing a reservoir,

under reservoir solutions, such as RMT

optimizing production with stimulation and

Elite, also contribute to advancing the art

treatment, and predicting the output.

of well production.

BioComp’s neural networks can learn the

Intelligent completion technologies

provide downhole sensing, communication

and remote control of completion tools. This

allows operators on the surface and in

remote locations to optimize reservoir per-

formance by interpreting downhole data in

real time and operating flow control devices.

Halliburton developed SmartWell™ tech-

nology for intelligent completions with PES

(International).

In February

2000,

Halliburton acquired the remaining 74

percent of PES, and it is now a wholly

owned subsidiary. In April, Halliburton

announced plans to form WellDynamics, a

joint venture with Shell International

Exploration and Production B.V., to further

develop and market this technology.

WellDynamics will combine Halliburton’s

SmartWell intelligent completions tech-

nology with Shell’s iWell™ intelligent well

technology. Together, they will be the state

of the art in downhole measurement, inflow

control, downhole processing, and commu-

WELLDYNAMICS TECHNOLOGY will enable
operators to remotely reconfigure a well’s
architecture in real time to boost production.

nications technologies that will enable

relationships among the variables that affect

operators to reconfigure a well’s architecture

future production, such as the geological

at will using real-time data. The net result

formation and drilling, completion, and

will be maximized fluids production

stimulation methods. Halliburton’s

without intervention, and improved total

engineers can use this information in

recovery – a combination that will have a

conjunction with reservoir understanding to

dramatic impact on a well’s economics for

perform the delicate balancing act involved

Halliburton’s customers.

in choosing optimum completion strategies.

Another important tool for boosting

This technology has been incorporated into

reservoir performance debuted in 2000

Halliburton’s SigmaSM service. H

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

l
l
e
w

d
e
c
n
a
v
d
a

w
a
t
e
r

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

eep water – depths greater than 1,500

specialized technolo-

feet – is the arena with the greatest

gies for deepwater

number of large untapped reservoirs and

work in recent years,

greatest revenue growth potential for

such

faster

Halliburton. As oil and gas companies move

Remotely Operated

into ever-deeper water to meet the demand

Vehicles (ROVs) with

for energy, they are predicted to spend about

greater mechanical

$84 billion in deepwater development over

abilities; flexible riser

the next five years. Most of this spending

systems made from

will be on multibillion-dollar projects, where

carbon fiber compos-

the preferred contractors will be large

ites

that

lift

the

integrated service companies who are able

hydrocarbons to the

to supply the necessary combination of key

surface and reduce the

technologies and project management skills.

need

for

surface

Halliburton aims to be the uniquely

equipment; and smart

qualified contractor for such developments.

tie-backs and smart

Deepwater development has special

control buoys that

challenges. Reservoirs in a field tend to be

can make remote-

widely dispersed, and for cost reasons must

controlled

adjust-

be developed with relatively few wells

ments in producing

requiring minimal intervention. This is why

fields spread over a

Halliburton’s deepwater flagship includes

wide area. All of these

many of the advanced technologies already

areas will see further

mentioned. Real-time reservoir description,

development in com-

Enventure expandable tubing, Anaconda,

ing years. Together

multilaterals, advanced stimulation and

they are making possible deepwater work

vention to restore the flow. Wax Eater,TM

SmartWells are all key enablers for the deep-

that was out of reach just a few years ago.

Halliburton’s new system currently being

water environment. In fact, it is the com-

The year’s most promising deepwater

field tested, is installed at the wellhead and

bined excellence of the other four flagships

breakthrough comes from the field of

breaks up the wax, removing it from the

that make Halliburton a leader in pursuing

flow assurance – technologies that allow

mixture. Wax Eater will eliminate the need

deepwater work.

improved uninterrupted flow of hydro-

for far more expensive alternative treat-

In addition, the company has introduced

carbons over time. Specifically, sending

ments, and enable the extended tie-backs

crude oil through long tie-

that are critical to developing fields of

backs in cold, deep water

smaller, widely dispersed reservoirs.

creates the danger of wax

In addition to specific technologies,

and gas hydrates forming

success in this arena also depends on the

deposits. This in turn

ability to treat deepwater projects with a

requires expensive inter-

total systems approach, matching all the sur-

IN THE HOSTILE
DEEPWATER
environment,
specialized Halliburton
technologies like the
mechanically adept
Remotely Operated
Vehicles pictured on
this page can perform
the most intricate of
mechanical maneuvers.

face and subsurface components, while

reducing cycle times, capital expenditures

and operating expenditures. These

capabilities are based on Halliburton’s

innovative products and services, as well

as its roster of skilled project managers, who

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

mooring facility and the largest FPSO built

The first two wells were completed in

in the last five years. All of these projects

January, 2001.

require the global resources and innovative

The subsea work will involve the manu-

project management that few organizations

facture of 28,000 tons of flowlines by

besides Halliburton can offer. By far the

Halliburton’s Wellstream unit. Halliburton

biggest and most important deepwater

Subsea will install the risers, flowlines, umbil-

development in the world today is the $2.5

icals and seabed fixtures in water depths from

billion Petrobras Barracuda/Caratinga pro-

2,500 feet to 4,000 feet.

ject offshore Brazil. This EPIC contract is

Halliburton will supply two FPSOs,

believed to be the largest ever awarded to a

which together will produce 300,000

single contractor.

barrels per day. One will be converted

This project began with a breakthrough

in Brazil’s Rio State Shipyards. Detail

in project finance, as foreign banks and

design for the topsides, along with the

trading companies came together to form a

fabrication and installation of 100,000 tons

special purpose company, Barracuda &

of process and utility modules, will also

Caratinga Leasing Company B.V.

be done by Brazilian contractors. This

Halliburton is lending its project manage-

high degree of local content, under

HALLIBURTON SUBSEA places a pre-fabricated
offshore pipeline bundle with its Controlled
Depth Tow Method.

have proven their worth in managing huge

ment and project finance expertise as the

Halliburton’s project management, will

development and fabrication jobs all over

EPIC contractor to facilitate the financing

fulfill one of Rio State’s

important

the world.

arrangements for Petrobras.

objectives – the growth and revitalization of

Recent projects include Exxon Diana in

The size and scope of the project are also

key sectors of its economy. Halliburton will

the Gulf of Mexico, which involved fabri-

precedent-setting. The development of

also hook up the wells to the FPSOs, com-

cating a record-sized production platform

these two fields, which together have

mission both vessels

and

subsea

and executing horizontal well completions;

reserves estimated at 1.2 billion barrels, will

systems, and operate the field for the first

and the $2 billion Terra Nova field offshore

take from late 2000 to the spring of 2004.

three months.

Newfoundland, which included building

Halliburton’s work includes subsurface well

Barracuda/Caratinga is the first deepwater

one of the largest floating, production, stor-

construction and completion, subsea

mega-project to be managed by one compa-

age and offloading (FPSO) vessels built to

manufacturing and installation, and float-

ny under one EPIC contract. It solves a cru-

date, plus drilling and completing six

ing production.

cial development and energy supply

complex subsea wells. This year saw the

The subsurface work will be on 51 wells.

problem for the customer, Brazil’s national

start of engineering, procurement, installa-

Virtually every Halliburton product and

oil company, and serves as a demonstration

tion and construction (EPIC) work for a

service line will take part, with Sperry-Sun

of Halliburton’s end-to-end project

$300 million offshore oil and gas facility in

drilling services and the completions group

management and execution capability

Nigeria for Shell, including fabrication of a

performing the lion’s share of the work.

in deep water. H

RICHARD D’SOUZA

Richard D’Souza joined Halliburton with a clear mission: develop a premier engineering team for

deepwater floating production and subsea systems. With his 25 years of experience, his reputation

with customers for technical excellence and his team-building success, Richard was the natural

choice. “Breakthroughs in deep water will come from a focused, elite engineering group creating

technology and execution strategies that will accelerate development. That makes the magic that

brings the customers to us. I’m excited to be working with a wonderful team on these challenging

projects. Ever since I came to the U.S. as a student from India, I’ve lived by the maxim that some-

times you have to go out on a limb, because that’s where the fruit is.”

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

DEEP SEA PLATFORM
fabrication is just part
of Halliburton’s ability
to treat deepwater
projects with a total
systems approach.

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

KBR’S LNG CAPABILITIES KBR’s unparalleled proprietary process technology, engineering skills and construction infrastructure
make it the leader in worldwide gas monetization.

urning the world’s abundant supply of

of fuel cell technology. Both of these

value of efficient, low-cost drilling systems,

natural gas into commercial products will

emerging industries could further increase

such as Geo-Pilot and Anaconda, and

grow in importance over the next decade.

the demand for natural gas.

efficient production technologies, including

Clean-burning natural gas is becoming the

Increased demand for gas will spur

intelligent completions and management of

fuel of choice for generating electric power

demand for virtually all of Halliburton’s

reservoirs to maximize the recovery rate. In

in North America. In other regions, liquefied

services – energy services as well as

addition, the floating technologies used in

natural gas (LNG) offers a way to

engineering and construction. The tech-

deep water – FPSOs, mooring and docking

commercialize gas without building a

nologies described in the other flagships

systems, pipeline and terminal design and

pipeline infrastructure. Demand for natural

will be valuable in the gas monetization

construction – play a large role in developing

gas for downstream products, such as

business. In addition, the technology lead-

natural gas reserves.

ammonia, ethylene, and propylene, will

ership of the Engineering and Construction

However, the largest part of the gas

continue to be strong in all regions.

Group in gas processing plant technology is

monetization flagship is the proprietary

And just over the horizon is the prospect

a critical part of this flagship.

processing technology, the engineering skill

of gas to liquids (GTL) technology – the

Natural gas exploration and production

and the construction infrastructure of

conversion of natural gas into premium

requires drilling many wells, because the

Halliburton’s Kellogg Brown & Root

liquid hydrocarbons and other specialty

wells often experience rapid rates of

business unit, which is described in the

products – and the continued development

declining production. This points to the

following section. H

MANFRED PRAMMER

Dr. Manfred Prammer is president of NUMAR, the Halliburton division that brought magnetic

resonance (MR) technology to the oilfield. An Austrian by birth, a physicist by training, and a teacher

by disposition, Manfred heads NUMAR’s team of scientists and engineers developing a range of

“disruptive technologies” – paradigm-breaking ideas like MR logging. “NUMAR is unique within

Halliburton. This group is not about making incremental improvements to existing technologies –

the industry already does that very well. We are looking for breakthroughs that will have a

profound, non-linear effect on the energy business. This is exciting, challenging work, and that

helps us attract top people.”

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

E N G I N E E R I N G

C O N S T R U C T I O N

G R O U P

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

E N G I N E E R I N G

C O N S T R U C T I O N

G R O U P

he Engineering and Construction

Group was consolidated into a single busi-

ness unit, Kellogg Brown & Root, at the

end of 2000. Beginning in 2001, the reor-

ganization will be complete, and the com-

pany’s financial statements will reflect this

change.

Energy-related work accounts for the

largest portion of the Group’s business.

This segment principally serves a wide

range of needs in the petroleum industry –

designing and building refining and pro-

cessing plants, surface facilities and

pipelines. This work complements the

business of our Energy Services Group,

forming a unique, integrated end-to-end

capability serving the petroleum industry –

subsurface, surface, facilities, and process-

ing. The non-energy business of the group

uses the same skill set and the same deep

corporate resources to meet the needs of

governments and civil infrastructure cus-

tomers.

With the inclusion of the engineering

and construction business of Brown & Root

Energy Services, KBR has added design,

fabrication and installation of offshore

production facilities and extensive oil and

gas production background to its leadership

position in hydrocarbon processing.

This combination will be particularly

valuable to natural gas customers. KBR

already has a strong position in LNG and

onshore gas production. Now customers

with offshore gas fields have the advantage

of dealing with just one company to help

them develop, process and transport their

gas production, onshore or off.

KBR’s competitive advantages begin

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

E N G I N E E R I N G

C O N S T R U C T I O N

G R O U P

with the expertise of its people. The depth

in most of the world, especially Asia, where

liquefaction plants using a new dynamic

and breadth of their experience, and their

there are large natural gas reserves to be

simulation program that eliminates the

ability to marshal that experience to meet

developed.

inherent over-design that is characteristic of

customers’ needs today and in the future are

KBR has built, either alone or in joint

traditional methods.

unmatched in the industry. This pool of

ventures, the majority of the world’s LNG

Another aspect of natural gas use is in

intellectual capital has proven its value by

complexes. It is currently working on

converting natural gas feedstocks into

developing proprietary process technologies

large-scale projects at Bonny Island,

ammonia for fertilizer. In this area, KBR’s

in key areas, and by creating innovations in

Nigeria, as well as in Malaysia, Algeria,

technologies account for more than half

the technology of project execution that

Qatar, Australia, Egypt and the Americas.

the worldwide production capacity. Recent

help KBR design and build faster and

Technological advances in LNG are

innovations in this area include KAAPplus™

better. Added to this intellectual capital is

typically efficiencies in the engineering of

– a complete, state-of-the art process tech-

the financial strength and the ability to take

large plants and equipment rather than

nology that combines the KBR Advanced

on large lump-sum projects that are beyond

breakthroughs in process technologies. In

Ammonia Process (KAAP), the KBR

the range of other competitors.

this area, KBR’s breadth of experience and

Reforming Exchanger System (KRES™),

Natural Gas

roster of specialists put it in an excellent

and the Braun Purifier.

Monetization of natural gas is a critical

need for the energy industry as a whole, a

flagship technology for Halliburton, and a

particular area of expertise for KBR. Natural

gas development includes liquefied natural

gas (LNG), ammonia, and olefins –

ethylene and propylene.

LNG is particularly important, as it

represents the only current commercially

feasible way of using stranded gas – natural

gas where pipeline infrastructure does not

exist and is not practical. This is the case

UNMATCHED IN THE INDUSTRY, KBR people
provide the clear advantage in the most
important area: intellectual capital.

EXACTING CRAFTSMANSHIP is never compromised, no matter where in the world
KBR works. For decades, non-stop innovation and quality – coupled with an
unrivaled dedication to health, safety and environmental protection – have kept
KBR out in front.

position to continue capturing a major

In olefins, KBR’s Selective Cracking

share of future LNG engineering and

Optimum Recovery (SCORE™) process,

construction business.

combining portions of KBR’s and

KBR has established a position as one of

ExxonMobil Chemical’s ethylene tech-

the preferred providers due to its reputation

nologies, will be licensed to Thai Olefins.

for helping clients deliver the lowest cost

This plant, which will be built in partner-

LNG. In 2000, KBR added to its position

ship with Chiyoda of Japan, will be the first

with a series of design firsts for the Ras

new ethylene project in Asia since the

Laffan Onshore Facilities Project in Qatar,

recent recession. A letter of intent was

including built-in reliability and maintain-

signed in 2000, and project completion is

ability in the design. KBR engineers also

scheduled for 2004.

developed a new way of designing LNG

This year also saw the mechanical com-

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

E N G I N E E R I N G

C O N S T R U C T I O N

G R O U P

KELLOGG

BROWN &

ROOT

pletion of the ExxonMobil Olefins Project

low-value, low-octane light gasoline streams

were selected by OMV Deutschland

in Singapore. KBR and Chiyoda provided

into propylene and ethylene by a catalytic

GmbH for production of premium diesel

the basic design, engineering, procurement

process. This new offering responds to

fuel in its refinery at Burghausen, Germany.

and construction for this 800,000-ton-a-year

customer needs to find alternative uses for

When completed, the plant will process

ethylene plant under a lump-sum contract

the feedstocks that are now producing

atmospheric distillate and gas oil feedstocks

which, along with ancillary work, was about

methyl tertiary butylether (MTBE) for

to produce high-quality diesel fuel with less

half the $2 billion Singapore Chemical

gasoline. As MTBE is phased out for

than 10 ppmw sulfur content. KBR per-

Plant. This project uses the ExxonMobil

environmental reasons, Superflex will

formed basic engineering design for the

low-residence-time cracking technology

provide customers a valuable option for

unit as part of its work with the Alliance.

that is now part of KBR’s SCORE offering.

upgrading these low-value products. KBR

In 2000, KBR formed an alliance with

In propylene, KBR acquired an exclusive

has made this technology available for license,

Fortrum Oil and Gas Oy of Finland to offer

license in 2000 from Lyondell for its

with the first contracts expected in 2001.

NExOCTANE, a new process technology

SuperflexSM technology. Superflex converts

Clean Fuels The production of clean fuels

for high-octane gasoline. NExOCTANE

CHARLES DURR

Charlie Durr has spent over 30

years helping to make KBR the

leading builder of LNG plants.

From his current position as

Technology Vice President for

LNG, Gas Processing and Gas

to Liquids, he oversees strategy,

technology, and risk manage-

is another area of focus

solves the problem of how to eliminate

for proprietary tech-

MTBE in gasoline production. The new

nology. Increasingly

technology allows refiners to convert their

stringent standards in

existing MTBE production facilities

the U.S., European

to isooctane, a cost-effective replacement

Union and elsewhere

for MTBE. KBR will offer

this

require refiners to

technology for license and will provide

continuously improve

engineering and continuing technical sup-

particulate and gaseous

port to licensees.

ment. “We’re successful because our people can build complex pro-

emissions.

Innovative Business Processes

jects in challenging locations. We know every part of the business –

The MAKfining™

KBR is also offering a broader range of

designing and building the plants, and dealing with the realities of

vendors, and client expectations. We learn how to manage risks, and

how to look for opportunities to innovate. Each project is an occasion

Premium Distillate

services aimed at creating and structuring

Technologies intro-

successful engineering and construction

duced in 1999 by the

projects. The company has

joined

to develop our people. That’s what I learned playing stickball in

MAKfining Alliance

with Mitsubishi Corporation to offer cus-

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

E N G I N E E R I N G

C O N S T R U C T I O N

G R O U P

KBR'S PROJECT EXECUTION TECHNOLOGY
helps win EPC contracts in many
petrochemical processing industries.

comprehensive, innovative approaches to choosing process

technologies, securing project funding, building plants and

infrastructure, and developing markets.

Project Execution Technology

Project execution technology – finding ways to remove time

and cost from projects through better ways to use the

organization’s intellectual capital – is the extra dimension that

complements KBR’s excellence in process engineering and

creates value in unexpected ways.

In 2000, KBR developed a breakthrough in high-tech work

processes with 3-D Conceptual™ – a collaborative work

environment that enables a multidisciplinary team to visual-

ize front-end engineering designs in 3-D. It is a work process

that uses KBR’s historical database of design experience to

tomers a range of innovative business relationships through

KBR Development Corporation (KBRDC), which landed its

THE FARMLAND MISSCHEM LTD. AMMONIA PLANT
in Trinidad produces 1,850 metric tons of
ammonia per day.

first project in 2000. KBRDC brings together owners of

feedstocks, funding sources, and potential end users to put

together workable projects. As a facilitator or developer,

KBRDC draws on the global resources of its partners to

support the development of projects in all the industries served

by KBR.

The first fruit of the KBRDC effort was in Trinidad, where

KBR was awarded multiple contracts from Ferrostaal

Aktiegensellschaft of Germany and Caribbean Nitrogen

Company Ldg. of Trinidad and Tobago to provide technology

licenses, basic engineering design and other services for an

ammonia plant using KBR’s KAAP process.

KBRDC is using the same approach in other parts of

the world where feedstocks exist and customers need

3-D CONCEPTUAL enables a design team to
visualize front-end engineering designs in 3-D.

create a 3-D model that enables early collaboration at the start

of the design process. It brings together the knowledge and

experience of KBR engineers in applying low-cost reference

designs. The 3-D visualization gives early and improved feed-

back to determine the cost implications of design decisions,

and allows the process engineer to interact with construction,

maintenance, piping, and other engineering groups at project

conception.

3-D Conceptual has the potential to drastically reduce the

time required for the engineering process, collapsing sequential

steps that traditionally take months into parallel activities that

take weeks. Similarly, it offers a better way to determine and

control project costs, 80% of which are determined in the front-

end phase. H

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

E N G I N E E R I N G

C O N S T R U C T I O N

G R O U P

THE LNG PLANT AT WOODSIDE, Northwestshelf, Australia, designed by a KBR joint
venture, uses air instead of water as the primary cooling medium – a first in LNG
production.

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

H E

L T H ,

E N V

O N M E N T

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

H E

L T H ,

E N V

O N M E N T

alliburton’s customers, especially

strong

implications

for stock price

H A business model that integrates HSE

those working in new and remote

performance. Back-test evidence indicates

into the core company business develop-

areas, need a service company that will help

that a diversified portfolio of environmen-

ment activities.

them reduce their risks, and they are plac-

tally high-performing companies can be

H Highly regarded HSE Management

ing increasing emphasis on environmental

expected to outperform its less efficient

System.

matters when issuing contracts. Customers

competitors. It has been estimated that

H Superior performance on emissions

also need a service company that will help

environmental excellence turns out to be an

and spills.

them achieve their goals in the areas of the

extraordinarily good proxy for — and

H Taking the lead in setting emission

triple bottom line — financial performance,

predictor of — superior corporate manage-

reduction goals via energy conservation

social benefit, and environmental protec-

ment, which in turn generates financial

measures.

tion. Halliburton is committed to integrat-

outperformance and shareholder value.

H Developing the world’s first biodegradable

ing social equity concerns into its business

Halliburton’s outstanding environmen-

invert emulsion drilling fluid system.

decision-making, capturing of the value

tal performance is demonstrated by:

through improved stakeholder relations,

H Genuine commitment by Board and

H Engaging in R&D for CO2 sequestration
and the reduction of flaring in gas

and reducing the company’s overall

senior management.

processing. H

environmental footprint. Halliburton’s con-

tinuing commitment to being the environ-

mental partner of choice is an asset in

competing for business.

And

for

investors, environmental

performance can be a source of hidden

value potential. Among other things,

it measures environmental risk exposure,

the ability to manage risk, and the ability

to capitalize on environmentally driven

business opportunities. These in turn have

Lost Time Incident Rates (per 200,000 work hours)
Halliburton Company vs. OSHA Industry Sector Averages*

Recordable Incident Rates (per 200,000 work hours)
Halliburton Company vs. OSHA Industry Sector Averages*

1.02
1997

0.88
1998

0.65
1999

0.56
2000

Halliburton

1.8
9
9
9
1

s
a
G
&

l
i

3.8
9
9
9
1

.
s
n
o
C
&

g
n
E

4.6
g
9
n
9
i
9
r
u
1
t
c
a
f
u
n
a
M

3.12
1997

2.21
1998

1.77
1999

1.72
2000

Halliburton

3.5
9
9
9
1

s
a
G
&

l
i

7.8
9
9
9
1

.
s
n
o
C
&

g
n
E

9.2
g
9
n
9
i
9
r
u
1
t
c
a
f
u
n
a
M

In 2000, Halliburton continued to make improvements in both recordable and lost-time incident rates. Our
performance, frequently in harsh and hazardous working conditions, compares very favorably with that of
our industry peers. *1999 OSHA data is most recent data available

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

H A L L I B U R T O N

C O M P A N Y F I N A N C I A L

I N F O R M A T I O N

financial
information

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In this section, we discuss the operating results and general
financial condition of Halliburton Company and its subsidiaries.
We explain:

these factors to cause increasing demand for oil and gas needed
for refined products, petrochemicals, fertilizers, power, and other
needs.

• factors and risks that impact our business;
• why our earnings and expenses for the year 2000 differ from

the years 1999 and 1998;

• capital expenditures;
• factors that impacted our cash flows; and
• other items that materially affect our financial condition or

earnings.

BUSINESS ENVIRONMENT

Our continuing business is organized around two business
segments:

• Energy Services Group; and
• Engineering and Construction Group.

We also report the results of a third business segment, Dresser

Equipment Group, as discontinued operations.

As the largest provider of products and services to the petroleum
and energy industries, the majority of the consolidated revenues
are derived from the sale of services and products to large oil and
gas companies. We conduct business in over 120 countries with
energy, industrial and governmental customers. These services
and products are used in the earliest phases of exploration and
development of oil and gas reserves through the refining and
distribution process. The industries we serve are highly
competitive with many substantial competitors for each segment.
No country other than the United States or the United
Kingdom accounts for more than 10% of our operations. Unsettled
political conditions, expropriation or other governmental actions,
exchange controls and currency devaluations may result in
increased business risk in any one country, including, among
others, Algeria, Angola, Libya, Nigeria, and Russia. We believe
the geographic diversification of our business activities reduces
the risk that loss of business in any one country would be
material to our consolidated results of operations.

Halliburton Company
The year 2000 showed increased activity in the North American
energy services environment. The international recovery from
1999 levels is expected to materialize in 2001. The engineering
and construction business remains hampered by lower customer
commitments; however, we believe the long-term fundamentals
remain sound. Rising populations in many countries and greater
industrialization efforts should continue to propel worldwide
economic expansion, especially in developing nations. We expect

Energy Services Group
During 2000, the demand for the group’s oilfield services and
products recovered from lower levels in 1999 and late 1998.
Consistent with past history, the activity levels in the United
States were the first to rebound with increased demand for
products and services and an improved pricing environment.
International activity began to improve in the second half of
2000. Growth in our business was driven primarily by increased
rotary rig count on natural gas wells in North America. The rotary
rig count, which is an indicator of activity, hit near-term record
highs for the third and fourth quarters after a brief drop in the
first half of the year. Some experts project that the average rig
count for 2001 will increase over 20% as compared to 2000. If
forecasts prove to be accurate, this would be the highest level of
activity in North America since 1985. This growth should have a
favorable impact for the Energy Services Group.

Crude oil prices remained at or near record highs throughout
2000, with West Texas Intermediate ending the year at over
$32 per barrel. Natural gas prices continued to climb as a result
of North America experiencing the coldest weather in recent
years and low volumes of gas in storage. Henry Hub gas prices
averaged $6.20/MCF in the fourth quarter of 2000 and
$8.12/MCF for the month of December with occasional spikes
over $10.00/MCF during the month. For the year, Henry Hub
gas prices averaged $4.20/MCF compared to $2.27/MCF in
1999. We believe the continued high commodity prices bode
well for the industry and should encourage our customers to
increase investments in exploration and production.

Internationally, our business activity levels have not
increased as much as in North America, although customers
who are focused on oil projects are now starting to increase
their global capital spending. The turnaround in international
rig activity continued in the fourth quarter, with the highest
average rig count since 1998 at 710 rigs working compared to
576 in 1999. However, we do not expect to see any significant
increase in larger capital-intensive field development projects
outside North America until the second half of 2001. The
merger and consolidation activities of a number of large
customers over the past two years have affected the demand
for our products and services. The companies that have
merged continue to evaluate their oil and gas properties,
refining and distribution facilities, and organizations. This
evaluation process has translated into a short-term reluctance
to undertake new investments resulting in a lower demand for
some of our products and services in 2000, especially outside
North America.

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Engineering and Construction Group
Most of the factors that adversely affected the Energy Services
Group in 1999 and 1998 also affected the Engineering and
Construction Group since over half of the group’s revenues come
from customers in the oil and gas industry. We believe the higher
rig counts experienced in the second half of 2000 and expected
for 2001 should begin to positively impact the Engineering and
Construction Group six to 12 months after the Energy Services
Group. Customers of the group are more reluctant to start large
capital projects, including refineries and petrochemical plants,
during periods of uncertain oil prices. Merged customers ration-
alizing and optimizing their existing capabilities have further
delayed project starts. The group has seen a number of large
potential projects deferred because of uncertain prices for
petroleum products. The group is beginning to experience an
increase in inquiries for bids and proposals for potential new
projects, including several large international liquefied natural gas
projects. The Engineering and Construction Group has
continued to expand its services to the military – both in the
United States and abroad. The group sees improving opportu-
nities to provide additional support services to other United
States agencies and to government agencies of other countries,
including the United Kingdom. The demand for these services
is expected to grow as governments at all levels seek to control
costs and improve services by outsourcing various functions.

RESULTS OF OPERATIONS IN 2000

COMPARED TO 1999 AND 1998

REVENUES

Millions of dollars
Energy Services Group
Engineering and

Construction Group

Total revenues

2 0 0 0
$ 7 , 9 1 6

1999
$ 6,999

1998
$ 9,009

4 , 0 2 8
$ 11 , 9 4 4

5,314
$12,313

5,495
$14,504

Revenues for 2000 were $11,944 million, a decrease of 3%
from 1999 revenues of $12,313 million and a decrease of 18%
from 1998 revenues of $14,504 million. In regard to 2000 compared
to 1999, lower levels of engineering and construction revenues in
both segments were partially offset by increased oilfield services
revenues within the Energy Services Group, particularly in the
United States. In regard to 2000 compared to 1998, the decline
was experienced in both segments. While our oilfield services
business recovered substantially during 2000, activity levels were
still about 10% lower than in 1998. The 2000 total engineering
and construction activity within both segments was off almost
25% as compared to 1998 as customers continued to postpone
most major new investments. International revenues were 66%
of our consolidated revenues in 2000, compared with 70% in
1999 and 68% in 1998.

Energy Services Group revenues were $7,916 million for
2000, an increase of 13% from 1999 revenues of $6,999 million
and a decrease of 12% from 1998 revenues of $9,009 million.
International revenues were 66% of total segment revenues in
2000 compared with 71% in 1999 and 67% in 1998. Revenues for
the group were positively impacted in late 1999 and throughout
2000 by increased rig counts and customer spending, particularly
within North America, following increases in oil and gas prices
that began in 1999. Increased demand for natural gas and
increased drilling activity positively benefited our oilfield
services product service lines. The pressure pumping and
logging product service lines achieved revenue growth of 30%
and 27%, respectively, compared to 1999. Drilling fluids
increased over 20%, while drill bits and completion products
service lines increased about 14%. Drilling systems service line
revenues increased by 7%. Geographically, strong North
American activity resulted in revenue growth of 43%, with
growth experienced across all product service lines in that region
compared to 1999. North America generated 52% of total oilfield
service product service line revenues for 2000 compared to 44%
in 1999. Pressure pumping accounted for approximately 50% of
the increase in revenues within North America, reflecting higher
activity levels in all work areas, particularly the Gulf of Mexico,
South Texas, Canada, and Rocky Mountains. Revenues in the
Middle East and Latin America regions increased 16% and 12%,
respectively, compared to 1999. Europe/Africa revenues were up
slightly while revenues in the Asia Pacific region declined by 3%.
Activity was slower to increase internationally throughout 2000
despite higher oil and gas prices. The turnaround in international
rig activity, which started late in the second quarter of 2000,
continued into the fourth quarter of 2000 when international rig
counts reached the highest levels since late 1998. Revenues also
increased across all regions outside North America during the
fourth quarter of 2000, as customer spending for exploration and
production began to increase outside North America.

Revenues from upstream oil and gas engineering and
construction services declined 2% in 2000 compared to 1999 and
about 20% compared to 1998. The decrease in 2000 reflects the
continued delay in engineering and construction project
spending by our customers. Upstream engineering and
construction business revenues benefited in 2000 from
deepwater projects in Latin America, particularly Mexico, and
Africa, reflecting the continued shift in work out of the North
Sea and into Latin America, Africa and Asia Pacific. In 1998,
revenues from upstream oil and gas engineering and construction
services benefited from large projects and from activities in the
subsea, pipecoating and flexible pipe product service lines.

for

Revenues

integrated exploration and production
information systems reached record high levels in 2000, breaking
the previous high set in 1998. Revenues from integrated
exploration and production information systems increased 13%
compared to 1999, and increased slightly over 1998. Increases in

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software and professional services revenues were partially offset
by lower hardware revenues, which have been de-emphasized.
Software sales contributed just over 19% in revenue growth,
while professional services increased over 7% compared to 1999.
In 1999 many customers for our information system product lines
put off software purchases due to customers’ consolidations,
lower activity levels and internal focus on Year 2000 issues.

Engineering and Construction Group revenues were
$4,028 million for 2000, down 24% from $5,314 million in 1999
and down 27% from 1998 revenues of $5,495 million. Higher oil
and gas prices during 2000 did not translate into customers
proceeding with new awards of large downstream projects. Many
other large projects, primarily gas and liquefied natural gas
projects, were also delayed, continuing a trend that started in
1999. In 1999 the group increased logistics support services to
military peacekeeping efforts in the Balkans and increased
activities at the Devonport Dockyard in the United Kingdom.
The logistics support services to military peacekeeping efforts in
the Balkans peaked in the fourth quarter of 1999 as the main
construction and procurement phases of the contract were
completed. These increases partially offset lower revenues from
engineering and construction projects, particularly major projects
in Europe and Africa, which were winding down. Revenues for
the group in 1998 reflect higher liquefied natural gas project
revenues in Asia and Africa, an enhanced oil recovery project in
Africa, and a major ethylene project in Singapore.

OPERATING INCOME

Millions of dollars
Energy Services Group
Engineering and

Construction Group

General corporate
Special charges and credits
Operating income

2 0 0 0
$ 5 2 6

1 4
( 7 8 )
(cid:209)
$ 4 6 2

1999
$222

203
(71)
47
$401

1998
$971

237
(79)
(959)
$170

Operating income was $462 million for 2000 compared to $401
million for 1999 and $170 million for 1998. Business segment
results include restructuring charges of $36 million in 2000
related to the restructuring of the engineering and construction
businesses. See Note 11. Excluding special credits of $47 million
in 1999 and special charges of $959 million during 1998,
operating income for 2000 increased by 31% from 1999 and
decreased 59% from 1998. See Note 12.

Energy Services Group operating income in 2000 was
$526 million, an increase of 137% from 1999 operating income of
$222 million and a decrease of 46% compared to 1998 operating
income of $971 million. Operating margins were 6.6% in 2000, up
from 3.2% in 1999 and down from 10.8% in 1998. Approximately
33% of the Energy Services Group’s operating income was
derived from international activities for 2000, compared with 54%

in 1999 and 1998. During 2000, strengthening North American
drilling and oilfield activity resulted in increased equipment
utilization and improved pricing within the oilfield services
product service lines. Pressure pumping operating income
increased about 135% compared to 1999 levels, which were
down about 70% compared to 1998, while logging services
operating income increased by over 200% compared to 1999.
Drilling fluids, drilling systems and completion products were
impacted by slow recovery in international activity. During the
fourth quarter of 2000, oilfield services recorded an $8 million
reversal of bad debts related to claims settled by the United
Nations against Iraq dating from the invasion of Kuwait in 1990.
Geographically, strong oil and gas prices throughout 2000 led to
higher levels of deepwater and onshore gas drilling within North
America. Activity increases in the Gulf of Mexico, South Texas,
Canada, and Rocky Mountain work areas were greater than most
other areas. Operating income outside North America continued
to lag the performance noted within North America, reflecting
continued delays in international exploration and production for
oil and gas. On a positive note, fourth quarter 2000 operating
income increased across all international geographic regions
compared to the third quarter, reflecting increased international
spending by our customers.

Operating income in 2000 for upstream oil and gas engineering
and construction activities declined by 5% compared to 1999 and
73% compared to 1998. Projects and workloads are increasingly
shifting from the North Sea to Latin America, Africa and Asia
Pacific. Operating income benefited in 2000 from a third quarter
$88 million gain on sale of two semi-submersible vessels and one
multipurpose support vessel. Lower activity levels in the North
Sea, particularly in the United Kingdom sector, negatively
impacted operating income in 2000 and 1999 through lower
utilization of engineering staff, as well as under utilization of
manufacturing and fabricating capacity and subsea equipment
and vessels, which carry large fixed costs. Given the number and
technical complexity of the engineering and construction
projects we perform, some project losses are normal occurrences.
However, the environment for negotiations with customers on
claims and change orders has become more difficult in the past
few years. This environment, combined with performance issues
on a few large, technically complex jobs, contributed to
unusually high job losses on major projects of $82 million in
2000, including $48 million in the fourth quarter, $77 million in
1999 and $99 million in 1998. In addition, the upstream oil and
gas engineering and construction business recorded $11 million
of restructuring charges in 2000.

Operating income from integrated exploration and production
information systems in 2000 increased almost 200% compared to
1999. Operating income in 2000 and 1999 was lower than 1998
due to lower software sales volumes in 1999 and change in the
software license product mix from perpetual license sales for
which income is recognized at the time of sale to annual access

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licenses where income is recognized over the license period.

Engineering and Construction Group operating income
for 2000 of $14 million decreased $189 million, or 93% from 1999
and about $223 million, or 94% from 1998. The operating margin
was just above zero in 2000 down from 3.8% in 1999 and 4.3% for
1998. Operating margins in 2000 declined both internationally
and in North America due to losses on projects as a result of higher
than estimated costs on selected jobs and claims negotiations on
other jobs not progressing as anticipated. In the fourth quarter of
2000, job losses of $109 million were recorded as a result of these
conditions. At the same time, the group recorded $25 million of
restructuring charges. Lower activity due to the trend in delayed
new projects, which continued through the year, also negatively
impacted operating income. Operating income in 1999 benefited
from higher activity levels supporting United States military
peacekeeping efforts in the Balkans, offset by reduced
engineering and construction project profits due to the timing of
project awards and revenue recognition. Operating income in 1998
includes $16 million favorable settlement of a claim on a Middle
Eastern construction project.

Special credits in 1999 are the result of a change in estimate
on some components of the 1998 special charges. We continuously
monitor the actual costs incurred and reexamine our estimates of
future costs. In the second quarter of 1999, we concluded that
total costs, particularly for severance and facility exit costs, were
lower than previously estimated. Therefore, we reversed $47
million of the $959 million special charge that was originally
recorded. See Note 12.

General corporate expenses for 2000 were $78 million,
an increase of $7 million from 1999 and down $1 million
compared to 1998. In 2000 general corporate expenses increased
primarily as a result of costs related to the early retirement of our
previous chairman and chief executive officer. In 1998 general
corporate expenses of $79 million included expenses for
operating Dresser’s corporate offices as well as our corporate
offices. As a percent of consolidated revenues, general corporate
expenses were 0.7% in 2000, 0.6% in 1999 and 0.5% in 1998.

NONOPERATING ITEMS

Interest expense was $146 million for 2000 compared to
$141 million in 1999 and $134 million in 1998. Interest expense
was up in 2000 due to higher average interest rates on short-term
borrowings and additional short-term debt used to repurchase
$759 million of our common stock under our share repurchase
program, mostly during the fourth quarter. These increases
offset the benefits from our lower borrowings earlier in 2000 due
to the use of the proceeds from the sale of Ingersoll-Dresser
Pump and Dresser-Rand to repay short-term debt.

Interest income of $25 million declined $49 million from
1999 and was about the same as 1998. Interest income in 1999
included settlement of income tax issues in the United States
and United Kingdom and imputed interest income on the note
receivable from the sale of our ownership in M-I L.L.C.

Foreign currency gains (losses) netted to a loss of $5
million, down from losses of $8 million in 1999 and $10 million
in 1998. The losses in 2000 were primarily in Asia Pacific
currencies and the euro. Losses in 1999 occurred primarily in
Russian and Latin American currencies. Losses in 1998 occurred
primarily in Asia Pacific currencies.

Other, net in 2000 was a net loss of $1 million compared to a
net loss of $19 million in 1999 and a net gain of $3 million in 1998.
The net loss in 1999 includes a $26 million charge in the second
quarter relating to an impairment of Kellogg Brown & Root’s net
investment in Bufete Industriale, S.A. de C.V., a large specialty
engineering, procurement and construction company in Mexico.
Provision for income taxes on continuing operations was
$129 million for an effective tax rate of 38.5%, compared to
37.8% in 1999 and 281.8% in 1998. Excluding our special
charges and related taxes, the effective rate was 38.8% in 1999
and 37.8% in 1998.

Minority interest in net income of subsidiaries was
$18 million in 2000 compared to $17 million in 1999 and $20
million in 1998.

Income from continuing operations was $188 million in
2000 and $174 million in 1999. In 1998 continuing operations was
a loss of $120 million.

Income from discontinued operations was $98 million

in 2000, $124 million in 1999 and $105 million in 1998.

Gain on disposal of discontinued operations resulting
from the sale of our 51% interest in Dresser-Rand was $215 million
after-tax or $0.48 per diluted share in 2000. In 1999 we recorded
a gain on the sale of our 49% interest in Ingersoll-Dresser Pump
of $159 million after-tax or $0.36 per diluted share.

Cumulative effect of change in accounting method
in 1999 of $19 million after-tax, or $0.04 per diluted share,
reflects our adoption of Statement of Position 98-5, “Reporting
on the Costs of Start-Up Activities.” See Note 13.

Net income in 2000 was $501 million or $1.12 per diluted share
and in 1999 was $438 million or $0.99 per diluted share. In 1998
the net loss of $15 million resulted in $0.03 loss per diluted share.

LIQUIDITY AND CAPITAL RESOURCES

We ended 2000 with cash and equivalents of $231 million
compared with $466 million in 1999 and $203 million in 1998.

Cash flows from operating activities used $57 million
for 2000 compared to $58 million used for 1999 and provided
$150 million for 1998. Working capital items, which include
receivables, inventories, accounts payable and other working
capital, net, used $563 million of cash in 2000 compared to

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providing $2 million in 1999 and using $533 million in 1998.
Included in changes to working capital and other net changes are
special charge usage for personnel reductions, facility closures,
merger transaction costs, and integration costs of $54 million in
2000 and $202 million in 1999 and $112 million in 1998.

Cash flows used in investing activities were $411
million for 2000, $107 million for 1999 and $790 million for 1998.
Capital expenditures of $578 million in 2000 were about 11%
higher than in 1999 and about 31% lower than in 1998. Capital
spending was mostly for equipment for Halliburton Energy
Services, which included investing in cementing equipment
designed to integrate our pumping and mixing systems with new
safety and technological features. Cash flows from investing
activities in 1999 include $254 million collected on the receivables
from the sale of our 36% interest in M-I L.L.C. Imputed interest
on this receivable of $11 million is included in operating cash
flows. In 1998, net cash used for investing activities includes
various acquisitions of businesses of approximately $40 million.
Cash flows from financing activities used $584 million
in 2000 and provided $189 million in 1999 and $267 million in 1998.
We repaid $308 million on our long-term debt in 2000. Net short-
term borrowings consisting of commercial paper and bank loans
provided $629 million in 2000. Proceeds from exercises of stock
options provided cash flows of $105 million in 2000 compared to
$49 million in 1999 and 1998. Dividends to shareholders used
$221 million of cash in 2000 and 1999. In April 2000 our Board of
Directors approved a plan to implement a share repurchase
program. As of December 31, 2000 we had repurchased over 20
million shares at a cost of $759 million. In addition, we
repurchased $10 million of common stock both in 2000 and 1999
and $20 million in 1998 from employees to settle their income tax
liabilities primarily for restricted stock lapses. We may periodically
repurchase our common stock as we deem appropriate.

Cash flows from discontinued operations provided
$826 million in 2000 as compared to $234 million and $235
million in 1999 and 1998, respectively. Cash flows for 2000
include proceeds from the sale of Dresser-Rand and Ingersoll-
Dresser Pump of approximately $913 million.

Capital resources from internally generated funds and
access to capital markets are sufficient to fund our working
capital requirements, share repurchases and
investing
activities. Our combined short-term notes payable and long-
term debt was 40%, 35% and 32% of total capitalization at the
end of 2000, 1999 and 1998, respectively. In 2000, we reduced
our short-term debt with proceeds from the sales of Ingersoll-
Dresser Pump and Dresser-Rand joint ventures early in the
year and increased short-term debt in the fourth quarter to
fund share repurchases. We plan to use proceeds from the
Dresser Equipment Group sale to pay down debt recently
incurred for the repurchase of our shares. This should return
the debt-to-capitalization ratio to the 30% to 35% range by the
end of the second quarter of 2001.

FINANCIAL INSTRUMENT MARKET RISK

We are exposed to financial instrument market risk from changes
in foreign currency exchange rates, interest rates and to a limited
extent, commodity prices. We selectively hedge these exposures
through the use of derivative instruments to mitigate our market
risk from these exposures. The objective of our hedging is to
protect our cash flows related to sales or purchases of goods or
services from fluctuations in currency rates. Our use of derivative
instruments includes the following types of market risk:

• volatility of the currency rates;
• time horizon of the derivative instruments;
• market cycles; and
• the type of derivative instruments used.

We do not use derivative instruments for trading purposes. We
do not consider any of our hedging activities to be material. See
Note 1 for additional information on our accounting policies on
derivative instruments. See Note 17 for additional disclosures
related to derivative instruments.

RESTRUCTURING ACTIVITIES

While oil and gas prices have continued to maintain the
strength that provides positive uplift to our oilfield services
and integrated exploration and production information
systems businesses, our engineering and construction
businesses continue to experience delays in customer
commitments for new upstream and downstream projects.
With the exception of deepwater projects, short-term
prospects for increased engineering and construction activities
in either the upstream or downstream businesses are not
positive. The continued delays of upstream and downstream
projects, and the resulting decrease in our backlog and levels
of work, will make it difficult to achieve acceptable margins in
2001
in our engineering and construction businesses.
Accordingly, in the fourth quarter of 2000 we approved a plan
to re-combine all of our engineering and construction
businesses into one business unit. As a result of the reorgani-
zation of the engineering and construction businesses, we took
actions to rationalize our operating structure including write-
offs of equipment, engineering reference designs and
capitalized software of $20 million and recorded severance
costs of $16 million.

During the third and fourth quarters of 1998, we incurred
special charges totaling $980 million related to the Dresser
merger and industry downturn, of which $21 million has been
recorded in discontinued operations. During the second
quarter of 1999, we reversed $47 million of our 1998 special
charges based on our reassessment of total costs to be incurred
to complete the actions covered in the charges.

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We have in process a program to exit approximately 500
properties, including service, administrative and manufacturing
facilities. We accrued expenses to exit approximately 400 of
these properties in the 1998 special charges. Most of these
properties are within the Energy Services Group. Through
December 31, 2000 we have vacated 97% of the approximate 500
total facilities. We have sold or returned to the owner 94% of the
vacated properties.

ENVIRONMENTAL MATTERS

We are subject to numerous environmental legal and regulatory
requirements related to our operations worldwide. As a result of
those obligations, we are involved in specific environmental
litigation and claims, the clean-up of properties we own or have
operated, and efforts to meet or correct compliance-related
matters. See Note 9.

FORWARD-LOOKING INFORMATION

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
annual report are forward-looking. We may also provide oral or
written forward-looking information in other materials we
release to the public. Forward-looking information involves
risks and uncertainties. Forward-looking information we
provide reflects our best judgement 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 operations may vary materially.

While it is not possible to identify all factors, we continue to
face many risks and uncertainties that could cause actual
results to differ from our forward-looking statements
including:

Geopolitical and legal.
• trade restrictions and economic embargoes imposed by the

United States and other countries;

• unsettled political conditions, war, civil unrest, currency
controls and governmental actions in the numerous countries
in which we operate;

• operations in countries with significant amounts of political
risk, including, for example, Algeria, Angola, Libya, Nigeria,
and Russia;

- encourage or mandate hiring local contractors; and
-

require foreign contractors to employ citizens of, or
purchase supplies from, a particular jurisdiction;
• litigation, including, for example, asbestos litigation and

environmental litigation; and

• environmental laws, including, for example, those that require

emission performance standards for facilities;

Weather related.
• the effects of severe weather conditions, including, for example,
hurricanes and tornadoes, on operations and facilities; and
• the impact of prolonged severe or mild weather conditions on

the demand for and price of oil and natural gas;

Customers and vendors.
• the magnitude of governmental spending and outsourcing for
military and logistical support of the type that we provide;
• changes in capital spending by customers in the oil and gas
industry for exploration, development, production, processing,
refining, and pipeline delivery networks;

• changes in capital spending by governments for infrastructure

projects of the sort that we perform;

• consolidation of customers in the oil and gas industry; and
• claim negotiations with engineering and construction customers

on cost variances and change orders on major projects;

Industry.
• technological and structural changes in the industries that

we serve;

• changes in the price of oil and natural gas, including:

- OPEC’s ability to set and maintain production levels and

prices for oil;
the level of oil production by non-OPEC countries;
the policies of governments regarding exploration for and
production and development of their oil and natural gas
reserves; and
the level of demand for oil and natural gas;

-
-

• changes in the price or the availability of commodities that

we use;

• risks that result from entering into fixed fee engineering,
procurement and construction projects of the types that we
provide where failure to meet schedules, cost estimates or
performance targets could result in non-reimbursable costs
which cause the project not to meet our expected profit
margins;

• risks that result from entering into complex business
arrangements for technically demanding projects where
failure by one or more parties could result in monetary
penalties; and

• changes in foreign exchange rates;
• changes in governmental regulations in the numerous countries
in which we operate including, for example, regulations that:

• the risk inherent in the use of derivative instruments of the
sort that we use which could cause a change in value of the
derivative instruments as a result of:

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

M A N A G E M E N T ’

D I

S C U S

I O N A N D A N A L Y S

- adverse movements in foreign exchange rates, interest

OTHER ISSUES

rates, or commodity prices, or
the value and time period of the derivative being
different than the exposures or cash flows being hedged;

Personnel and mergers/reorganizations/dispositions.
• increased competition in the hiring and retention of
employees in specific areas, including, for example, energy
services operations, accounting and finance;

• integration of acquired businesses into Halliburton, including:
- standardizing information systems or integrating data

from multiple systems;

- maintaining uniform standards, controls, procedures and

policies; and

- combining operations and personnel of acquired

businesses with ours;

• effectively reorganizing operations and personnel within

Halliburton;

• replacing discontinued lines of businesses with acquisitions

that add value and complement our core businesses; and

• successful completion of planned dispositions.

In addition, future trends for pricing, margins, revenues and
profitability remain difficult to predict in the industries we serve.
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. We do advise you to review any additional
disclosures we make in our 10-Q, 8-K and 10-K reports to the
Securities and Exchange Commission. We also suggest that you
listen to our quarterly earnings release conference calls with
financial analysts.

Conversion to the Euro Currency
On January 1, 1999, some member countries of the European
Union established fixed conversion rates between their existing
currencies and the European Union’s common currency (euro).
This was the first step toward transition from existing national
currencies to the use of the euro as a common currency. The
transition period for the introduction of the euro ends June 30,
2002. Issues resulting from the introduction of the euro include
converting information technology systems, reassessing currency
risk, negotiating and amending existing contracts and processing
tax and accounting records. We are addressing these issues and
do not expect the euro to have a material effect on our financial
condition or results of operations.

Implementation of SAB 101
The Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) 101, “Revenue Recognition in
Financial Statements,” in December 1999. The SAB summarizes
some of the SEC staff’s views in applying generally accepted
accounting principles to revenue recognition in financial
statements. We have completed a thorough review of our
revenue recognition policies and determined that our policies are
consistent with SAB 101.

Accounting Change
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 133,
“Accounting for Derivative Instruments and for Hedging
Activities,” subsequently amended by SFAS No. 137 and SFAS
No. 138. This standard requires entities to recognize all
derivatives on the statement of financial position as assets or
liabilities and to measure the instruments at fair value.
Accounting for gains and losses from changes in those fair values
are specified in the standard depending on the intended use of
the derivative and other criteria. We have completed our review
of contracts for embedded derivatives and evaluated our
accounting policies for derivatives and hedging activities. We
adopted SFAS 133 effective January 2001 and determined the
initial adoption did not have a material effect on our financial
condition or results of operations.

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

R E P O R T O F

I N D E P E N D E N T P U B L I C A C C O U N T A N T S

TO THE SHAREHOLDERS AND BOARD OF DIRECTORS

HALLIBURTON COMPANY:

We have audited the accompanying consolidated balance sheets
of Halliburton Company (a Delaware corporation) and subsidiary
companies as of December 31, 2000 and 1999, and the related
consolidated statements of income, cash flows, and shareholders’
equity for each of the three years in the period ended December 31,
2000. These financial statements are the responsibility of the
Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing
standards generally accepted in the United States. Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Halliburton Company and subsidiary companies as of
December 31, 2000 and 1999, and the results of their operations
and their cash flows for each of the three years in the period
ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States.

ARTHUR ANDERSEN LLP

Dallas, Texas,

January 30, 2001 (Except with respect to the matters discussed

in Notes 9 and 19, as to which the date is March 23, 2001.)

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

R E S P O N S I B I L I T Y F O R F I N A N C I A L R E P O R T I N G

We are responsible for the preparation and integrity of our
published financial statements. The financial statements have
been prepared in accordance with accounting principles
generally accepted in the United States and, accordingly, include
amounts based on judgements and estimates made by our
management. We also prepared the other information included
in the annual report and are responsible for its accuracy and
consistency with the financial statements.

The financial statements have been audited by the
independent accounting firm, Arthur Andersen LLP. Arthur
Andersen was given unrestricted access to all financial records
and related data, including minutes of all meetings of
stockholders, the Board of Directors and committees of the
Board. Halliburton’s Audit Committee of the Board of Directors
consists of directors who, in the business judgement of the Board
of Directors, are independent under the New York Exchange
listing standards. The Board, operating through its Audit
Committee, provides oversight to the financial reporting process.
Integral to this process is the Audit Committee’s review and
discussion with management and the external auditors of the
quarterly and annual financial statements prior to their
respective filing.

We maintain a system of internal control over financial
reporting, which is intended to provide reasonable assurance to
our management and Board of Directors regarding the reliability
of our financial statements. The system includes:

report

recommendations

Internal auditors monitor the operation of the internal control
system and
to
findings and
management and the Board of Directors. Corrective actions are
taken to address control deficiencies and other opportunities for
improving the system as they are identified. In accordance with
the Securities and Exchange Commission’s new rules to improve
the reliability of financial statements, our interim financial
statements are reviewed by Arthur Andersen LLP.

There are inherent limitations in the effectiveness of any
system of internal control, including the possibility of human
error and the circumvention or overriding of controls.
Accordingly, even an effective internal control system can
provide only reasonable assurance with respect to the reliability
of our financial statements. Also, the effectiveness of an internal
control system may change over time.

We have assessed our internal control system in relation to
criteria for effective internal control over financial reporting
described in “Internal Control-Integrated Framework” issued by
the Committee of Sponsoring Organizations of the Treadway
Commission. Based upon that assessment, we believe that, as of
December 31, 2000, our system of internal control over financial
reporting met those criteria.

HALLIBURTON COMPANY
by

• a documented organizational structure and division of

responsibility;

• established policies and procedures, including a code of conduct
to foster a strong ethical climate which is communicated
throughout the company; and

• the careful selection, training and development of our people.

David J. Lesar
Chairman of the Board,
President and
Chief Executive Officer

Gary V. Morris
Executive Vice President and
Chief Financial Officer

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

C O N S O L I D A T E D

S T A T E M E N T S

O F

I N C O M E

Years ended December 31
(Millions of dollars and shares except per share data)
REVENUES:
Services
Sales
Equity in earnings of unconsolidated affiliates

Total revenues

OPERATING COSTS AND EXPENSES:
Cost of services
Cost of sales
General and administrative
Gain on sale of marine vessels
Special charges and credits

Total operating costs and expenses

OPERATING INCOME
Interest expense
Interest income
Foreign currency losses, net
Other, net
INCOME FROM CONTINUING OPERATIONS BEFORE TAXES,

MINORITY INTEREST, AND CHANGE IN ACCOUNTING METHOD
Provision for income taxes
Minority interest in net income of subsidiaries
Income (loss) from continuing operations before change in accounting method
DISCONTINUED OPERATIONS:
Income from discontinued operations, net of tax of $60, $98, and $90
Gain on disposal of discontinued operations, net of tax of $141 and $94
Income from discontinued operations
Cumulative effect of change in accounting method, net of tax benefit of $11
Net income (loss)
BASIC INCOME (LOSS) PER SHARE:
Income (loss) from continuing operations before change in accounting method
Income from discontinued operations
Gain on disposal of discontinued operations
Change in accounting method
Net income (loss)
DILUTED INCOME (LOSS) PER SHARE:
Income (loss) from continuing operations before change in accounting method
Income from discontinued operations
Gain on disposal of discontinued operations
Change in accounting method
Net income (loss)
Basic average common shares outstanding
Diluted average common shares outstanding

2 0 0 0

1999

1998

$ 1 0 , 1 8 5
1 , 6 7 1
8 8
$ 11 , 9 4 4

$ 9 , 7 5 5
1 , 4 6 3
3 5 2
( 8 8 )
(cid:209)
$ 11 , 4 8 2
4 6 2
( 1 4 6 )
2 5
( 5 )
( 1 )

3 3 5
( 1 2 9 )
( 1 8 )
1 8 8

9 8
2 1 5
3 1 3
(cid:209)
5 0 1

0 . 4 2
0 . 2 2
0 . 4 9
(cid:209)
1 . 1 3

0 . 4 2
0 . 2 2
0 . 4 8
(cid:209)
1 . 1 2
4 4 2
4 4 6

$10,826
1,388
99
$12,313

$10,368
1,240
351
—
(47)
$11,912
401
(141)
74
(8)
(19)

307
(116)
(17)
174

124
159
283
(19)
438

0.40
0.28
0.36
(0.04)
1.00

0.39
0.28
0.36
(0.04)
0.99
440
443

$12,089
2,261
154
$14,504

$11,127
1,895
437
—
875
$14,334
170
(134)
26
(10)
3

55
(155)
(20)
(120)

105
—
105
—
(15)

$ (0.27)
0.24
—
—
$ (0.03)

$ (0.27)
0.24
—
—
$ (0.03)
439
439

See notes to annual financial statements.

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

C O N S O L I D A T E D B A L A N C E

S H E E T S

December 31
(Millions of dollars and shares except per share data)

2 0 0 0

1999

CURRENT ASSETS:
Cash and equivalents
Receivables:
Notes and accounts receivable (less allowance for bad debts of $125 and $94)
Unbilled work on uncompleted contracts

ASSETS

TOTAL RECEIVABLES

Inventories
Current deferred income taxes
Net current assets of discontinued operations
Other current assets

TOTAL CURRENT ASSETS
Net property, plant and equipment
Equity in and advances to related companies
Excess of cost over net assets acquired (net of accumulated amortization of $231 and $189)
Noncurrent deferred income taxes
Net noncurrent assets of discontinued operations
Other assets

TOTAL ASSETS

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES:
Short-term notes payable
Current maturities of long-term debt
Accounts payable
Accrued employee compensation and benefits
Advance billings on uncompleted contracts
Deferred revenues
Income taxes payable
Accrued special charges
Other current liabilities

TOTAL CURRENT LIABILITIES

Long-term debt
Employee compensation and benefits
Other liabilities
Minority interest in consolidated subsidiaries

TOTAL LIABILITIES

SHAREHOLDERS’ EQUITY:
Common shares, par value $2.50 per share – authorized 600 shares, issued 453 and 448 shares
Paid-in capital in excess of par value
Deferred compensation
Accumulated other comprehensive income
Retained earnings

Less 26 and 6 shares of treasury stock, at cost
TOTAL SHAREHOLDERS’ EQUITY

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

See notes to annual financial statements.

2 3 1

3 , 0 2 9
8 1 6
3 , 8 4 5
7 2 3
2 3 5
2 9 8
2 3 6
5 , 5 6 8
2 , 4 1 0
4 0 0
5 9 7
3 4 0
3 9 1
3 9 7
$ 1 0 , 1 0 3

$ 1 , 5 7 0
8
7 8 2
2 6 7
2 8 8
9 8
11 3
6
6 9 4
3 , 8 2 6
1 , 0 4 9
6 6 2
6 0 0
3 8
6 , 1 7 5

1 , 1 3 2
2 5 9
( 6 3 )
( 2 8 8 )
3 , 7 3 3
4 , 7 7 3
8 4 5
3 , 9 2 8
$ 1 0 , 1 0 3

$ 466

2,349
625
2,974
723
171
793
235
5,362
2,390
384
505
398
310
290
$9,639

$ 939
308
665
137
286
44
120
69
465
3,033
1,056
672
547
44
5,352

1,120
68
(51)
(204)
3,453
4,386
99
4,287
$9,639

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

C O N S O L I D A T E D S T A T E M E N T S O F S H A R E H O L D E R S ’

E Q U I T Y

Years ended December 31
(Millions of dollars and shares)
COMMON STOCK (NUMBER OF SHARES)

Balance at beginning of year
Shares issued under compensation and incentive

stock plans, net of forfeitures

Shares issued for acquisition
Cancellation of treasury stock
Balance at end of year

COMMON STOCK (DOLLARS)

Balance at beginning of year
Shares issued under compensation and incentive

stock plans, net of forfeitures

Shares issued for acquisition
Cancellation of treasury stock
Balance at end of year

PAID-IN CAPITAL IN EXCESS OF PAR VALUE

Balance at beginning of year
Shares issued under compensation and incentive

stock plans, net of forfeitures

Tax benefit
Shares issued for acquisition
Cancellation of treasury stock
Balance at end of year

DEFERRED COMPENSATION
Balance at beginning of year
Current year awards, net
Balance at end of year

ACCUMULATED OTHER COMPREHENSIVE INCOME

Cumulative translation adjustment
Pension liability adjustment
Unrealized gain (loss) on investments
Balance at end of year

CUMULATIVE TRANSLATION ADJUSTMENT

Balance at beginning of year
Conforming fiscal years
Sales of subsidiaries
Current year changes, net of tax
Balance at end of year

2 0 0 0

1999

1998

4 4 8

4
1
(cid:209)
4 5 3

$ 1 , 1 2 0

9
3
(cid:209)
$ 1 , 1 3 2

6 8

1 0 9
3 8
4 4
(cid:209)
2 5 9

( 5 1 )
( 1 2 )
( 6 3 )

$ ( 2 7 5 )
( 1 2 )
( 1 )
$ ( 2 8 8 )

$ ( 1 8 5 )
(cid:209)
11
( 1 0 1 )
$ ( 2 7 5 )

446

2
—
—
448

$1,115

5
—
—
$1,120

47
13
—
—
68

(51)
—
(51)

$ (185)
(19)
—
$ (204)

$ (142)
—
(17)
(26)
$ (185)

454

1
—
(9)
446

$1,134

3
—
(22)
$1,115

$ 168

37
12
—
(209)
8

(45)
(6)
(51)

$ (142)
(7)
—
$ (149)

$ (127)
(15)
9
(9)
$ (142)

See notes to annual financial statements.

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

C O N S O L I D A T E D S T A T E M E N T S O F S H A R E H O L D E R S ’

E Q U I T Y

( C O N T I N U E D )

Years ended December 31
(Millions of dollars and shares)
PENSION LIABILITY ADJUSTMENT

Balance at beginning of year
Sale of subsidiary
Current year adjustment
Balance at end of year

UNREALIZED GAIN (LOSS) ON INVESTMENTS
Current year unrealized gain (loss) on investments
Balance at end of year
RETAINED EARNINGS

Balance at beginning of year
Net income (loss)
Cash dividends paid
Cancellation of treasury stock
Conforming fiscal years
Balance at end of year

TREASURY STOCK (NUMBER OF SHARES)

Beginning of year
Shares issued under benefit, dividend reinvestment plan and

incentive stock plans, net

Shares purchased
Cancellation of treasury stock
Balance at end of year

TREASURY STOCK (DOLLARS)

Beginning of year
Shares issued under benefit, dividend reinvestment plan and

incentive stock plans, net

Shares purchased
Cancellation of treasury stock
Balance at end of year

COMPREHENSIVE INCOME

Net income (loss)
Translation rate changes, net of tax
Current year adjustment to minimum pension liability
Unrealized gain (loss) on investments
Total comprehensive income

2 0 0 0

1999

1998

$
$

( 1 9 )
7
(cid:209)
( 1 2 )

( 1 )
( 1 )

$ 3 , 4 5 3
5 0 1
( 2 2 1 )
(cid:209)
(cid:209)
$ 3 , 7 3 3

(cid:209)
2 0
(cid:209)
2 6

(7)
—
(12)
(19)

$ —
$ —

$3,236
438
(221)
—
—
$3,453

—
—
—
6

(4)
—
(3)
(7)

$ —
$ —

$ 3,563
(15)
(254)
(61)
3
$ 3,236

(1)
—
(9)
6

9 9

$ 374

( 2 3 )
7 6 9
(cid:209)
8 4 5

5 0 1
( 1 0 1 )
(cid:209)
( 1 )
3 9 9

(9)
10
—
99

$ 438
(26)
(12)
—
$ 400

(26)
20
(270)
98

(15)
(9)
(3)
—
(27)

See notes to annual financial statements.

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

C O N S O L I D A T E D S T A T E M E N T S O F C A S H F L O W S

Years ended December 31
(Millions of dollars)
CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)
Adjustments to reconcile net income to net cash from operations:

Income from discontinued operations
Depreciation, depletion and amortization
(Benefit) provision for deferred income taxes
Change in accounting method, net
Distributions from (advances to) related companies,

net of equity in (earnings) losses

Accrued special charges
Other non-cash items
Other changes, net of non-cash items:
Receivables and unbilled work
Inventories
Accounts payable
Other working capital, net
Other, net

Total cash flows from operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Capital expenditures
Sales of property, plant and equipment
Acquisitions of businesses, net of cash acquired
Dispositions of businesses, net of cash disposed
Other investing activities
Total cash flows from investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Borrowings of long-term debt
Payments on long-term borrowings
Net borrowings of short-term debt
Payments of dividends to shareholders
Proceeds from exercises of stock options
Payments to reacquire common stock
Other financing activities
Total cash flows from financing activities

Effect of exchange rate changes on cash
Net cash flows from discontinued operations (1)
Increase (decrease) in cash and equivalents
Cash and equivalents at beginning of year
CASH AND EQUIVALENTS AT END OF YEAR

2 0 0 0

1999

1998

$ 5 0 1

$ 438

$ (15)

( 3 1 3 )
5 0 3
( 6 )
(cid:209)

( 6 4 )
( 6 3 )
( 2 2 )

( 8 9 6 )
8
1 7 0
1 5 5
( 3 0 )
( 5 7 )

( 5 7 8 )
2 0 9
( 1 0 )
1 9
( 5 1 )
( 4 11 )

(cid:209)
( 3 0 8 )
6 2 9
( 2 2 1 )
1 0 5
( 7 6 9 )
( 2 0 )
( 5 8 4 )
( 9 )
8 2 6
( 2 3 5 )
4 6 6
$ 2 3 1

(283)
511
187
19

24
(290)
19

616
(3)
(179)
(432)
(685)
(58)

(520)
118
(7)
291
11
(107)

—
(59)
436
(221)
49
(10)
(6)
189
5
234
263
203
$ 466

(105)
500
(297)
—

9
359
5

(215)
(38)
(25)
(255)
227
150

(841)
83
(40)
7
1
(790)

150
(28)
386
(254)
49
(20)
(16)
267
(5)
235
(143)
346
$ 203

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash payments during the year for:

Interest
Income taxes

Non-cash investing and financing activities:

$ 1 4 4
$ 3 1 0

$ 145
98
$

$ 137
$ 535

Liabilities assumed in acquisitions of businesses
Liabilities disposed of in dispositions of businesses

5
24
(1) Net cash flows from discontinued operations in 2000 include proceeds of approximately $913 million from the sales of Dresser-

$
9 5
$ 4 9 9

$
90
$ 111

$
$

Rand in 2000 and Ingersoll-Dresser Pump in 1999. See Note 2.

See notes to annual financial statements.

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

N O T E S T O A N N U A L F I N A N C I A L S T A T E M E N T S

NOTE 1. SIGNIFICANT ACCOUNTING POLICIES

We employ accounting policies that are in accordance with
generally accepted accounting principles in the United States.
The preparation of financial statements in conformity with
generally accepted accounting principles requires us to make
estimates and assumptions that affect:

• the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements; and

• the reported amounts of revenues and expenses during the

reporting period.

Ultimate results could differ from those estimates.
Principles of consolidation. The consolidated financial
statements include the accounts of our company and all of our
majority-owned subsidiaries. All material intercompany accounts
and transactions are eliminated. Investments in other companies
in which we own a 20% to 50% interest are accounted for using the
equity method. Specific prior year amounts have been reclassified
to conform to the current year presentation.

Revenues and income recognition. We recognize
revenues as services are rendered or products are shipped. The
distinction between services and product sales is based upon the
overall activity of the particular business operation. Revenues
from engineering and construction contracts are reported on the
percentage of completion method of accounting using measure-
ments of progress towards completion appropriate for the work
performed. All known or anticipated losses on contracts are
provided for currently. Claims and change orders which are in the
process of being negotiated with customers, for extra work or
changes in the scope of work are included in revenue when
collection is deemed probable. Post-contract customer support
agreements are recorded as deferred revenues and recognized as
revenue ratably over the contract period of generally one year’s
duration. Training and consulting service revenues are
recognized as the services are performed. Sales of perpetual
software licenses, net of deferred maintenance fees, are recorded
as revenue upon shipment. Sales of use licenses are recognized
as revenue over the license period.

Research and development. Research and development
expenses are charged to income as incurred. See Note 4 for
research and development expense by business segment.

Software development costs. Costs of developing
software for sale are charged to expense when incurred, as
research and development, until technological feasibility has
been established for the product. Once technological feasibility is
established, software development costs are capitalized until the
software is ready for general release to customers. We capitalized
costs related to software developed for resale of $7 million in
2000, $12 million in 1999 and $13 million in 1998. Amortization

expense of software development costs was $12 million for 2000,
$15 million for 1999 and $18 million for 1998. Once the software
is ready for release, amortization of the software development
costs begins. Capitalized software development costs are
amortized over periods which do not exceed three years.

Income per share. Basic income per share is based on the
weighted average number of common shares outstanding during
the year. Diluted income per share includes additional common
shares that would have been outstanding if potential common
shares with a dilutive effect had been issued. See Note 10 for a
reconciliation of basic and diluted income per share.

Cash equivalents. We consider all highly

liquid
investments with an original maturity of three months or less to
be cash equivalents.

Receivables. Our receivables are generally not collateralized.
With the exception of claims and change orders which are in the
process of being negotiated with customers, unbilled work on
uncompleted contracts generally represents work currently
billable, and this work is usually billed during normal billing
processes in the next month. These claims and change orders,
included in unbilled receivables, amounted to $113 million and
$98 million at December 31, 2000 and 1999, respectively, and are
generally expected to be collected in the following year.

Included in notes and accounts receivable are notes with
varying interest rates. Notes receivable totaled $38 million at
December 31, 2000 and $41 million at December 31, 1999.

Inventories. Inventories are stated at the lower of cost or
market. Cost represents invoice or production cost for new items
and original cost less allowance for condition for used material
returned to stock. Production cost includes material, labor and
manufacturing overhead. The cost of most inventories is
determined using either the first-in, first-out method or the
average cost method, although the cost of some United States
manufacturing and field service inventories is determined using
the last-in, first-out method. Inventories of sales items owned by
foreign subsidiaries and inventories of operating supplies and
parts are generally valued at average cost.

Property, plant and equipment. Property, plant and
equipment are reported at cost less accumulated depreciation,
which is generally provided on the straight-line method over the
estimated useful lives of the assets. Some assets are depreciated
on accelerated methods. Accelerated depreciation methods are
also used for tax purposes, wherever permitted. Upon sale or
retirement of an asset, the related costs and accumulated
depreciation are removed from the accounts and any gain or loss
is recognized. When events or changes in circumstances indicate
that assets may be impaired, an evaluation is performed. The
estimated future undiscounted cash flows associated with the
asset are compared to the asset’s carrying amount to determine if
a write-down to market value or discounted cash flow value is
required. We follow the successful efforts method of accounting
for oil and gas properties.

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

N O T E S T O A N N U A L F I N A N C I A L S T A T E M E N T S

Maintenance and repairs. Expenditures for maintenance
and repairs are generally expensed; expenditures for renewals and
improvements are generally capitalized. We use the accrue-in-
advance method of accounting for major maintenance and repair
costs of marine vessel dry docking expense and major aircraft
overhauls and repairs. Under this method we anticipate the need
for major maintenance and repairs and charge the estimated
expense to operations before the actual work is performed. At the
time the work is performed, the actual cost incurred is charged
against the amounts that were previously accrued with any
deficiency or excess charged or credited to operating expense.

Excess of cost over net assets acquired. The excess
of cost over net assets acquired is amortized on a straight-line
basis over periods not exceeding 40 years. The excess of cost
over net assets acquired is continually monitored for potential
impairment. When negative conditions such as significant
current or projected operating losses exist, a review is performed
to determine if the projected undiscounted future cash flows
indicate that an impairment exists. If an impairment exists, the
excess of cost over net assets acquired, and, if appropriate, the
associated assets are reduced to reflect the estimated discounted
cash flows to be generated by the underlying business. This is
consistent with methodologies in Statement of Financial
Accounting Standards No. 121 “Accounting for the Impairment of
Long-lived Assets and for Long-lived Assets to be Disposed of.”
Income taxes. A valuation allowance is provided for
deferred tax assets if it is more likely than not these items will
either expire before we are able to realize their benefit, or that
future deductibility is uncertain. Deferred tax assets and liabilities
are recognized for the expected future tax consequences of events
that have been realized in the financial statements or tax returns.
Derivative instruments. We enter into derivative financial
transactions to hedge existing or projected exposures to changing
foreign exchange rates, interest rates and commodity prices. We
do not enter into derivative transactions for speculative or trading
purposes. Derivative financial instruments to hedge exposure
with an indeterminable maturity date are generally carried at fair
value with the resulting gains and losses reflected in the results
of operations. Gains or losses on hedges of identifiable
commitments are deferred and recognized when the offsetting
gains or losses on the related hedged items are recognized.
Deferred gains or losses for hedges which are terminated prior to
the transaction date are recognized when the underlying hedged
transactions are recognized. In the event an identifiable
commitment is no longer expected to be realized, any deferred
gains or losses on hedges associated with the commitment are
recognized currently. Costs associated with entering into these
contracts are presented in other assets, while deferred gains or
losses are included in other liabilities or other assets, respec-
tively, on the consolidated balance sheets. Recognized gains or
losses on derivatives entered into to manage foreign exchange
risk are included in foreign currency gains and losses on the

consolidated statements of income. Gains or losses on interest
rate derivatives and commodity derivatives are included in
interest expense and operating income, respectively. During the
years ended December 31, 2000, 1999 and 1998, we did not enter
into any significant transactions to hedge interest rates or
commodity prices.

Foreign currency translation. Foreign entities whose
functional currency is the United States dollar translate monetary
assets and liabilities at year-end exchange rates and non-
monetary items are translated at historical rates. Income and
expense accounts are translated at the average rates in effect
during the year, except for depreciation, cost of product sales and
revenues and expenses associated with non-monetary balance
sheet accounts which are translated at historical rates. Gains or
losses from changes in exchange rates are recognized in consoli-
dated income in the year of occurrence. Foreign entities whose
functional currency is the local currency translate net assets at
year-end rates and income and expense accounts at average
exchange rates. Adjustments resulting from these translations are
reflected in the consolidated statements of shareholders’ equity
titled “cumulative translation adjustment.”

NOTE 2. ACQUISITIONS AND DISPOSITIONS

PES acquisition. In February 2000, our offer to acquire the
remaining 74% of the shares of PES (International) Limited
that we did not already own was accepted by PES
shareholders. PES is based in Aberdeen, Scotland, and has
developed technology that complements Halliburton Energy
Services’ real-time reservoir solutions. To acquire the
remaining 74% of PES, we issued 1.2 million shares of
Halliburton common stock. We also issued rights that will
result in the issuance of between 850,000 and 2.1 million
additional shares of Halliburton common stock between
February 2001 and February 2003. We issued 1 million shares
in February 2001 under the rights. We have preliminarily
recorded, subject to the final valuation of intangible assets and
other costs, $115 million of goodwill which will be amortized
over 20 years. PES is part of the Energy Services Group.

Dresser merger. On September 29, 1998 we completed
the acquisition of Dresser Industries, Inc. by converting the
outstanding Dresser common stock into approximately 176
million shares of our common stock. We also reserved approx-
imately 7 million shares of common stock for outstanding
Dresser stock options and other employee and directors plans.
The merger qualified as a tax-free exchange to Dresser’s
shareholders for United States federal income tax purposes
and was accounted for using the pooling of interests method of
accounting for business combinations. Financial statements
have been restated to include the results of these Dresser
operations for all periods presented.

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

N O T E S T O A N N U A L F I N A N C I A L S T A T E M E N T S

Combined and separate company results of Halliburton
Company and Dresser Industries, Inc. for the period preceding
the merger are as follows:

Nine Months ended September 30
Millions of dollars

REVENUES:
Halliburton Company
Dresser Industries, Inc.
Amounts reclassified to

discontinued operations

Combined continuing operations

INCOME (LOSS):
Halliburton Company
Dresser Industries, Inc.
Amounts reclassified to

discontinued operations
1998 special charges, net of tax
Amounts reclassified to

discontinued operations

Combined continuing operations

1998

$ 7,045

3,949
$10,994

359

$ 6,019

(2,070)

282

(93)
(722)

189

(707)
(159)

Other acquisitions. We acquired other businesses in 2000,
1999 and 1998 for $10 million, $13 million and $42 million,
respectively. These businesses did not have a significant effect
on revenues or earnings.

Joint venture divestitures. In October 1999, we announced
the sales of our 49% interest in the Ingersoll-Dresser Pump joint
venture and our 51% interest in the Dresser-Rand joint venture
to Ingersoll-Rand. See Note 3. The sales were triggered by
Ingersoll-Rand’s exercise of its option under the joint venture
agreements to cause us to either buy their interests or sell ours.
Both joint ventures were part of the Dresser Equipment Group
segment. Our Ingersoll-Dresser Pump interest was sold in
December 1999 for approximately $515 million. We recorded a
gain on disposition of discontinued operations of $253 million
before tax, or $159 million after-tax, for a net gain of $0.36 per
diluted share in 1999 from the sale of Ingersoll-Dresser Pump.
Proceeds from the sale, after payment of our intercompany
balance, were received in the form of a $377 million promissory
note with an annual interest rate of 3.5%, which was collected on
January 14, 2000. On February 2, 2000 we completed the sale of
our 51% interest in Dresser-Rand for a price of approximately
$579 million. Proceeds from the sale, net of intercompany
amounts payable to the joint venture, were $536 million,
resulting in a gain on disposition of discontinued operations of
$356 million before tax, or $215 million after-tax, for a net gain
of $0.48 per diluted share in the first quarter of 2000. The
proceeds from these sales were used to repay short-term
borrowings and for other general corporate purposes.

LWD divestiture. In March 1999, in connection with the
Dresser merger, we sold the majority of our pre-merger
worldwide logging-while-drilling business and a portion of the
pre-merger measurement-while-drilling business. The sale was
in accordance with a consent decree with the United States
Department of Justice. The financial impact of the sale was
reflected in the third quarter 1998 special charge. See Note 12.
This business was previously part of the Energy Services Group.
We continue to provide separate logging-while-drilling services
through our Sperry-Sun Drilling Systems business line, which
was acquired as part of the merger with Dresser and is now part
of the Energy Services Group. In addition, we will continue to
provide sonic logging-while-drilling services using technologies
we had before the merger with Dresser.

M-I L.L.C. drilling divestiture. In August 1998, we sold our
36% interest in M-I L.L.C. to Smith International, Inc. for $265
million. Payment was made in the form of a non-interest-bearing
promissory note which was collected in April 1999. The sale
completed our commitment to the United States Department of
Justice to sell our M-I interest in connection with our merger
with Dresser. M-I was previously part of the Energy Services
Group. We continue to offer drilling fluid products and services
through our Baroid Drilling Fluids business line which was
acquired as part of the merger with Dresser and is now part of the
Energy Services Group.

NOTE 3. DISCONTINUED OPERATIONS

The Dresser Equipment Group in 1999 was comprised of six
operating divisions and two joint ventures that manufacture and
market equipment used primarily in the energy, petrochemical,
power and transportation industries. In late 1999 we announced
our intentions to sell, and have subsequently sold, our interests
in the two joint ventures within this segment. These joint
ventures represented nearly half of the group’s revenues and
operating profit in 1999. See Note 2. The sale of our interests in
the segment’s joint ventures prompted a strategic review of the
remaining businesses within the Dresser Equipment Group
segment. As a result of this review, we determined that these
businesses do not closely fit with our core businesses, long-term
goals and strategic objectives. In April 2000, our Board of
Directors approved plans to sell all the remaining businesses
within our Dresser Equipment Group segment. In January 2001,
we signed a definitive agreement and expect to close the sale of
these businesses in the second quarter of 2001. Total consider-
ation under the agreement is $1.55 billion in cash, less assumed
liabilities, and is subject to adjustments at closing for changes in
net assets. As part of the terms of the transaction, we will retain
a 5% equity interest in Dresser Equipment Group after closing.

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

N O T E S T O A N N U A L F I N A N C I A L S T A T E M E N T S

NOTE 4. BUSINESS SEGMENT INFORMATION

We have two business segments. These segments are organized
around the products and services provided to the customers they
serve. See the following tables for information on our business
segments.

The Energy Services Group segment provides pressure
pumping equipment and services, logging and perforating,
drilling systems and services, drilling fluids systems, drill bits,
specialized completion and production equipment and services,
well control, integrated solutions, and reservoir description. Also
included in the Energy Services Group are upstream oil and gas
engineering, construction and maintenance services, specialty pipe-
coating, insulation, underwater engineering services, integrated
exploration and production information systems, and professional
services to the petroleum industry. The Energy Services Group
has three business units: Halliburton Energy Services, Brown &
Root Energy Services and Landmark Graphics. The long-term
performance for these business units is linked to the long-term
demand for oil and gas. The products and services the group
provides are designed to help discover, develop and produce oil
and gas. The customers for this segment are major oil companies,
national oil companies and independent oil and gas companies.
The Engineering and Construction Group segment provides
engineering, procurement, construction, project management,
and facilities operation and maintenance for hydrocarbon
processing and other industrial and governmental customers.
The Engineering and Construction Group has two business
units: Kellogg Brown & Root and Brown & Root Services. Both
business units are engaged in the delivery of engineering and
construction services.

Our equity in pretax income or losses for unconsolidated
related companies that are accounted for on the equity method is
included in revenues and operating income of the applicable
segment. Intersegment revenues included in the revenues of the
other business segments and sales between geographic areas are
immaterial. General corporate assets not included in a business
segment are primarily composed of receivables, deferred tax
assets and other shared assets, including the investment in an
enterprise-wide information system.

The financial results of the Dresser Equipment Group segment
are presented as discontinued operations in our financial
statements. Prior periods are restated to reflect this presentation.

Income from Operations of Discontinued Businesses
Years ended December 31
Millions of dollars
Revenues
Operating income
Other income and expense
Taxes
Minority interest
Net income

2 0 0 0
$ 1 , 4 0 0
1 5 8
$
(cid:209)
( 6 0 )
(cid:209)
9 8

1999
$2,585
$ 249
(1)
(98)
(26)
$ 124

1998
$2,849
$ 227
(3)
(90)
(29)
$ 105

Gain on disposal of discontinued operations reflects the gain
on the sale of Dresser-Rand in February 2000 and the gain on the
sale of Ingersoll-Dresser Pump in December 1999.

Gain on Disposal of Discontinued Operations
2 0 0 0
Millions of dollars
Proceeds from sale, less

intercompany settlement

Net assets disposed
Gain before taxes
Income taxes
Gain on disposal of

$ 5 3 6
( 1 8 0 )
3 5 6
( 1 4 1 )

1999

$ 377
(124)
253
(94)

discontinued operations

$ 2 1 5

$ 159

Net assets of discontinued operations at December 31, 2000

and 1999 are composed of the following items:

Millions of dollars
Receivables
Inventories
Other current assets
Accounts payable
Other current liabilities
Net current assets of

discontinued operations

Net property, plant and equipment
Net goodwill
Other assets
Employee compensation and benefits
Other liabilities
Minority interest in

consolidated subsidiaries

Net noncurrent assets of
discontinued operations

2 0 0 0
$ 2 8 6
2 5 5
2 2
( 1 0 4 )
( 1 6 1 )

$ 2 9 8
$ 2 1 9
2 5 7
3 0
( 11 3 )
( 2 )

1999
$ 904
515
34
(267)
(393)

$ 793
$ 401
263
74
(313)
(5)

(cid:209)

(110)

$ 3 9 1

$ 310

Revenues, assets, and liabilities declined from 1999 primarily
due to the sales of Dresser-Rand and Ingersoll-Dresser Pump
joint ventures.

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

N O T E S T O A N N U A L F I N A N C I A L S T A T E M E N T S

The tables below present information on our continuing

operations business segments.

Operations by Business Segment
Years ended December 31
Millions of dollars

2 0 0 0

1999

1998

REVENUES:
Energy Services Group
Engineering and

Construction Group

Total

OPERATING INCOME:
Energy Services Group
Engineering and

Construction Group
Special charges and credits
General corporate
Total

CAPITAL EXPENDITURES:
Energy Services Group
Engineering and

Construction Group
General corporate and

shared assets

Total

Construction Group
General corporate and

shared assets

Total

TOTAL ASSETS:
Energy Services Group
Engineering and

Construction Group

Net assets of

$ 7 , 9 1 6

$ 6,999

$ 9,009

4 , 0 2 8
$ 11 , 9 4 4

5,314
$12,313

5,495
$14,504

5 2 6

222

971

1 4
(cid:209)
( 7 8 )
4 6 2

4 9 5

3 2

5 1
5 7 8

3 6

4 7
5 0 3

203
47
(71)
401

414

72
520

421

47
511

100
841

405

46
500

$ 7 , 1 4 8

$ 6,167

$ 6,618

1 , 2 5 8

1,282

1,405

DEPRECIATION AND AMORTIZATION:
4 2 0
Energy Services Group
Engineering and

discontinued operations

6 8 9

1,103

950

General corporate and

shared assets

Total

1 , 0 0 8
$ 1 0 , 1 0 3

1,087
$ 9,639

1,099
$10,072

RESEARCH AND DEVELOPMENT:
Energy Services Group
Engineering and

2 2 4

207

220

Years ended December 31
Millions of dollars

SPECIAL CHARGES

AND CREDITS:
Energy Services Group
Engineering and

Construction Group

General corporate
Total

2 0 0 0

1999

1998

$ (cid:209)

$(45)

$721

(cid:209)
(cid:209)
$ (cid:209)

—
(2)
$(47)

40
198
$959

Operations by Geographic Area
Years ended December 31
Millions of dollars

2 0 0 0

1999

1998

237
(959)
(79)
170

REVENUES:
United States
United Kingdom
Other areas

$ 4 , 0 7 3
1 , 5 1 2

$ 3,727
1,656

$ 4,642
2,153

(over 120 countries)

707

Total

6 , 3 5 9
$ 11 , 9 4 4

6,930
$12,313

7,709
$14,504

LONG-LIVED ASSETS:
United States
United Kingdom
Other areas

(numerous countries)

Total

$ 2 , 0 6 8
5 2 5

$ 1,801
684

$ 1,788
579

7 7 6
$ 3 , 3 6 9

643
$ 3,128

920
$ 3,287

NOTE 5.

INVENTORIES

Inventories to support continuing operations at December 31,
2000 and 1999 are composed of the following:

Millions of dollars
Finished products and parts
Raw materials and supplies
Work in process
Total

2 0 0 0
$ 4 8 6
1 7 8
5 9
$ 7 2 3

1999
$619
79
25
$723

Inventories on the last-in, first-out method were $66 million at
December 31, 2000 and 1999. If the average cost method had
been used, total inventories would have been about $28 million
higher than reported at December 31, 2000, and $35 million
higher than reported at December 31, 1999.

Construction Group

Total

7
2 3 1

4
211

4
224

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

N O T E S T O A N N U A L F I N A N C I A L S T A T E M E N T S

NOTE 6. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment to support continuing operations
at December 31, 2000 and 1999 are composed of the following:

Millions of dollars
Land
Buildings and property improvements
Machinery, equipment and other
Total
Less accumulated depreciation
Net property, plant and equipment

2 0 0 0
8 3
9 6 8
4 , 5 0 9
5 , 5 6 0
3 , 1 5 0
$ 2 , 4 1 0

1999
$ 110
959
4,443
5,512
3,122
$ 2,390

At December 31, 2000 and 1999, machinery, equipment and
other property includes oil and gas investments of approximately
$363 million and $309 million, respectively, and software
developed for an information system of $223 million and $197
million, respectively.

NOTE 7. RELATED COMPANIES

We conduct some of our operations through various joint
ventures which are in partnership, corporate and other business
forms, and are principally accounted for using the equity
method. Information pertaining to related companies for our
continuing operations is set out below.

The larger unconsolidated entities include European Marine
Contractors, Limited, and Bredero-Shaw which are both part of
the Energy Services Group. European Marine Contractors,
Limited, which is 50%-owned, specializes in engineering,
procurement and construction of marine pipelines. Bredero-Shaw,
which is 50%-owned, specializes in pipecoating.

We sold our 36% ownership interest in M-I to Smith
International, Inc. on August 31, 1998. This transaction completed
our commitment to the United States Department of Justice to
sell our M-I interest in connection with our merger with Dresser
Industries, Inc. See Note 2 for further information on the sale of
M-I. Prior to the sale of our interest, we accounted for our interest
in M-I on the equity method.

Combined summarized financial information for all jointly

owned operations which are not consolidated is as follows:

Combined Operating Results
Years ended December 31
Millions of dollars
Revenues
Operating income
Net income

2 0 0 0
$ 3 , 0 9 8
1 9 2
$
1 6 9
$

1999
$3,215
$ 193
$ 127

1998
$4,262
$ 398
$ 276

Combined Financial Position
December 31
Millions of dollars
Current assets
Noncurrent assets
Total
Current liabilities
Noncurrent liabilities
Minority interests
Shareholders’ equity
Total

2 0 0 0
$ 1 , 6 0 4
1 , 3 0 7
$ 2 , 9 11
$ 1 , 2 3 8
9 4 7
2
7 2 4
$ 2 , 9 11

1999
$1,718
1,455
$3,173
$1,301
1,135
4
733
$3,173

NOTE 8. LINES OF CREDIT, NOTES PAYABLE AND

LONG-TERM DEBT

At December 31, 2000, we had committed short-term lines of credit
totaling $1.85 billion. There were no borrowings outstanding
under these lines of credit. Fees for committed lines of credit
were immaterial.

Short-term debt consists primarily of $1.54 billion in commercial
paper with an effective interest rate of 6.6% and $30 million of other
facilities with varying rates of interest.

Long-term debt at the end of 2000 and 1999 consists of the

following:

Millions of dollars
6.25% notes due June 2000
7.6% debentures due August 2096
8.75% debentures due February 2021
8% senior notes due April 2003
Medium-term notes due 2002

2 0 0 0

1999
(cid:209) $ 300
300
200
139

3 0 0
2 0 0
1 3 9

through 2027

4 0 0

400

Term loans at LIBOR (GBP) plus 0.75%
payable in semiannual installments
through March 2002

Other notes with varying interest rates
Total long-term debt
Less current portion
Noncurrent portion of long-term debt

11
7
1 , 0 5 7
8
$ 1 , 0 4 9

20
5
1,364
308
$1,056

We repaid $300 million on our 6.25% notes which came due in
June 2000. The 7.6% debentures due 2096, 8.75% debentures
due 2021, and 8% senior notes due 2003 may not be redeemed
prior to maturity and do not have sinking fund requirements.

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

N O T E S T O A N N U A L F I N A N C I A L S T A T E M E N T S

At December 31, 2000, we have outstanding notes under our

medium-term note program as follows:

Amount
$ 75 million
$150 million
$ 50 million
$125 million

Due
08/2002
12/2008
05/2017
02/2027

Issue
Rate
6.30)%
5.63)%
7.53)%
6.75)%

Price
Par
99.97)%
Par
99.78)%

Each holder of the 6.75% medium-term notes has the right to
require us to repay the holder’s notes in whole or in part, on
February 1, 2007. We may redeem the 5.63% medium-term
notes in whole or in part at any time. Other notes issued under
the medium-term note program may not be redeemed prior to
maturity. The medium-term notes do not have sinking fund
requirements.

Our debt matures as follows: $8 million in 2001; $84 million in
2002; $139 million in 2003; none in 2004 and 2005; and $825
million thereafter.

NOTE 9. COMMITMENTS AND CONTINGENCIES

Leases. At year end 2000, we were obligated under noncancelable
operating leases, expiring on various dates through 2021,
principally for the use of land, offices, equipment, field facilities,
and warehouses. Total rentals charged to continuing operations
for noncancelable leases in 2000, 1999 and 1998 were as follows:

Millions of dollars
Rental expense

2 0 0 0
$ 1 4 9

1999
$139

1998
$156

Future total rentals on noncancelable operating leases are as
follows: $94 million in 2001; $80 million in 2002; $66 million in
2003; $45 million in 2004; $32 million in 2005; and $84 million
thereafter.

Asbestos litigation. Since 1976, our subsidiary, Dresser
Industries, Inc. and its former divisions or subsidiaries have been
involved in litigation alleging some products they manufactured
contained asbestos that injured persons that inhaled the fibers.

Dresser has entered into agreements with insurance carriers,
that cover, in whole or in part, indemnity payments, legal fees
and expenses for specific categories of claims. Dresser is
negotiating with insurance carriers for coverage for the remaining
categories of claims. Because these agreements are governed by
exposure dates, payment type and the product involved, the
covered amount varies by claim. In addition, lawsuits are
pending against several carriers seeking to recover additional
amounts related to these claims.

Our Engineering and Construction Group is also involved in
asbestos litigation. Third parties allege they sustained injuries
from the inhalation of asbestos fibers contained in some of the

materials used in various construction and renovation projects
involving our Brown & Root subsidiary, now named Kellogg
Brown & Root, Inc. The insurance coverage for Kellogg Brown
& Root for the applicable periods was written by Highlands
Insurance Company. Highlands was a subsidiary of Halliburton
prior to its spin-off to our shareholders in early 1996. Our negoti-
ations with Highlands have not produced an agreement on the
amount of insurance coverage for asbestos and defense costs. On
April 5, 2000, Highlands filed suit in Delaware Chancery Court
alleging that, as part of the spin-off in 1996, Halliburton assumed
liability for all asbestos claims filed against Halliburton after the
spin-off. Highlands also alleges that Halliburton did not
adequately disclose to Highlands the existence of Halliburton’s
subsidiaries’ potential asbestos liability. On August 23, 2000
Highlands issued a letter denying coverage under the policies
based on the claims asserted in the Delaware action. We believe
that Highlands is contractually obligated to provide insurance
coverage for the asbestos claims filed against Kellogg Brown &
Root and that Highlands’ lawsuit and its denial of coverage are
without merit. We intend to assert our right to the insurance
coverage vigorously. On April 24, 2000, Halliburton filed suit
against Highlands in Harris County, Texas, claiming that
Highlands breached its contractual obligation to provide
insurance coverage. We have asked the court to order Highlands
to provide coverage for asbestos claims under the guaranteed
cost policies issued by Highlands to Kellogg Brown & Root.

On March 21, 2001 the Delaware Chancery Court ruled that
Highlands is not obligated to provide insurance coverage for
asbestos claims filed against Kellogg Brown & Root because,
in the court’s opinion, the agreements entered into by
Highlands and Halliburton at the time of the spin-off
terminated the policies previously written by Highlands that
would otherwise cover such claims.This ruling, if it is not
reversed on appeal, would eliminate our primary insurance
covering asbestos claims against Kellogg Brown & Root for
periods prior to the spin-off. Most claims filed against Kellogg
Brown & Root allege exposure to asbestos prior to the spin-off
and are disposed of for less than the limits of the Highlands
policies. However, we and our legal counsel, Vinson & Elkins
L.L.P., believe the court’s ruling is wrong. We intend to appeal
the ruling to the Delaware Supreme Court as soon as possible.
Vinson & Elkins has opined to us that it is very likely that the
ruling of the Chancery Court will be reversed because the
ruling clearly contravenes the provisions of the applicable
agreements between Highlands and Halliburton. Vinson &
Elkins has also opined to us that it is likely that we will
ultimately prevail in this litigation.

Since 1976, approximately 282,000 claims have been filed
against various current and former divisions and subsidiaries.
About 25,000 of these claims relate to Kellogg Brown & Root and
the balance of these claims relate to Dresser, its former divisions
and subsidiaries. Approximately 165,000 of these claims have

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

N O T E S T O A N N U A L F I N A N C I A L S T A T E M E N T S

Accounts receivable for billings to other insurance carriers for
payments made on claims were $13 million at December 31, 2000
and $9 million at December 31, 1999.

We recognize the uncertainties of litigation and the possibility
that a series of adverse court rulings or new legislation affecting
the claims settlement process could materially impact the expected
resolution of asbestos related claims. However, based upon:

• our historical experience with similar claims;
• the time elapsed since Dresser and its former divisions or
subsidiaries discontinued sale of products containing asbestos;
• the time elapsed since Kellogg Brown & Root used asbestos in

any construction process; and

• our understanding of the facts and circumstances that gave rise

to asbestos claims,

we believe that the pending asbestos claims will be resolved
without material effect on our financial position or results of
operations.

Resolution of dispute with Global Industrial Technologies,
Inc. We previously reported that under an agreement entered into
at the time of the spin-off of Global Industrial Technologies, Inc.,
formerly INDRESCO, Inc., from Dresser Industries, Inc., Global
assumed liability for all asbestos related claims filed against Dresser
after July 31, 1992 relating to refractory products manufactured or
marketed by the former Harbison-Walker Refractories division of
Dresser. Those business operations were transferred to Global in
the spin-off. These asbestos claims are subject to agreements with
Dresser’s insurance carriers that cover expense and indemnity
payments. However, the insurance coverage is incomplete and
Global has to-date paid the uncovered portion of asbestos claims
with its own funds.

been settled or disposed of at a gross cost of approximately $124
million, with insurance carriers paying all but approximately $32
million. Claims continue to be filed, with about 45,000 claims
filed in 2000. We have established an accrual estimating our
liability for known asbestos claims. Our estimate is based on our
historical litigation experience, settlements and expected
recoveries from insurance carriers. Our expected insurance
recoveries are based on agreements with carriers or, where
agreements are still under negotiation or litigation, our estimate
of recoveries. We believe that the insurance carriers with which
we have signed agreements will be able to meet their share of
future obligations under the agreements. Prior to the Chancery
Court’s ruling, Highlands Insurance Group Inc., the parent of
Highlands Insurance Company, stated in its SEC filings that if
it lost the litigation with us and was required to pay the asbestos
claims against Kellogg Brown & Root, there could be a material
adverse impact on Highlands Insurance Group’s financial
position. Highlands Insurance Company reported statutory
capital surplus of $152 million to the Texas Insurance
Commission in its Quarterly Statement as of September 30,
2000. On March 12, 2001 Highlands Insurance Group, Inc.
announced that it expected to report a significant loss for the
fourth quarter of 2000 and for the full year 2000. Although we
do not know the extent of the impact of this loss on Highlands
Insurance Company, we believe that Highlands has the ability
to pay substantially all of these asbestos claims when this
litigation is resolved in our favor.

At December 31, 2000, there were about 117,000 open claims,
including about 23,000 associated with recoveries we expect
from Highlands. Open claims at December 31, 2000 also include
9,000 for which settlements are pending. The number of open
claims at the end of 2000 compares with approximately 107,700
open claims at the end of the prior year. The accrued liabilities
for these claims and corresponding billed and estimated
recoveries from carriers are as follows:

December 31
Millions of dollars
Accrued liability
Estimated insurance recoveries:

Highlands Insurance Company
Other insurance carriers

Net asbestos liability

2 0 0 0
$ 8 0

( 3 9 )
( 1 2 )
$ 2 9

1999
$ 71

(28)
(18)
$ 25

As of December 31, 2000, we have accounts receivable from
Highlands Insurance Company of $11 million for payments we
have made on asbestos claims. If our appeal of the Chancery
Court’s ruling in the Highlands litigation is unsuccessful, we
will be unable to collect this account receivable or the $39
million estimated recovery from Highlands for asbestos claims.
This may have a material adverse impact on the results of our
operations and our financial position at that time.

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

N O T E S T O A N N U A L F I N A N C I A L S T A T E M E N T S

We also reported that a dispute arose with Global concerning
those agreements, which led to arbitration and litigation proceedings.
We have now resolved the dispute and agreed with Global that:

• the arbitration, and all related litigation, is dismissed;
• Global acknowledges its obligation to assume responsibility
for new asbestos claims filed after the date of the spin-off;
• Global agrees to continue to cooperate with Dresser on

Dresser’s remaining refractory claims; and,

• Dresser continues to make available its direct insurance

program for the Global assumed asbestos liabilities.

Fort Ord litigation. Brown & Root Services is a defendant
in civil litigation pending in federal court in Sacramento,
California. The lawsuit alleges that Brown & Root Services
violated provisions of the False Claims Act while performing
work for the United States Army at Fort Ord in California. This
lawsuit was filed by a former employee in 1997. Brown & Root
Services has denied the allegations and is preparing to defend
itself at trial. Further proceedings in this civil lawsuit have been
stayed while the investigation referred to in the next paragraph
is ongoing. We believe that it is remote that this civil litigation
will result in any material amount of damages being assessed
against the company, although the cost of our defense could well
exceed $1 million before the matter is brought to a conclusion.

Although in 1998 the United States Department of Justice
declined to join this litigation, it has advised us that Brown &
Root Services is the target of a federal grand jury investigation
regarding the contract administration issues raised in the civil
litigation. Brown & Root Services has been served with grand
jury subpoenas, which required the production of documents
relating to the Fort Ord contract and similar contracts at other
locations. We have also been informed that several current and
former employees will be called to testify before the grand jury.
We have retained independent counsel for these employees. We
are cooperating in this investigation. The United States
Department of Justice has not made any specific allegations
against Brown & Root Services.

Environmental. We are subject to numerous environmental
legal and regulatory requirements related to our operations
worldwide. We take a proactive approach to evaluating and
addressing the environmental impact of our operations. Each year
we assess and remediate contaminated properties in order to avoid
future liabilities and comply with legal and regulatory require-
ments. On occasion we are involved in specific environmental
litigation and claims, including the clean-up of properties we
own or have operated as well as efforts to meet or correct
compliance-related matters.

Some of our subsidiaries and former operating entities are
involved as a potentially responsible party or PRP in remedial
activities to clean-up several “Superfund” sites under United
States federal law and comparable state laws. Kellogg Brown &

Root, Inc., one of our subsidiaries, is one of nine PRPs named at
the Tri-State Mining District “Superfund” Site, also known as
the Jasper County “Superfund” Site, which we have reported in
the past. Based on our negotiations with federal regulatory
authorities and our evaluation of our responsibility for
remediation at small portions of this site, we do not believe we
will be compelled to make expenditures which will have a
material adverse effect on our financial position or results of
operations. However, the United States Department of the
Interior and the State of Missouri have indicated that they might
make a separate claim against Kellog Brown & Root for natural
resource damages. Discussions with them have not been
concluded and we are unable to make a judgement about the
amount of damages they may seek.

We also incur costs related to compliance with ever-changing
environmental legal and regulatory requirements in the jurisdic-
tions where we operate. It is very difficult to quantify the potential
liabilities. We do not expect these expenditures to have a
material adverse effect on our consolidated financial position or
our results of operations.

Our accrued liabilities for environmental matters were
$31 million as of December 31, 2000 and $29 million as of
December 31, 1999.

Other. We are a party to various other legal proceedings. We
expense the costs of legal fees related to these proceedings. We
believe any liabilities we may have arising from these
proceedings will not be material to our consolidated financial
position or our results of operations.

NOTE 10.

INCOME PER SHARE

Millions of dollars and shares
except per share data
Income (loss) from continuing
operations before change in
accounting method

Basic weighted average shares
Effect of common
stock equivalents

Diluted weighted
average shares

Income (loss) per common
share from continuing
operations before change
in accounting method:

2 0 0 0

1999

1998

$ 1 8 8
4 4 2

$ 174
440

$ (120)
439

4 4 6

443

—

439

Basic
Diluted

$ 0 . 4 2
$ 0 . 4 2

$0.40
$0.39

$(0.27)
$(0.27)

Income per common share from

discontinued operations:

Basic
Diluted

$ 0 . 7 1
$ 0 . 7 0

$0.64
$0.64

$ 0.24
$ 0.24

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

N O T E S T O A N N U A L F I N A N C I A L S T A T E M E N T S

Income per share from discontinued operations includes $0.49
and $0.36 basic and $0.48 and $0.36 diluted from the gain on the
sale of discontinued operations in 2000 and 1999, respectively.

Basic income 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. Included in the computation of diluted
income per share are rights we issued in connection with the
PES acquisition for between 850,000 and 2.1 million shares of
Halliburton common stock. Excluded from the computation of
diluted income per share are options to purchase 1 million shares
of common stock in 2000; 2 million shares in 1999; and 1 million
shares in 1998. These options were outstanding during these
respective years, but were excluded because the option exercise
price was greater than the average market price of the common
shares. Since we incurred a loss in 1998, diluted earnings per
share for that year excludes 3 million potential common shares
which were antidilutive for earnings per share purposes.

Asset Related Charges
As a result of the reorganization of the engineering and
construction businesses, we took actions to rationalize our cost
structure including write-offs of equipment, engineering reference
designs and capitalized software. Cost of services includes $20
million of charges for equipment, licenses and engineering
reference designs related to specific projects that were discontinued
as a result of the reorganization. Equipment and licenses with a
net book value of $10 million were abandoned. Engineering
reference designs specific to a project with a net book value of $4
million were written off. Software developed for internal use
with a net book value of $6 million which we no longer plan to
use due to standardization of systems was also written off.

Personnel Charges
Personnel charges of $16 million include severance and related
costs incurred for the planned reduction of approximately 30
senior management positions, most of which will be terminated
in the first quarter of 2001. We expect payments under the
severance agreements to be completed by mid-2001.

NOTE 11. ENGINEERING AND CONSTRUCTION

REORGANIZATION

NOTE 12. SPECIAL CHARGES AND CREDITS

The table below summarizes non-recurring charges of $36
million pretax recorded in December 2000 related to the
reorganization of our engineering and construction businesses.

The table below summarizes the 1998 pretax expenses for
special charges and the accrued amounts utilized and adjusted
through December 31, 2000.

Millions of dollars

Charges

Total

1998 CHARGES TO EXPENSE

Asset

Personnel

Millions of dollars

Asset
Related
Charges

Facility

Merger

Personnel
Charges

Consolidation Transaction

Charges

Other
Charges

Total

$ 2

$ 9

$ 11

Group

$ 453

$ 157

$ 93

$ — $ 18 $ 721

BY BUSINESS SEGMENT

Energy Services

2000 CHARGES TO EXPENSE

BY BUSINESS SEGMENT
Energy Services Group
Engineering and

Construction Group

Total
Utilized in 2000
Balance December 31, 2000

18
20
(20)
$ —

7
16
—
$ 16

25
36
(20)
$ 16

These charges were reflected in the following captions of the
consolidated statements of income:

Year ended December 31
Millions of dollars
Cost of services
General and administrative
Total

2 0 0 0
$ 3 0
6
$ 3 6

Engineering and

Construction Group

Discontinued

operations

General corporate

Total

Utilized in 1998

509

235

126

—

198

980

and 1999

(509)

(196)

(77)

(63)

(19)

(864)

Adjustments to

1998 charges

—

(30)

(16)

(1)

— (47)

Balance

December 31, 1999 $ — $

Utilized in 2000

—

(9)

$ 33

(28)

$ — $ 27 $ 69

—

(26)

(63)

Balance

December 31, 2000 $ (cid:209) $ (cid:209)

$ 5

$ (cid:209) $ 1 $

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

N O T E S T O A N N U A L F I N A N C I A L S T A T E M E N T S

Our 1998 results of operations reflect special charges totaling
$980 million to provide for costs associated with the Dresser
Industries, Inc. merger and industry downturn due to declining
oil and gas prices. These charges were reflected in the following
captions of the consolidated statements of income:

Year ended December 31
Millions of dollars
Cost of services
Cost of sales
Special charges
Discontinued operations
Total

1998
$ 68
16
875
21
$980

Most restructuring activities accrued for in the 1998 special
charges were completed and expended by the end of 1999. We
utilized $63 million in 2000 for sales of facilities and other actions
that were initiated in 1999 but were concluded in 2000. From
inception through December 31, 2000, we used $368 million in
cash for items associated with the 1998 special charges. The
unutilized special charge reserve balance at December 31, 2000
is expected to result in future cash outlays of $6 million. At
December 31, 2000, no adjustments or reversals to the remaining
accrued special charges are planned.

During the second quarter of 1999, we reversed $47 million of
the 1998 special charge based on our reassessment of total costs
to be incurred to complete the actions covered in our special
charges. The components of the reversal are as follows:

• $30 million in personnel charges primarily due to a reduction
in estimated legal costs associated with employee layoffs,
lower than anticipated average severance per person and fewer
than expected terminations due to voluntary employee
resignations;

• $16 million in facility consolidation charges due to fewer than
initially estimated facility exits, resulting in an estimated $7
million reduction in facilities consolidation costs, combined
with other factors including more favorable exit costs than
anticipated; and

• $1 million of merger transaction costs primarily as a result of lower
than previously estimated legal and other professional costs.

Asset Related Charges
Asset related charges include impairments and write-offs of
intangible assets and excess and/or duplicate machinery,
equipment, inventory, and capitalized software. Charges also
include write-offs and lease cancellation costs related to
acquired information technology equipment replaced with our
standard common office equipment and exit costs on other
leased assets.

As a result of the merger, Halliburton Company’s and Dresser
Industries, Inc.’s completion products operations and formation
evaluation businesses have been combined. Excluded is
Halliburton’s logging-while-drilling business and a portion of our
measurement-while-drilling business which were required to be
disposed of in connection with the United States Department of
Justice consent decree. See Note 2. We recorded impairments
based upon anticipated future cash flows in accordance with
Statement of Financial Accounting Standards No. 121. This was
based on the change in strategic direction, the outlook for the
industry, the decision to standardize equipment product offerings
and the expected loss on the disposition of the logging-while-
drilling business. The following table summarizes the resulting
write-downs of excess of cost over net assets acquired and long-
lived assets associated with:

• the directional drilling and formation evaluation businesses

acquired in 1993 from Smith International, Inc.;

• the formation evaluation business acquired in the 1988

acquisition of Gearhart Industries, Inc.; and

• Mono Pumps and AVA acquired in 1990 and 1992.

Millions of dollars
Drilling operations of

pre-merger Halliburton
Energy Services
Logging operations of

pre-merger Halliburton
Energy Services
Mono Pump industrial
and oilfield pump
operations of Dresser
AVA completion products

Excess
of Cost
Over Net
Assets

Related
Long-
Lived
Assets

Total

$125

$ 96

$221

—

3
—
$ 153

105

37
1
$407

business of Dresser Oil Tools

Abandonment of a trademark
Total

34
1
$ 254

As discussed below, the merger caused management to
reevaluate the realizability of excess cost over net assets acquired
and related long-lived assets of these product service lines. Each
business was considered to be impaired under SFAS No. 121
guidance.

The overall market assumptions on which the impairment
computations were made assumed that 1999 calendar year drilling
activity as measured by worldwide rig count would be 1,900 rigs
which was up from the 1,700 level in the third quarter of 1998.
Rig count for calendar year 2000 and beyond was assumed to

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

N O T E S T O A N N U A L F I N A N C I A L S T A T E M E N T S

increase about 3% per year based upon estimated long-term
growth in worldwide demand for oil and gas. These assumptions
were based on market data available at the time of the merger.

In addition to these assumptions, management utilized a 10-
year timeframe for future projected cash flows, a discount rate
that approximates its average cost of capital, and specific
assumptions for the future performance of each product service
line. The most significant assumptions are discussed below. In
each case, these analyses represented management’s best
estimate of future results for these product service lines.

Drilling operations of pre-merger Halliburton Energy
Services. Our pre-merger drilling business consisted of
logging-while-drilling, measurement-while-drilling and directional
drilling services. The majority of the pre-merger logging-while-
drilling business and a portion of the pre-merger measurement-
while-drilling business were required to be sold under the
United States Department of Justice consent decree. We have
integrated the remaining drilling business with the Sperry-Sun
operations of Dresser. Our strategy focuses generally on
operating under the Sperry-Sun name and using Sperry-Sun’s
superior technology, tools and industry reputation. Our
remaining pre-merger drilling assets and technology are being
de-emphasized as they wear out or become obsolete. These tools
will not be replaced resulting in significant decreases in future
cash flows and an impairment of the excess of cost over net assets
and related long-lived assets.

Significant forecast assumptions included a revenue decline in
the remaining pre-merger drilling business due to the
measurement-while-drilling sale in the first year. Related
revenue and operating income over the following 10 years were
projected to decline due to reduced business opportunities
resulting from our shift in focus toward Sperry-Sun’s tools and
technologies. We determined that there was a $125 million
impairment of excess of cost over net assets acquired. In
addition, related long-lived asset impairments consisted of $61
million of property and equipment and $14 million of related
spare parts, the value of which was estimated using the “held for
use” model during the forecast period. An impairment of $3
million was recorded related to property and equipment and $18
million of spare parts using the “held for sale” model sold in
accordance with the consent decree with the United States
Department of Justice. See Note 2.

Logging operations of pre-merger Halliburton Energy
Services. The merger of Halliburton Company and Dresser
Industries, Inc. enabled the acceleration of a formation evaluation
strategy. This strategy takes advantage of Sperry-Sun’s logging-
while-drilling competitive position and reputation for reliability
combined with our Magnetic Resonance Imaging Logging
(MRIL®) technology acquired with the NUMAR acquisition in
1997. Prior to the merger, we were focused on growing the
traditional logging business while working toward development

of new systems to maximize the MRIL® technology. The merger
allowed us to implement the new strategy and place the
traditional logging business in a sustaining mode. This change in
focus and strategy resulted in a shift of operating cash flows away
from our traditional logging business. This created an impairment
of the excess of cost over net assets and related long-lived assets
related to our logging business.

included

Significant

forecast assumptions

revenues
decreasing slowly over the 10-year period, reflecting the
decline in the traditional logging markets. Operating income
initially was forecasted to increase due to cost cutting activity,
and then decline as revenue decreased due to the significant
fixed costs in this product service line. We calculated $51
million impairment of the excess of cost over net assets
acquired. In addition, related long-lived asset impairments
consisted of $22 million of property and equipment and $32
million of spare parts which management estimated using the
“held for use” model during the forecast period.

Mono Pump operations of pre-merger Dresser.
The amount of the impairment is $43 million, all of which
represents excess of cost over net assets acquired associated
with the business.

Our strategy for Mono Pump is to focus primarily on the
oilfield business including manufacturing power sections for
drilling motors. The prior strategy included emphasis on non-
oilfield related applications of their pumping technology and
the majority of Mono Pump revenues were related to non-
oilfield sales. The change in strategy will result in reduced
future cash flows resulting in an impairment of the excess of
costs over net assets acquired.

Significant forecast assumptions included stable revenue for
several years and then slowly declining due to decreasing
emphasis of industrial market applications. Operating income
was forecasted to initially be even with current levels but then
decline over the period as revenues declined and fixed costs
per unit increased.

AVA operations of Dresser Oil Tools. The amount of the
impairment is $37 million of which $34 million relates to excess
of costs over net assets acquired.

The plan for Dresser’s AVA business line (which supplies
subsurface safety valves and other completion equipment) was
to rationalize product lines which overlap with our pre-existing
completion equipment business line. The vast majority of the
AVA product lines were de-emphasized except for supporting
the installed base of AVA equipment and specific special order
requests from customers. AVA products were generally aimed at
the high-end custom completion products market. Our strategy
was to focus on standardized high-end products based upon
pre-merger Halliburton designs thus reducing future AVA cash
flows and impairing its assets and related excess of costs over
net assets acquired.

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

N O T E S T O A N N U A L F I N A N C I A L S T A T E M E N T S

Additional asset related charges. Additional asset

related charges include:

• $37 million for various excess fixed assets as a result of
merging similar product lines. We have no future use for these
assets and they have been scrapped;

• $33 million for other assets related to capitalized software,
which became redundant with the merger. Major components
included redundant computer aided design systems and
capitalized costs related to a portion of our enterprise-wide
information system abandoned due to changed requirements
of the post merger company. The redundant computer aided
design systems were used in both the Energy Services Group
and the Engineering and Construction Group and were
immediately abandoned and replaced by superior systems
required to meet the needs of the merged company;

• $ 26 million for the inventory charge relates to excess
inventory as a result of merging similar product lines and/or
industry downturn. This included approximately $17 million
related to overlapping product lines and excess inventory in
the completion products business and $9 million related to
various Dresser Equipment Group divisions due to excess
inventory related to industry downturn. Inventory that was
overlapping due to the merger was segregated and has been
scrapped. Inventory reserves were increased to cover the
estimated write-down to market for inventory with future use
determined to be excess as a result of the industry downturn.
Any future sales are expected to approximate the new lower
carrying value of the inventory;

• $5 million for the impairment of excess of cost over net assets
acquired related to well construction technology that became
redundant once the merger was complete due to similar but
superior technology offered by Sperry-Sun. This technology
will no longer be used as part of our integrated service offerings,
thus reducing future cash flows. We will, however, continue to
market this technology individually to third parties. An
impairment based on a “held for use” model was calculated
using a 10-year discounted cash flow model with a discount
rate which approximates our average cost of capital; and

• $1 million write-off of excess of cost over net assets acquired
related to the Steamford product line in the Dresser
Equipment Group valve and control division. Management
made the strategic decision to exit this product line.

Asset related charges have been reflected as direct reductions

of the associated asset balances.

Personnel Charges
Personnel charges include severance and related costs incurred
for announced employee reductions of 10,850 affecting all business
segments, corporate and shared service functions. Personnel
charges also include personnel costs related to change of control.
In June 1999, management revised the planned employee
reductions to 10,100 due in large part to higher than anticipated
voluntary employee resignations. As of December 31, 2000,
terminations of employees, consultants and contract personnel
related to the 1998 special charge have been completed.

Facility Consolidation Charges
Facility consolidation charges include costs to dispose of owned
properties or exit leased facilities. As a result of the merger with
Dresser and the industry downturn, we recorded a charge for
costs to vacate, sell or close excess and redundant service,
manufacturing and administrative facilities throughout the
world. The majority of these facilities are within the Energy
Services Group. Expenses of $126 million included:

• $85 million write-down of owned facilities for anticipated
losses on planned disposals based upon the difference
between the assets’ net book values and anticipated future net
realizable value based upon the “to be disposed of” method;
• $37 million lease buyout costs or early lease termination cost

including:

- estimated costs to buy out leases;
-

facility refurbishment/restoration expenses as required by
the lease in order to exit property;

- sublease differentials, as applicable; and
-

related broker/agent fees to negotiate and close buyouts;
• $4 million facility maintenance costs to maintain vacated
facilities between the abandonment date and the expected
disposition date. Maintenance costs include lease expense,
depreciation, maintenance, utilities, and third-party adminis-
trative costs.

As of December 31, 2000, we have substantially completed the
work to vacate, sell or close the service, manufacturing and
administrative facilities related to the 1998 special charge. The
majority of the sold, returned or vacated properties are located in
North America and have been eliminated from the Energy
Services Group. The remaining expenditures will be made as the
remaining properties are vacated and sold.

Merger Transaction Charges
Merger transaction costs include investment banking, filing fees,
legal and professional fees and other merger related costs. We
estimated our merger transaction costs to be $64 million.

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

N O T E S T O A N N U A L F I N A N C I A L S T A T E M E N T S

Other Charges
Other charges of $46 million include the estimated contract exit
costs associated with the elimination of duplicate agents and
suppliers in various countries throughout the world. Through
December 31, 2000, we have utilized substantially all of the
estimated amount of other special charge costs.

NOTE 13. CHANGE IN ACCOUNTING METHOD

In April 1998, the American Institute of Certified Public
Accountants issued Statement of Position 98-5 “Reporting on
the Costs of Start-Up Activities.” This Statement requires costs
of start-up activities and organization costs to be expensed as
incurred. We adopted Statement of Position 98-5 effective
January 1, 1999 and recorded expense of $30 million pretax or
$19 million after-tax or $0.04 per diluted share. The components
of the $30 million pretax cost, all contained within the Energy
Services Group, that were previously deferred include:

• $23 million for mobilization costs associated with specific
contracts and for installation of offshore cementing equipment
onto third party marine drilling rigs or vessels; and

• $7 million for costs incurred opening a new manufacturing

facility in the United Kingdom.

NOTE 14.

INCOME TAXES

The components of the (provision) benefit for income taxes are:

Years ended December 31
Millions of dollars
Current income taxes:
Federal
Foreign
State
Total
Deferred income taxes:
Federal
Foreign and state
Total
Continuing operations
Discontinued operations
Disposal of discontinued

operations

Benefit for change in
accounting method

Total

2 0 0 0

1999

1998

$ ( 1 6 )
( 11 4 )
( 5 )
( 1 3 5 )

( 2 0 )
2 6
6
( 1 2 9 )
( 6 0 )

$ 137
(64)
(2)
71

(175)
(12)
(187)
(116)
(98)

$(260)
(185)
(7)
(452)

293
4
297
(155)
(90)

( 1 4 1 )

(94)

—

(cid:209)
$ ( 3 3 0 )

11
$(297)

—
$ (245)

Included in federal income taxes for continuing operations are
foreign tax credits of $113 million in 2000, $52 million in 1999
and $94 million in 1998. The United States and foreign
components of income (loss) from continuing operations before
income taxes and minority interests are as follows:

Years ended December 31
Millions of dollars
United States
Foreign
Total

2 0 0 0
$ 1 2 8
2 0 7
$ 3 3 5

1999
$131
176
$307

1998
$(428)
483
$ 55

The primary components of our deferred tax assets and

liabilities and the related valuation allowances are as follows:

December 31
Millions of dollars
Gross deferred tax assets:
Employee benefit plans
Accrued liabilities
Construction contract
accounting methods

Insurance accruals
Inventory
Intercompany profit
Net operating loss carryforwards
Basis in joint ventures
Intangibles
Special charges
Alternative minimum tax carryforward
All other
Total
Gross deferred tax liabilities:
Depreciation and amortization
Unrepatriated foreign earnings
Safe harbor leases
All other
Total
Valuation allowances:
Net operating loss carryforwards
All other
Total
Net deferred income tax asset

2 0 0 0

1999

$ 2 6 1
11 8

$250
116

11 7
1 0 9
4 3
4 2
3 5
3 3
2 0
6
(cid:209)
6 0
8 4 4

1 2 8
2 9
9
6 6
2 3 2

98
98
31
26
34
92
28
25
7
69
874

135
29
10
99
273

2 9
8
3 7
$ 5 7 5

31
1
32
$569

We have accrued for the potential repatriation of undistributed
earnings of our foreign subsidiaries and consider earnings above
the amounts on which tax has been provided to be permanently
reinvested. While these additional earnings could become subject
to additional tax if repatriated, repatriation is not anticipated.
Any additional amount of tax is not practicable to estimate.

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

N O T E S T O A N N U A L F I N A N C I A L S T A T E M E N T S

We have net operating loss carryforwards of $44 million which
expire in 2001 through 2005. We also have net operating loss
carryforwards of $75 million with indefinite expiration dates.
Reconciliations between the actual provision for income taxes
and that computed by applying the United States statutory rate
to income from continuing operations before income taxes and
minority interest are as follows:

In connection with the acquisition of Dresser in 1998, we
assumed the outstanding stock options under the stock option
plans maintained by Dresser. See Note 2. Stock option transac-
tions summarized below include amounts for the 1993 Stock and
Long-Term Incentive Plan and stock plans of Dresser and other
aquired companies. No further awards are being made under the
stock plans of aquired companies.

Years ended December 31
Millions of dollars
Provision computed at

2 0 0 0

1999

1998

statutory rate

$ ( 11 7 )

$ (99)

$ (13)

Reductions (increases) in
taxes resulting from:
Tax differentials on
foreign earnings

State income taxes, net of

federal income tax benefit

Special charges
Nondeductible goodwill
Other items, net
Continuing operations
Discontinued operations
Disposal of discontinued

operations

Benefit for change in
accounting method

Total

( 1 4 )

(14)

(17)

( 3 )
(cid:209)
( 11 )
1 6
( 1 2 9 )
( 6 0 )

(1)
—
(10)
8
(116)
(98)

(7)
(109)
(11)
2
(155)
(90)

( 1 4 1 )

(94)

—

(cid:209)
$ ( 3 3 0 )

11
$(297)

—
$(245)

Stock Options

Outstanding at

December 31, 1997

Granted
Exercised
Forfeited

Outstanding at

December 31, 1998

Granted
Exercised
Forfeited

Outstanding at

December 31, 1999

Granted
Exercised
Forfeited

Outstanding at

Number
of Shares
(in millions)

Exercise
Price per Share

12.4
4.2
(2.4)
(0.4)

13.8
5.6
(1.7)
(0.6)

17.1
1.7
(3.6)
(0.5)

$ 3.10 – 61.50
26.19 – 46.50
3.10 – 37.88
5.40 – 54.50

$ 3.10 – 61.50
28.50 – 48.31
3.10 – 54.50
8.28 – 54.50

$ 3.10 – 61.50
34.75 – 54.00
3.10 – 45.63
12.20 – 54.50

Weighted
Average
Exercise
Price
per Share

$26.55
33.07
20.84
33.64

$29.37
36.46
24.51
35.61

$32.03
41.61
25.89
37.13

December 31, 2000

14.7

$ 8.28 – 61.50

$34.54

NOTE 15. COMMON STOCK

Options outstanding at December 31, 2000 are composed of

On June 25, 1998, our shareholders voted to increase the number
of authorized shares from 400 million to 600 million.

Our 1993 Stock and Long-Term Incentive Plan provides for

the grant of any or all of the following types of awards:

• stock options, including incentive stock options and non-

qualified stock options;

• stock appreciation rights, in tandem with stock options or

freestanding;
• restricted stock;
• performance share awards; and
• stock value equivalent awards.

Under the terms of the 1993 Stock and Long-Term Incentive
Plan as amended, 49 million shares of common stock have been
reserved for issuance to key employees. The plan specifies that no
more than 16 million shares can be awarded as restricted stock.
At December 31, 2000, 27 million shares were available for future
grants under the 1993 Stock and Long-Term Incentive Plan with
12.7 million shares remaining available for restricted stock awards.

the following:

Range of
Exercise Prices

$ 8.28 – 28.13

28.50 – 34.75

35.00 – 39.50

39.56 – 61.50

Outstanding

Weighted

Exercisable

Number of
Shares
(in millions)

Average Weighted
Average
Exercise
Price

Remaining
Contractual
Life

Number of
Shares
(in millions)

3.8

5.0

2.1

5.8

7.5

8.0

7.6

7.2

$23.60

30.58

39.08

50.42

$34.54

3.2

1.8

2.4

1.4

8.8

Weighted
Average
Exercise
Price

$22.76

29.50

38.77

50.87

$32.81

$ 8.28 – 61.50

14.7

There were 9.5 million options exercisable with a weighted
average exercise price of $28.96 at December 31, 1999, and 7.8
million options exercisable with a weighted average exercise
price of $25.72 at December 31, 1998.

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

N O T E S T O A N N U A L F I N A N C I A L S T A T E M E N T S

All stock options under the 1993 Stock and Long-Term
Incentive Plan, including options granted to employees of
Dresser since its acquisition, are granted at the fair market value
of the common stock at the grant date.

The fair value of options at the date of grant was estimated
using the Black-Scholes option pricing model. The weighted
average assumptions and resulting fair values of options granted
are as follows:

Assumptions

Risk-Free
Interest Rate

Expected
Dividend Yield

Expected
Life
(in years)

5.2%

5.8%

1.3%

Expected
Volatility

54.0%

56.0%

4.3 – 5.3%

1.2 – 2.7% 5 – 6.5

20.1 – 38.0%

Weighted
Average Fair
Value of
Options
Granted

$21.57

$19.77

$11.63

2000

1999

1998

Stock options generally expire 10 years from the grant date.
Stock options under the 1993 Stock and Long-Term Incentive
Plan vest over a three-year period, with one-third of the shares
becoming exercisable on each of the first, second and third
anniversaries of the grant date. Other plans have vesting periods
ranging from three to 10 years. Options under the Non-
Employee Directors’ Plan vest after six months.

We account for the option plans in accordance with
Accounting Principles Board Opinion No. 25, under which no
compensation cost has been recognized for stock option awards.
Compensation cost for the stock option programs calculated
consistent with Statement of Financial Accounting Standards
No. 123, “Accounting for Stock-Based Compensation,” is set forth
on a pro forma basis below:

Years ended December 31
Millions of dollars
except per share data
Net income:

As reported
Pro forma

Diluted earnings per share:

As reported
Pro forma

2 0 0 0

1999

1998

$ 5 0 1
4 6 0

$ 1 . 1 2
1 . 0 3

$ 438
406

$0.99
0.92

$ (15)
(43)

$(0.03)
(0.10)

Restricted shares awarded under the 1993 Stock and Long-Term
Incentive Plan were 695,692 in 2000, 352,267 in 1999 and 414,510
in 1998. The shares awarded are net of forfeitures of 69,402 in
2000, 72,483 in 1999 and 136,540 in 1998. The weighted average
fair market value per share at the date of grant of shares granted
was $42.25 in 2000, $43.41 in 1999 and $34.77 in 1998.

Our Restricted Stock Plan for Non-Employee Directors allows
for each non-employee director to receive an annual award of 400
restricted shares of common stock as a part of compensation. We
reserved 100,000 shares of common stock for issuance to non-

employee directors. Under this plan we issued 3,600 restricted
shares in 2000, 4,800 restricted shares in 1999 and 3,200
restricted shares in 1998. At December 31, 2000, 28,800 shares
have been issued to non-employee directors under this plan.
The weighted average fair market value per share at the date of
grant of shares granted was $46.81 in 2000, $46.13 in 1999 and
$36.31 in 1998.

Our Employees’ Restricted Stock Plan was established for
employees who are not officers, for which 200,000 shares of
common stock have been reserved. At December 31, 2000,
152,850 shares (net of 42,550 shares forfeited) have been issued.
Forfeitures were 7,450 in 2000, 8,400 in 1999 and 1,900 in 1998.
No further grants are being made under this plan.

Under the terms of our Career Executive Incentive Stock
Plan, 15 million shares of our common stock were reserved for
issuance to officers and key employees at a purchase price not to
exceed par value of $2.50 per share. At December 31, 2000, 11.7
million shares (net of 2.2 million shares forfeited) have been
issued under the plan. No further grants will be made under the
Career Executive Incentive Stock Plan.

Restricted shares issued under the 1993 Stock and Long-Term
Incentive Plan, Restricted Stock Plan for Non-Employee
Directors, Employees’ Restricted Stock Plan and the Career
Executive Incentive Stock Plan are limited as to sale or
disposition. These restrictions lapse periodically over an extended
period of time not exceeding ten years. Restrictions may also
lapse for early retirement and other conditions in accordance
with our established policies. The fair market value of the stock,
on the date of issuance, is being amortized and charged to
income (with similar credits to paid-in capital in excess of par
value) generally over the average period during which the restric-
tions lapse. At December 31, 2000, the unamortized amount is
$63 million. We recognized compensation costs in income of $18
million in 2000, $11 million in 1999 and $8 million in 1998.

NOTE 16. SERIES A JUNIOR PARTICIPATING

PREFERRED STOCK

We previously declared a dividend of one preferred stock
purchase right on each outstanding share of common stock.
The dividend is also applicable to each share of our common
stock that was issued subsequent to adoption of the Rights
Agreement entered into with Mellon Investor Services LLC.
Each preferred stock purchase right entitles its holder to buy
one two-hundredth of a share of our Series A Junior
Participating Preferred Stock, without par value, at an exercise
price of $75. These preferred stock purchase rights are subject
to antidilution adjustments, which are described in the Rights
Agreement entered into with Mellon. The preferred stock
purchase rights do not have any voting rights and are not
entitled to dividends.

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

N O T E S T O A N N U A L F I N A N C I A L S T A T E M E N T S

The preferred stock purchase rights become exercisable in
limited circumstances involving a potential business combination.
After the preferred stock purchase rights become exercisable,
each preferred stock purchase right will entitle its holder to an
amount of our common stock, or in some circumstances, securities
of the acquirer, having a total market value equal to two times
the exercise price of the preferred stock purchase right. The
preferred stock purchase rights are redeemable at our option at
any time before they become exercisable. The preferred stock
purchase rights expire on December 15, 2005. No event during
2000 made the preferred stock purchase rights exercisable.

NOTE 17. FINANCIAL INSTRUMENTS AND RISK

MANAGEMENT

Foreign exchange risk. Techniques in managing foreign
exchange risk include, but are not limited to, foreign currency
borrowing and investing and the use of currency derivative
instruments. We selectively hedge significant exposures to
potential foreign exchange losses considering current market
conditions, future operating activities and the cost of hedging the
exposure in relation to the perceived risk of loss. The purpose of
our foreign currency hedging activities is to protect us from the
risk that the eventual dollar cash flows resulting from the sale
and purchase of products and services in foreign currencies will
be adversely affected by changes in exchange rates. We do not
hold or issue derivative financial instruments for trading or
speculative purposes.

We hedge our currency exposure through the use of currency
derivative instruments. These contracts generally have an
expiration date of two years or less. Forward exchange contracts,
which are commitments to buy or sell a specified amount of a
foreign currency at a specified price and time, are generally used
to hedge identifiable foreign currency commitments. Losses of
$1 million for identifiable foreign currency commitments were
deferred at December 31, 2000. Forward exchange contracts and
foreign exchange option contracts, which convey the right, but
not the obligation, to sell or buy a specified amount of foreign
currency at a specified price, are generally used to hedge foreign
currency commitments with an indeterminable maturity date.
None of the forward or option contracts are exchange traded.

While hedging instruments are subject to fluctuations in
value, the fluctuations are generally offset by the value of the
underlying exposures being hedged. The use of some contracts
may limit our ability to benefit from favorable fluctuations in
foreign exchange rates. The notional amounts of open forward
contracts and options for continuing operations were $281
million and $297 million at year-end 2000 and 1999, respectively.
Amounts related to discontinued operations were $61 million
and $96 million at December 31, 2000 and 1999, respectively.
The notional amounts of our foreign exchange contracts do not

generally represent amounts exchanged by the parties, and thus,
are not a measure of our exposure or of the cash requirements
relating to these contracts. The amounts exchanged are
calculated by reference to the notional amounts and by other
terms of the derivatives, such as exchange rates. We actively
monitor our foreign currency exposure and adjust the amounts
hedged as appropriate.

Exposures to some currencies are generally not hedged due
primarily to the lack of available markets or cost considerations
(non-traded currencies). We attempt to manage our working
capital position to minimize foreign currency commitments in
non-traded currencies and recognize that pricing for the services
and products offered in these countries should cover the cost of
exchange rate devaluations. We have historically incurred
transaction losses in non-traded currencies.

Credit risk. Financial instruments that potentially subject us
to concentrations of credit risk are primarily cash equivalents,
investments and trade receivables. It is our practice to place our
cash equivalents and investments in high-quality securities with
various investment institutions. We derive the majority of our
revenues from sales and services, including engineering and
construction, to the energy industry. Within the energy industry,
trade receivables are generated from a broad and diverse group
of customers. There are concentrations of receivables in the
United States and the United Kingdom. We maintain an
allowance for losses based upon the expected collectibility of all
trade accounts receivable.

There are no significant concentrations of credit risk with
any individual counterparty or groups of counterparties related
to our derivative contracts. We select counterparties based on
creditworthiness, which we continually monitor, and on the
counterparties’ ability to perform their obligations under the
terms of the transactions. We do not expect any counterparties
to fail to meet their obligations under these contracts given
their high credit ratings. Therefore, we consider the credit risk
associated with our derivative contracts to be minimal.

Fair market value of financial instruments. The
estimated fair market value of long-term debt at year-end 2000
and 1999 was $1,066 million and $1,352 million, respectively,
as compared to the carrying amount of $1,057 million at year-
end 2000 and $1,364 million at year-end 1999. The fair market
value of fixed rate long-term debt is based on quoted market
prices for those or similar instruments. The carrying amount of
variable rate long-term debt approximates fair market value
because these instruments reflect market changes to interest
rates. See Note 8. The carrying amount of short-term financial
instruments, cash and equivalents, receivables, short-term
notes payable and accounts payable, as reflected in the consol-
idated balance sheets approximates fair market value due to
the short maturities of these instruments. The fair market
value of currency derivative instruments generally approxi-
mates their carrying amount based upon third-party quotes.

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

N O T E S T O A N N U A L F I N A N C I A L S T A T E M E N T S

The fair market values of derivative instruments used for fair
value hedging and cash flow hedging were immaterial.

Millions of dollars

2 0 0 0

1999

U.S.

Int’l.

U.S.

Int’l.

NOTE 18. RETIREMENT PLANS

at beginning of year

$ 466

$ 2,134

$445

$1,817

CHANGE IN PLAN ASSETS

Fair value of plan assets

Our company and subsidiaries have various plans which cover a
significant number of their employees. These plans include
defined contribution plans, which provide retirement contribu-
tions in return for services rendered, provide an individual
account for each participant and have terms that specify how
contributions to the participant’s account are to be determined
rather than the amount of pension benefits the participant is to
receive. Contributions to these plans are based on pretax income
and/or discretionary amounts determined on an annual basis. Our
expense for the defined contribution plans for both continuing
and discontinued operations totaled $182 million, $146 million,
and $152 million in 2000, 1999 and 1998, respectively. Other
retirement plans include defined benefit plans, which define an
amount of pension benefit to be provided, usually as a function
of age, years of service or compensation. These plans are funded
to operate on an actuarially sound basis. Plan assets are primarily
invested in cash, short-term investments, real estate, equity and
fixed income securities of entities domiciled in the country of
the plan’s operation. Plan assets, expenses and obligations for
retirement plans in the following tables include both continuing
and discontinued operations.

Actual return on plan assets

Employer contribution

Settlements

Plan participants’ contributions

Divestitures

Currency fluctuations

Benefits paid

(14)

(cid:209)

(153)

(cid:209)

(21)

262

(cid:209)

(47)

(199)

(58)

Fair value of plan assets at end of year

$ 313

$ 2,130

$ 25

493

(13)

—

(53)

$466

$ 53

376

—

(47)

(53)

$2,134

$ 387

Funded status

Unrecognized transition

obligation/(asset)

Unrecognized actuarial (gain)/loss

Unrecognized prior

(1)

(378)

—

(31)

(6)

(275)

service cost/(benefit)

(79)

(41)

Net amount recognized

$ 41

$ 29

We recognized an additional minimum pension liability for the
underfunded defined benefit plans. The additional minimum
liability is equal to the excess of the accumulated benefit obligation
over plan assets and accrued liabilities. A corresponding amount
is recognized as either an intangible asset or a reduction of
shareholders’ equity.

Millions of dollars

2 0 0 0

1999

Millions of dollars

2 0 0 0

1999

U.S.

Int’l.

U.S.

Int’l.

U.S.

Int’l.

U.S.

Int’l.

CHANGE IN BENEFIT OBLIGATION

AMOUNTS RECOGNIZED

Benefit obligation at beginning of year

$ 413

$ 1,747

$430

$1,716

IN THE CONSOLIDATED

Service cost

Interest cost

Plan participants’ contributions

Effect of business combinations

Amendments

Divestitures

Settlements/curtailments

Currency fluctuations

Actuarial gain/(loss)

Benefits paid

(cid:209)

(138)

(8)

(cid:209)

(21)

(cid:209)

(61)

(cid:209)

(163)

(11)

(58)

—

(3)

—

(3)

(53)

—

(44)

(60)

(53)

Benefit obligation at end of year

$ 288

$ 1,637

$413

$1,747

BALANCE SHEETS

Prepaid benefit cost

Accrued benefit liability

Intangible asset

Deferred tax asset

Accumulated other

comprehensive income

$ 54

(28)

$ 93

(49)

(cid:209)

Net amount recognized

$ 41

$ 53

$ 43

(38)

—

$ 29

$ 98

(40)

—

$ 65

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

N O T E S T O A N N U A L F I N A N C I A L S T A T E M E N T S

Assumed long-term rates of return on plan assets, discount
rates for estimating benefit obligations and rates of compensation
increases vary for the different plans according to the local
economic conditions. The rates used are as follows:

Weighted-average assumptions

2 0 0 0

1999

1998

Expected return on plan assets:

United States plans

9.0%

8.5% to 9.0%

expected future health care cost inflation rate affects the
accumulated postretirement benefit obligation amount. These
plans have assumed health care trend rates (weighted based on
the current year benefit obligation) for 2000 of 10.0% which are
expected to decline to 5.0% by 2005.

Obligations and expenses for postretirement medical plans in the
following tables include both continuing and discontinued operations.

International plans

3.5% to 8.0% 7.25% to 8.0%

7.0% to 11.0%

Millions of dollars

2 0 0 0

1999

Discount rate:

United States plans

7.5%

7.25% to 8.0%

International plans

4.0% to 5.5%

2.5% to 7.5%

2.0% to 12.5%

Rate of compensation increase:

United States plans

4.5%

4.5% to 5.0%

International plans

3.5% to 7.6% 1.0% to 10.5%

2.0% to 11.0%

Millions of dollars

2 0 0 0

1999

1998

U.S.

Int’l.

U.S.

Int’l.

U.S.

Int’l.

COMPONENTS OF NET

PERIODIC BENEFIT COST

Service cost

Interest cost

Expected return on

4 $

$ 7

$ 66

$ 5

$ 57

111

plan assets

(26)

(135)

(33)

(145)

(30)

(123)

Transition amount

(cid:209)

(2)

Amortization of prior

service cost

(1)

(6)

(2)

(7)

(4)

(7)

Settlements/curtailments

loss/(gain)

(cid:209)

—

(4)

(2)

Recognized actuarial

(gain)/loss

(cid:209)

(10)

(1)

(11)

—

Net periodic benefit cost

7 $ (13)

$ 16

(3)

$ (5) $ 34

The projected benefit obligation, accumulated benefit
obligation, and fair value of plan assets for the pension plans with
accumulated benefit obligations in excess of plan assets were
$172 million, $154 million, and $82 million, respectively, as of
December 31, 2000. They were $205 million, $199 million, and
$183 million, respectively, as of December 31, 1999.

Postretirement medical plan. We offer postretirement
medical plans to specific eligible employees. For some plans, our
liability is limited to a fixed contribution amount for each
participant or dependent. The plan participants share the total
cost for all benefits provided above our fixed contribution and
participants’ contributions are adjusted as required to cover
benefit payments. We have made no commitment to adjust the
amount of our contributions; therefore, the computed
accumulated postretirement benefit obligation amount is not
affected by the expected future health care cost inflation rate.

Other postretirement medical plans are contributory but we
generally absorb the majority of the costs. We may elect to adjust
the amount of our contributions for these plans. As a result, the

CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year
Service cost
Interest cost
Plan participants’ contributions
Amendments
Acquisitions/divestitures, net
Settlements/curtailments
Actuarial gain/(loss)
Benefits paid
Benefit obligation at end of year

CHANGE IN PLAN ASSETS
Fair value of plan assets
at beginning of year
Employer contribution
Plan participants’ contributions
Benefits paid
Fair value of plan assets at end of year
Funded status
Employer contribution
Unrecognized actuarial (gain)/loss
Unrecognized prior service cost
Net amount recognized

$ 3 9 2
3
2 0
11
(cid:209)
( 11 0 )
(cid:209)
11
( 3 1 )
$ 2 9 6

$ (cid:209)
2 0
11
( 3 1 )
$ (cid:209)
$ ( 2 9 6 )
3
( 2 0 )
( 7 8 )
$ ( 3 9 1 )

$403
5
28
8
1
—
(1)
(15)
(37)
$392

$ —
29
8
(37)
$ —
$(392)
1
(72)
(98)
$(561)

Millions of dollars

AMOUNTS RECOGNIZED

IN THE CONSOLIDATED

BALANCE SHEETS
Accrued benefit liability
Net amount recognized

2 0 0 0

1999

$ ( 3 9 1 )
$ ( 3 9 1 )

$(561)
$(561)

Weighted-average assumptions 2 0 0 0
Discount rate

1998
7.50% 7.50% 7.0% to 8.0%

1999

Millions of dollars

2 0 0 0

1999

1998

COMPONENTS OF NET

PERIODIC BENEFIT COST
$ 3
Service cost
2 0
Interest cost
( 7 )
Amortization of prior service cost
Settlements/curtailments loss/(gain) (cid:209)
( 1 )
Recognized actuarial (gain)/loss
$ 1 5
Net periodic benefit cost

$ 5
28
(9)
(2)
(5)
$17

$ 4
28
(10)
—
(8)
$ 14

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

N O T E S T O A N N U A L F I N A N C I A L S T A T E M E N T S

NOTE 20. DRESSER FINANCIAL INFORMATION

Since becoming a wholly owned subsidiary, Dresser Industries,
Inc. has ceased filing periodic reports with the Securities and
Exchange Commission. Dresser’s 8% guaranteed senior notes,
which were initially issued by Baroid Corporation, remain
outstanding and are fully and unconditionally guaranteed by
Halliburton. In January 1999, as part of the legal reorganization
associated with the merger, Halliburton Delaware, Inc., a first-
tier holding company subsidiary, was merged into Dresser. The
majority of our operating assets and activities are included in
Dresser and its subsidiaries. In August 2000 the Securities and
Exchange Commission released a new rule governing the
financial statements of guarantors and issuers of guaranteed
securities registered with the SEC. The following condensed
consolidating financial information presents Halliburton and our
subsidiaries on a stand-alone basis using the equity method and
as if our current organizational structure were in place for all
periods presented.

Assumed health care cost trend rates have a significant effect
on the amounts reported for the total of the health care plans. A
one-percentage-point change in assumed health care cost trend
rates would have the following effects:

Millions of dollars
Effect on total of service and
interest cost components
Effect on the postretirement

benefit obligation

One-Percentage-Point
(Decrease)
Increase

$ 2

$ (2)

(22)

NOTE 19. SUBSEQUENT EVENT

In March 2001 our offer to acquire the PGS Data Management
division of Petroleum Geo-Services ASA (PGS) was accepted by
the PGS shareholders. PGS Data Management has developed
cost effective internet enabled storage, browsing and retrieval of
large volumes of exploration and production data and
information. Terms of the agreement include a cash transfer of
$175 million prior to working capital contribution and a contract
where Landmark will manage the seismic library of PGS for
three years. PGS Data Management will become part of the
Landmark Graphics business that is included in the Energy
Services Group.

Condensed Consolidating Statements of Income

Millions of dollars
YEAR ENDED DECEMBER 31, 2000
Total revenues
Cost of revenues
General and administrative
Gain on sale of marine vessels
Interest expense
Interest income
Other, net
Income from continuing operations
before taxes and minority interest

Provision for income taxes
Minority interest in net income of

subsidiaries

Income from continuing operations
Income from discontinued operations
Gain on disposal of discontinued

operations, net of tax

Net income

Non-issuer/
Non-guarantor
Subsidiaries

Dresser
Industries, Inc.
(Issuer)

Halliburton
Company
(Guarantor)

Consolidating
Adjustments

Consolidated
Halliburton
Company

$ 11 , 9 4 4
11 , 2 1 8
3 5 2
( 8 8 )
( 2 9 )
2 1
3

4 5 7
( 1 6 3 )

( 1 8 )
2 7 6
9 8

(cid:209)
3 7 4

$ 3 7 4
(cid:209)
(cid:209)
(cid:209)
( 4 5 )
1 8
1 2 9

4 7 6
8

(cid:209)
4 8 4
(cid:209)

2 1 5
$ 6 9 9

$ 6 9 9
(cid:209)
(cid:209)
(cid:209)
( 8 7 )
1
5 5

6 6 8
2 6

(cid:209)
6 9 4
(cid:209)

$ ( 1 , 0 7 3 )
(cid:209)
(cid:209)
(cid:209)
1 5
( 1 5 )
( 1 9 3 )

( 1 , 2 6 6 )
(cid:209)

(cid:209)
( 1 , 2 6 6 )
(cid:209)

(cid:209)
$ 6 9 4

(cid:209)
$ ( 1 , 2 6 6 )

$ 11 , 9 4 4
11 , 2 1 8
3 5 2
( 8 8 )
( 1 4 6 )
2 5
( 6 )

3 3 5
( 1 2 9 )

( 1 8 )
1 8 8
9 8

2 1 5
5 0 1

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

N O T E S T O A N N U A L F I N A N C I A L S T A T E M E N T S

Condensed Consolidating Statements of Income

Non-issuer/
Non-guarantor
Subsidiaries

Dresser
Industries, Inc.
(Issuer)

Halliburton
Company
(Guarantor)

Consolidating
Adjustments

Consolidated
Halliburton
Company

Millions of dollars
YEAR ENDED DECEMBER 31, 1999
Total revenues
Cost of revenues
General and administrative
Special charges and credits
Interest expense
Interest income
Other, net
Income from continuing operations

before taxes, minority interest, and
change in accounting method

Provision for income taxes
Minority interest in net income of

subsidiaries

Income from continuing operations

before change in accounting method

Income from discontinued operations
Gain on disposal of discontinued

operations, net of tax

$12,313
11,608
351
(47)
(33)
77
(29)

416
(92)

(17)

307
124

159

Cumulative effect of change in accounting

method, net of tax benefit

Net income

(19)
571

Condensed Consolidating Statements of Income

$571
—
—
—
(50)
26
105

652
2

—

654
—

—

—
$654

$654
—
—
—
(87)
—
183

750
(26)

—

724
—

—

$ (1,225)
—
—
—
29
(29)
(286)

(1,511)
—

—

(1,511)
—

—

$ 12,313
11,608
351
(47)
(141)
74
(27)

307
(116)

(17)

174
124

159

—
$724

—
$ (1,511)

(19)
438

Millions of dollars
YEAR ENDED DECEMBER 31, 1998
Total revenues
Cost of revenues
General and administrative
Special charges and credits
Interest expense
Interest income
Other, net
Income from continuing operations
before taxes and minority interest

Provision for income taxes
Minority interest in net income of

subsidiaries

Income from continuing operations
Income from discontinued operations
Net income (loss)

Non-issuer/
Non-guarantor
Subsidiaries

Dresser
Industries, Inc.
(Issuer)

Halliburton
Company
(Guarantor)

Consolidating
Adjustments

Consolidated
Halliburton
Company

$14,504
13,022
438
875
(20)
52
(1)

200
(127)

(20)
53
105
158

$ 158
—
(1)
—
(225)
4
(1)

(63)
(8)

—
(71)
—
$ (71)

$ (71)
—
—
—
(52)
133
(5)

5
(20)

—
(15)
—
$ (15)

$ (87)
—
—
—
163
(163)
—

(87)
—

—
(87)
—
$ (87)

$14,504
13,022
437
875
(134)
26
(7)

55
(155)

(20)
(120)
105
(15)

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

2 1 6

N O T E S T O A N N U A L F I N A N C I A L S T A T E M E N T S

Condensed Consolidating Balance Sheets

Non-issuer/
Non-guarantor
Subsidiaries

Dresser
Industries, Inc.
(Issuer)

Halliburton
Company
(Guarantor)

Consolidating
Adjustments

Consolidated
Halliburton
Company

Millions of dollars
DECEMBER 31, 2000

ASSETS
Current assets:
Cash and equivalents
Receivables:
Notes and accounts receivable, net
Unbilled work on uncompleted contracts
Total receivables
Inventories
Other current assets
Total current assets
Property, plant and equipment, net
Equity in and advances to
unconsolidated affiliates
Intercompany receivable from

consolidated affiliates
Equity in and advances to
consolidated affiliates

Net goodwill
Other assets
Total assets

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts and notes payable
Other current liabilities
Total current liabilities
Long-term debt
Intercompany payable from
consolidated affiliates

Other liabilities
Minority interest in consolidated

subsidiaries
Total liabilities
Shareholders’ equity:
Common shares
Other shareholders’ equity
Total shareholders’ equity
Total liabilities and shareholders’ equity

2 , 9 6 6
8 1 6
3 , 7 8 2
7 2 3
7 5 3
5 , 4 7 4
2 , 4 1 0

2 5 8

6 8

(cid:209)
5 1 0
1 , 1 0 9
$ 9 , 8 2 9

7 5 6
1 , 3 7 4
2 , 1 3 0
2 0 5

(cid:209)
1 , 11 8

3 8
3 , 4 9 1

3 9 1
5 , 9 4 7
6 , 3 3 8
$ 9 , 8 2 9

6 3
(cid:209)
6 3
(cid:209)
1
7 5
(cid:209)

1 4 2

(cid:209)

6 , 5 5 8
8 7
5
$ 6 , 8 6 7

6 4
3 6
1 0 0
4 4 4

2 , 2 0 6
2 6

(cid:209)
2 , 7 7 6

(cid:209)
4 , 0 9 1
4 , 0 9 1
$ 6 , 8 6 7

(cid:209)
(cid:209)
(cid:209)
(cid:209)
1 5
1 9
(cid:209)

(cid:209)

(cid:209)
(cid:209)
(cid:209)
(cid:209)
(cid:209)
(cid:209)
(cid:209)

(cid:209)

2 3 1

3 , 0 2 9
8 1 6
3 , 8 4 5
7 2 3
7 6 9
5 , 5 6 8
2 , 4 1 0

4 0 0

(cid:209)

2 , 1 3 8

( 2 , 2 0 6 )

4 , 2 2 0
(cid:209)
1 4
$ 6 , 3 9 1

( 1 0 , 7 7 8 )
(cid:209)
(cid:209)
$ ( 1 2 , 9 8 4 )

(cid:209)
5 9 7
1 , 1 2 8
$ 1 0 , 1 0 3

$ 1 , 5 4 0
5 6
1 , 5 9 6
4 0 0

(cid:209)
11 8

(cid:209)
2 , 11 4

1 , 1 3 2
3 , 1 4 5
4 , 2 7 7
$ 6 , 3 9 1

(cid:209)
(cid:209)
(cid:209)
(cid:209)

( 2 , 2 0 6 )
(cid:209)

(cid:209)
( 2 , 2 0 6 )

$ 2 , 3 6 0
1 , 4 6 6
3 , 8 2 6
1 , 0 4 9

(cid:209)
1 , 2 6 2

3 8
6 , 1 7 5

( 3 9 1 )
( 1 0 , 3 8 7 )
( 1 0 , 7 7 8 )
$ ( 1 2 , 9 8 4 )

1 , 1 3 2
2 , 7 9 6
3 , 9 2 8
$ 1 0 , 1 0 3

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

N O T E S T O A N N U A L F I N A N C I A L S T A T E M E N T S

Condensed Consolidating Balance Sheets

Non-issuer/
Non-guarantor
Subsidiaries

Dresser
Industries, Inc.
(Issuer)

Halliburton
Company
(Guarantor)

Consolidating
Adjustments

Consolidated
Halliburton
Company

$ 315

$ 107

Millions of dollars
DECEMBER 31, 1999

consolidated affiliates
Equity in and advances to
consolidated affiliates

Net goodwill
Other assets
Total assets

Other liabilities
Minority interest in consolidated

subsidiaries
Total liabilities
Shareholders’ equity:
Common shares
Other shareholders’ equity
Total shareholders’ equity
Total liabilities and shareholders’ equity

2,282
625
2,907
723
1,198
5,143
2,390

384

—

—
411
993
$9,321

$ 758
671
1,429
213

628
1,136

44
3,450

391
5,480
5,871
$9,321

61
—
61
—
—
105
—

—

6,126
94
5
$ 6,330

$ 228
425
653
443

1,897
29

—
3,022

—
3,308
3,308
$ 6,330

6
—
6
—
1
114
—

—

—
—
—
—
—
—
—

—

2,525

(2,525)

3,308
—
—
$5,947

$ 926
25
951
400

—
54

—
1,405

1,120
3,422
4,542
$ 5,947

(9,434)
—
—
$ (11,959)

—
—
—
—

(2,525)
—

—
(2,525)

(391)
(9,043)
(9,434)
$(11,959)

$ 466

2,349
625
2,974
723
1,199
5,362
2,390

384

—

—
505
998
$ 9,639

$ 1,912
1,121
3,033
1,056

—
1,219

44
5,352

1,120
3,167
4,287
$9,639

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

N O T E S T O A N N U A L F I N A N C I A L S T A T E M E N T S

Condensed Consolidating Statements of Cash Flows

Millions of dollars

Non-issuer/
Non-guarantor
Subsidiaries

Dresser
Industries, Inc.
(Issuer)

Halliburton
Company
(Guarantor)

Consolidating
Adjustments

Consolidated
Halliburton
Company

YEAR ENDED DECEMBER 31, 2000
Net cash flows from operating activities
Capital expenditures
Sales of property, plant and equipment
Other investing activities
Payments on long-term borrowings
Net borrowings (repayments) of short-term debt
Payments of dividends to shareholders
Proceeds from exercises of stock options
Payments to reacquire common stock
Other financing activities
Effect of exchange rate on cash
Net cash flows from discontinued operations
Increase (decrease) in cash and equivalents

$ ( 2 3 2 )
( 5 7 8 )
2 0 9
( 4 2 )
( 8 )
1 7
(cid:209)
(cid:209)
(cid:209)
( 2 8 2 )
( 9 )
8 2 6
$ ( 9 9 )

YEAR ENDED DECEMBER 31, 1999
Net cash flows from operating activities
Capital expenditures
Sales of property, plant and equipment
Other investing activities
Payments on long-term borrowings
Net borrowings (repayments) of short-term debt
Payments of dividends to shareholders
Proceeds from exercises of stock options
Payments to reacquire common stock
Other financing activities
Effect of exchange rate on cash
Net cash flows from discontinued operations
Increase (decrease) in cash and equivalents

YEAR ENDED DECEMBER 31, 1998
Net cash flows from operating activities
Capital expenditures
Sales of property, plant and equipment
Other investing activities
Borrowings of long-term debt
Payments on long-term borrowings
Net borrowings (repayments) of short-term debt
Payments of dividends to shareholders
Proceeds from exercises of stock options
Payments to reacquire common stock
Other financing activities
Effect of exchange rate on cash
Net cash flows from discontinued operations
Increase (decrease) in cash and equivalents

$ (203)
(520)
118
295
(9)
(27)
—
—
—
237
5
234
130

409
(839)
83
(23)
—
(17)
(77)
—
—
—
143
(5)
235
(91)

$ 11 4
(cid:209)
(cid:209)
(cid:209)
( 3 0 0 )
(cid:209)
(cid:209)
(cid:209)
(cid:209)
1 5 3
(cid:209)
(cid:209)
$ ( 3 3 )

53
—
—
—
—
—
—
—
—
(12)
—
—
41

$ (337)
(2)
—
—
—
(11)
—
(100)
—
(16)
466
—
—
$ —

6 1
(cid:209)
(cid:209)
1 0 9
(cid:209)
6 1 2
( 2 2 1 )
1 0 5
( 7 6 9 )
(cid:209)
(cid:209)
(cid:209)
$ ( 1 0 3 )

92
—
—
(231)
(50)
463
(221)
49
(10)
—
—
—
92

78
—
—
(634)
150
—
463
(154)
49
(4)
—
—
—
(52)

$ (cid:209)
(cid:209)
(cid:209)
( 1 0 9 )
(cid:209)
(cid:209)
(cid:209)
(cid:209)
(cid:209)
1 0 9
(cid:209)
(cid:209)
$ (cid:209)

$ —
—
—
231
—
—
—
—
—
(231)
—
—
$ —

$ —
—
—
625
—
—
—
—
—
—
(625)
—
—
$ —

$ ( 5 7 )
( 5 7 8 )
2 0 9
( 4 2 )
( 3 0 8 )
6 2 9
( 2 2 1 )
1 0 5
( 7 6 9 )
( 2 0 )
( 9 )
8 2 6
$ ( 2 3 5 )

(58)
(520)
118
295
(59)
436
(221)
49
(10)
(6)
5
234
263

150
(841)
83
(32)
150
(28)
386
(254)
49
(20)
(16)
(5)
235
$ (143)

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

S E L E C T E D F I N A N C I A L D A T A

( U N A U D I T E D )

We have restated our prior year information to display Dresser Equipment Group as discontinued operations.

2 0 0 0

1999

1998

1997

1996

$ 7 , 9 1 6
4 , 0 2 8
$ 11 , 9 4 4

$ 6,999
5,314
$12,313

$ 9,009
5,495
$ 14,504

Years ended December 31
Millions of dollars and shares
except per share and employee data

OPERATING RESULTS
Net revenues

Energy Services Group
Engineering and Construction Group

Total revenues

OPERATING INCOME

Energy Services Group
Engineering and Construction Group
Special charges and credits (1)
General corporate

Total operating income (1)

Nonoperating income (expense), net (2)

INCOME FROM CONTINUING

OPERATIONS BEFORE INCOME

TAXES AND MINORITY INTEREST
(Provision) benefit for income taxes (3)
Minority interest in net income of

consolidated subsidiaries

Income (loss) from continuing operations
Income (loss) from discontinued operations
Net income (loss)

BASIC INCOME (LOSS) PER COMMON SHARE

Continuing operations
Net income (loss)

$
$
$

5 2 6
1 4
(cid:209)
( 7 8 )
4 6 2
( 1 2 7 )

3 3 5
( 1 2 9 )

( 1 8 )
1 8 8
3 1 3
5 0 1

0 . 4 2
1 . 1 3

$
$
$

222
203
47
(71)
401
(94)

307
(116)

(17)
174
283
438

0.40
1.00

DILUTED INCOME (LOSS) PER COMMON SHARE

Continuing operations
Net income (loss)

Cash dividends per share
Return on average shareholders’ equity

FINANCIAL POSITION
Net working capital
Total assets
Property, plant and equipment, net
Long-term debt (including current maturities)
Shareholders’ equity
Total capitalization
Shareholders’ equity per share
Average common shares outstanding (basic)
Average common shares outstanding (diluted)

OTHER FINANCIAL DATA
Capital expenditures
Long-term borrowings (repayments), net
Depreciation and amortization expense
Payroll and employee benefits (4)
Number of employees (4), (5)

0 . 4 2
1 . 1 2
0 . 5 0
1 2 . 2 0 )%

0.39
0.99
0.50
10.49)%

$ 1 , 7 4 2
1 0 , 1 0 3
2 , 4 1 0
1 , 0 5 7
3 , 9 2 8
6 , 5 5 5
9 . 2 0
4 4 2
4 4 6

( 5 7 8 )
( 3 0 8 )
5 0 3
( 5 , 2 6 0 )
9 3 , 0 0 0

$ 2,329
9,639
2,390
1,364
4,287
6,590
9.69
440
443

(520)
(59)
511
(5,647)
103,000

continued on next page

$ 8,505
4,993
$ 13,498

$ 1,019
219
11
(71)
1,178
(82)

1,096
(406)

(30)
660
112
772

1.53
1.79

$
$
$

$ 6,515
4,721
$11,236

$
$
$

698
134
(86)
(72)
674
(70)

604
(158)

—
446
112
558

1.04
1.30

1.51
1.77
0.50
19.16)%

1.03
1.29
0.50
15.25)%

$ 1,985
9,657
2,282
1,303
4,317
5,647
9.86
431
436

(804)
285
465
(5,479)
102,000

$ 1,501
8,689
2,047
957
3,741
4,828
8.78
429
432

(612)
286
405
(4,674)
93,000

$
$
$

971
237
(959)
(79)
170
(115)

55
(155)

(20)
(120)
105
(15)

$ (0.27)
(0.03)

(0.27)
(0.03)
0.50
(0.35)%

$ 2,129
10,072
2,442
1,426
4,061
5,990
9.23
439
439

(841)
122
500
(5,880)
107,800

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

S E L E C T E D F I N A N C I A L D A T A

( U N A U D I T E D )

( C O N T I N U E D )

We have restated our prior year information to display Dresser Equipment Group as discontinued operations.

Years ended December 31
Millions of dollars and shares
except per share and employee data

OPERATING RESULTS
Net revenues

Energy Services Group
Engineering and Construction Group

Total revenues

OPERATING INCOME

Energy Services Group
Engineering and Construction Group
Special charges and credits (1)
General corporate

Total operating income (1)

Nonoperating income (expense), net (2)

INCOME FROM CONTINUING

OPERATIONS BEFORE INCOME

TAXES AND MINORITY INTEREST
(Provision) benefit for income taxes (3)
Minority interest in net income of

consolidated subsidiaries

Income (loss) from continuing operations
Income (loss) from discontinued operations
Net income (loss)

BASIC INCOME (LOSS) PER COMMON SHARE

Continuing operations
Net income (loss)

DILUTED INCOME (LOSS) PER COMMON SHARE

Continuing operations
Net income (loss)

Cash dividends per share
Return on average shareholders’ equity

OTHER FINANCIAL DATA
Capital expenditures
Long-term borrowings (repayments), net
Depreciation and amortization expense
Payroll and employee benefits (4)
Number of employees (4), (5)

1995

1994

1993

1992

1991

$5,308
3,737
$9,045

$ 544
97
(8)
(71)
562
(34)

528
(167)

(1)
$ 360
$
36
$ 381

$ 0.83
0.88

0.83
0.88
0.50
10.44)%

$1,477
7,723
1,865
667
3,577
4,378
8.29
431
432

$ (474)
(481)
380
(4,188)
89,800

$ 4,978
3,562
$8,540

$ 406
71
(19)
(56)
402
333

735
(275)

(14)
$ 446
$
97
$ 543

$ 1.04
1.26

1.03
1.26
0.50
15.47)%

$2,197
7,774
1,631
1,119
3,723
4,905
8.63
431
432

$ (358)
(120)
387
(4,222)
86,500

$5,470
3,675
$9,145

$ 414
76
(419)
(63)
8
(61)

(53)
(18)

(24)
(95)
81
(14)

$
$
$

$ (0.23)
(0.04)

$5,038
4,410
$ 9,448

$ 303
32
(294)
(58)
(17)
(63)

(80)
(30)

(9)
$ (119)
$
49
$ (483)

$ (0.29)
(1.18)

$5,156
4,721
$ 9,877

$ 378
48
(142)
(56)
228
(23)

205
(117)

(19)
$
69
$ 106
$ 182

$ 0.17
0.45

(0.23)
(0.04)
0.50
(0.43)%

(0.29)
(1.18)
0.50
(12.72)%

0.17
0.45
0.50
4.16)%

$ 1,563
8,087
1,747
1,129
3,296
4,746
7.70
422
422

$ (373)
192
574
(4,429)
90,500

$1,423
7,480
1,741
872
3,277
4,179
7.99
408
408

$ (405)
(187)
470
(4,590)
96,400

$1,775
8,029
1,754
927
4,315
5,266
10.61
405
406

$ (572)
460
396
(4,661)
104,500

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

S E L E C T E D F I N A N C I A L D A T A

( U N A U D I T E D )

( C O N T I N U E D )

(1) Operating income includes the following special charges and credits:
1999 – $47 million: reversal of a portion of the 1998 special charges.
1998 – $959 million: asset related charges ($491 million), personnel reductions ($234 million), facility consolidations ($124 million),

merger transaction costs ($64 million), and other related costs ($46 million).

1997 – $11 million: merger costs ($9 million), write-downs on impaired assets and early retirement incentives ($10 million), losses

from the sale of assets ($12 million), and gain on extension of joint venture ($42 million).

1996 – $86 million: merger costs ($13 million), restructuring, merger and severance costs ($62 million), and write-off of acquired

in-process research and development costs ($11 million).

1995 – $8 million: restructuring costs ($5 million) and write-off of acquired in-process research and development costs ($3 million).
1994 – $19 million: merger costs ($27 million), litigation ($10 million), and litigation and insurance recoveries ($18 million).
1993 – $419 million: loss on sale of business ($322 million), merger costs ($31 million), restructuring ($5 million), litigation ($65

million), and gain on curtailment of medical plan ($4 million).

1992 – $294 million: merger costs ($273 million) and restructuring and severance ($21 million).
1991 – $142 million: restructuring ($121 million) and loss on sale of business ($21 million).

(2) Nonoperating income in 1994 includes a gain of $276 million from the sale of an interest in Western Atlas International, Inc.

and a gain of $102 million from the sale of our natural gas compression business.

(3) Provision for income taxes in 1996 includes tax benefits of $44 million due to the recognition of net operating loss carryforwards

and the settlement of various issues with the Internal Revenue Service.

(4)

Includes employees of Dresser Equipment Group which is accounted for as discontinued operations.

(5) Does not include employees of 50% or less owned affiliated companies.

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

Q U A R T E R L Y D A T A A N D M A R K E T P R I C E I N F O R M A T I O N ( U N A U D I T E D )

Millions of dollars except per share data

First

Second

Third

Fourth

Year

Quarter

2000
Revenues
Operating income (1)
Income (loss) from continuing operations
Income from discontinued operations
Gain on disposal of discontinued operations
Net income
Earnings per share:

Basic income (loss) per common share:

Income (loss) from continuing operations
Income from discontinued operations
Gain on disposal of discontinued operations
Net income

Diluted income (loss) per common share:

Income (loss) from continuing operations
Income from discontinued operations
Gain on disposal of discontinued operations
Net income

Cash dividends paid per share
Common stock prices (2)

High
Low
1999 (3)
Revenues
Operating income (4)
Income from continuing operations before change

in accounting method (4)

Income from discontinued operations
Gain on disposal of discontinued operations
Change in accounting method
Net income (4)
Earnings per share:

Basic income per common share:

Income from continuing operations before

change in accounting method (4)
Income from discontinued operations
Gain on disposal of discontinued operations
Change in accounting method
Net income

Diluted income per common share:

Income from continuing operations before

change in accounting method (4)
Income from discontinued operations
Gain on disposal of discontinued operations
Change in accounting method
Net income

Cash dividends paid per share
Common stock prices (2)

High
Low

$ 2 , 8 5 9
8 1
2 7
2 2
2 1 5
2 6 4

0 . 0 6
0 . 0 5
0 . 4 9
0 . 6 0

0 . 0 6
0 . 0 5
0 . 4 8
0 . 5 9
0 . 1 2 5

4 4 . 5 0
3 3 . 6 9

$ 2 , 8 6 8
1 2 6
5 2
2 3
(cid:209)
7 5

0 . 1 2
0 . 0 5
(cid:209)
0 . 1 7

0 . 1 2
0 . 0 5
(cid:209)
0 . 1 7
0 . 1 2 5

5 1 . 5 6
3 7 . 7 5

$ 3 , 0 2 4
2 4 8
1 3 0
2 7
(cid:209)
1 5 7

0 . 2 9
0 . 0 6
(cid:209)
0 . 3 5

0 . 2 9
0 . 0 6
(cid:209)
0 . 3 5
0 . 1 2 5

5 4 . 6 9
4 1 . 6 9

$ 3 , 1 9 3
7
( 2 1 )
2 6
(cid:209)
5

$ 11 , 9 4 4
4 6 2
1 8 8
9 8
2 1 5
5 0 1

( 0 . 0 5 )
0 . 0 6
(cid:209)
0 . 0 1

( 0 . 0 5 )
0 . 0 6
(cid:209)
0 . 0 1
0 . 1 2 5

5 0 . 3 8
3 3 . 3 8

0 . 4 2
0 . 2 2
0 . 4 9
1 . 1 3

0 . 4 2
0 . 2 2
0 . 4 8
1 . 1 2
0 . 5 0

5 4 . 6 9
3 3 . 3 8

$ 3,261
98

$ 3,053
143

$ 2,973
81

$ 3,026
79

12,313
401

53
28
—
(19)
62

0.12
0.06
—
(0.04)
0.14

0.12
0.06
—
(0.04)
0.14
0.125

41.19
28.25

55
28
—
—
83

0.13
0.06
—
—
0.19

0.13
0.06
—
—
0.19
0.125

47.94
35.00

38
20
—
—
58

0.09
0.04
—
—
0.13

0.09
0.04
—
—
0.13
0.125

51.44
39.06

28
48
159
—
235

0.06
0.11
0.36
—
0.53

0.06
0.11
0.36
—
0.53
0.125

44.13
33.88

174
124
159
(19)
438

0.40
0.28
0.36
(0.04)
1.00

0.39
0.28
0.36
(0.04)
0.99
0.50

51.44
28.25

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

Q U A R T E R L Y D A T A A N D M A R K E T P R I C E I N F O R M A T I O N ( U N A U D I T E D )

( C O N T I N U E D )

(1)

Includes pretax job losses and severance for engineering and construction contracts and related restructuring of $193 million
($118 million after-tax or $0.27 per diluted share) in the fourth quarter of 2000.

(2) New York Stock Exchange – composite transactions high and low closing price.

(3) Amounts for revenues, operating income, net income, and earnings per share have been restated to show Dresser Equipment

Group as discontinued operations.

(4)

Includes pretax special charge credit of $47 million ($32 million after-tax or $0.07 per diluted share) in the second quarter of 1999.

H A L L I B U R T O N C O M PA N Y 2000 ANNUAL REPORT

H A L L I B U R T O N

C O M P A N Y 2 0 0 0 A N N U A L

R E P O R T

H A L L I B U R T O N
C O M P A N Y

HALLIBURTON COMPANY 2000 ANNUAL REPORT

H A L L I B U R T O N

C O M P A N Y 2 0 0 0 A N N U A L

R E P O R T

Lord Clitheroe
(1987) (a) (b) (d) (e)
Retired Chairman,
The Yorkshire Bank, PLC
London, England

Charles J. DiBona
(1997) (a) (b) (d)
Retired President and
Chief Executive Officer,
American Petroleum
Institute
Great Falls, Virginia

Ray L. Hunt
(1998) (a) (b) (c)
Chairman of the Board and
Chief Executive Officer,
Hunt Oil Company
Dallas, Texas

J. Landis Martin
(1998) (a) (d) (e)
President and
Chief Executive Officer,
NL Industries, Inc.
Denver, Colorado

Lawrence S. Eagleburger
(1998) (a) (b) (c) (e)
Senior Foreign
Policy Advisor,
Baker, Donelson,
Bearman & Caldwell
Washington, D.C.

Robert L. Crandall
(1986) (a) (b) (c) (e)
Chairman Emeritus,
AMR Corporation/
American Airlines, Inc.
Irving, Texas

W. R. Howell
(1991) (a) (b) (c)
Chairman Emeritus,
J. C. Penny Company, Inc.
Dallas, Texas

David J. Lesar
(2000)
Chairman of the Board,
President and
Chief Executive Officer,
Halliburton Company
Dallas, Texas

Jay A. Precourt
(1998) (a) (b) (d)
Chairman of the Board,
Hermes Consolidated, Inc.
Vail, Colorado

C. J. Silas
(1993) (a) (b) (c)
Retired Chairman
of the Board and
Chief Executive Officer,
Phillips Petroleum Company
Bartlesville, Oklahoma

(a) Member of the Management Oversight Committee, (b) Member of the Compensation Committee, (c) Member of the Audit Committee,
(d) Member of the Health, Safety and Environment Committee, (e) Member of the Nominating and Corporate Governance Committee

HALLIBURTON COMPANY 2000 ANNUAL REPORT

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C O R P O R AT E O F F I C E : 3600 Lincoln Plaza, 500 North Akard Street, Dallas, Texas 75201-3391 USA www.halliburton.com