Halliburton Company (HAL) Cash Flow Statement

The OCF/NI ratio has been highly erratic, ranging from 0.59 to 27.11 over the past ten quarters, with the extreme outlier in Q3 2025 driven by a near-zero net income of $18M. This volatility suggests that reported earnings are not consistently translating into cash, and investors should monitor the sustainability of cash generation relative to accruals. The gap between net income and operating cash flow in Q1 2026, where OCF was only 59% of net income, may indicate aggressive revenue recognition or delayed collections, warranting further investigation.

Free cash flow has been highly cyclical, with quarterly FCF margins ranging from 1.4% to 18.4% over the past ten quarters. The recent rebound in Q2 2026 to $589M is encouraging, but it follows a weak Q1 2026 where FCF was only $81M, reflecting the lumpy nature of working capital and capex timing. Compared to peers like SLB and BKR with FCF margins of 13.1% and 11.3%, respectively, Halliburton's average FCF margin appears lower, suggesting a competitive disadvantage in cash generation efficiency.

The reduction in capital intensity suggests management is prioritizing cash preservation over expansion, which may limit future growth capacity. However, the absolute CapEx levels remain substantial, and with D&A running around $280-300M per quarter, the current capex may be barely covering maintenance needs. This could imply that Halliburton is underinvesting in its asset base, potentially affecting long-term operational efficiency, though the data does not distinguish between maintenance and growth capex.

The large swings in working capital, particularly the $542M positive contribution in Q4 2024 and the -$276M drag in Q4 2025, indicate that Halliburton's cash flow is heavily influenced by timing of collections and payments. This volatility complicates the assessment of operational cash generation, as the company appears to be managing its cash conversion cycle actively. Investors should monitor whether these swings are due to project milestones or structural changes in customer payment behavior, as they may not be sustainable.

Halliburton has consistently returned capital to shareholders, with quarterly dividends around $143-151M and buybacks ranging from $100M to $1.0B. In Q4 2025, buybacks spiked to $1.0B, which was more than the quarter's FCF of $828M, indicating a reliance on balance sheet cash or debt to fund returns. This aggressive capital deployment, combined with modest FCF, may strain liquidity if cash generation does not improve, though the company's balance sheet appears adequate for now.

While cumulative OCF has exceeded net income, the quarterly divergence has been inconsistent, with some quarters showing OCF below net income (e.g., Q1 2026). This pattern suggests that earnings quality is not consistently high, and the recent improvement in OCF/NI ratios may be temporary. The cumulative gap between net income and OCF is not alarming, but the volatility indicates that investors should not rely on a stable conversion rate.