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=== SUMMARY ===
J.P. Morgan Halliburton Few Holes in a Story That Keeps Getting Better We spent last week on the road in Europe with CFO Mark McCollum, which reinforced our view that the bull case on Halliburton continues to strongly outweigh any of the bear arguments, of which there are few. With the North American pressure pumping market tightening, HAL is going to be testing pricing in the coming months, providing upside to margin targets. We edged up 2014/2015 EPS above consensus to $4.00/$5.20, with an add


=== EXTRACTED TEXT ===
J.P. Morgan 
Halliburton 
Few Holes in a Story That Keeps Getting Better 
We spent last week on the road in Europe with CFO Mark McCollum, which 
reinforced our view that the bull case on Halliburton continues to strongly 
outweigh any of the bear arguments, of which there are few. With the North 
American pressure pumping market tightening, HAL is going to be testing pricing 
in the coming months, providing upside to margin targets. We edged up 
2014/2015 EPS above consensus to $4.00/$5.20, with an additional $0.15/$0.35 in 
EPS upside from share buybacks. Our detailed note begins on Page 2. 
• With the North America market tightening, HAL is starting to push 
pricing...will they put Tier 2 players in their place with new capacity? With 
only 10-12% excess industry capacity and 80% of HAL's hp on 24 hrs, the time 
is now to start pushing pricing. If successful, HAL likely starts adding capacity 
in addition to accelerating the Q10 pump rollout, which should make the tier 2 
players nervous in light of HAL's considerable cost advantage. 
• Few concerns about an IOC slowdown, emerging IPM opportunities with 
NOCs. A lot of talk about IOC capital discipline, but Halliburton isn't seeing a 
slowdown in the offshore market, nor do they see excess service capacity. 
NOCs are getting more creative in looking to fund activity with service 
company balance sheets, creating a growing opportunity set for HAL that must 
be balanced against higher project risk. 
- Swirling currents in Latin America. The one soft spot is LatAm where 
margins should appreciably improve in 2015. Petrobras has agreed to re-tender 
the drilling contracts on lower activity levels, with costs right-sizing by 2Q15. 
Mexico reform is getting close and onshore service contracts could materialize 
in 2H14 followed by IOC offshore tenders in 1H15. Even Venezuela is 
improving with a recent agreement on receivables and additional activity. 
• Raising EPS estimates slightly, more upside from buybacks. We raised 
2014/2015 EPS to $4.001$5.20 from $3.9515.10 primarily on modest tweaks to 
our NAM margin and revenue progression, but could see upside on buybacks. 
We expect HAL to raise its dividend in the coming quarters (we model +20% to 
50.18/qtr in 4Q14) to stay within 10-15% of net income but with plans to 
distribute 30-35% of operating cash flows, we could see -$2bn in buybacks in 
2014 (would add —$0.15 to our '14 EPS) and another 42.5bn in 2015 (adds 
—$0.35 to our '15 EPS). 
Haillburton Company (HAL;HAL US) 
FYE Dec 2013A 2014E 
(Prey) 2014E 
(Cuff) 2015E 
(Prey) 2015E 
(Cuff) 
EPS (S) 
01 (Mar) 0.67 0.73A 0.73A 1.12 1.14 
02 (Jun) 0.73 0.91 0.91 1.22 1.24 
03 (Sep) 0.83 1.13 1.13 1.32 1.35 
04 (Dec) 0.93 1.18 1.23 1.44 1.48 
FY 3.15 3.95 4.00 5.10 5.20 
Bloomberg EPS FY (s) 3.10 3.98 5.10 
Source: Company data. Bloomberg. J.P. Morgan estimates. North America Equity Research 
12 June 2014 
Overweight 
HAL, HAL US 
Price: $66.94 
A Price Target: $78.00 
Previous: $77.00 
Oil Services and Equipment 
J. David Anderson, PE, CFA AC
Bloomberg JPMA ANDERSON <GO' 
William S Thompson 
Samantha Hoh, CFA 
J.P. Morgan Securities LLC 
Price Performance 
70 
* 
Asia 10.13 Neal INM4 Me 
— HAL sten Oa (0.1 StP500 (teemed) 
YID 1m 3m 12m 
Ate I 33.9% SA% 20.1% 59.2% 
Rel I 234% 2S% 16.2% 39.2% 
Company Data 
Price ($) 66.94 
Date Of Price 11 Jun 14 
52-week Range ($) 67.35-40.12 
Market Cap ($ mn) 62,321.14 
Fiscal Year End Dec 
Shares 0/S (mn) 931 
Price Target ($) 78.00 
Price Target End Date 31-Dec-14 
See page 11 for analyst certification and important disclosures. 
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that 
the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single 
factor in making their investment decision. 
www.jpmorganmarkets.com 
EFTA00301083
J. David Anderson, PE. CFA 
Figure 1: US Land Rig Count 
2.500 ti Hor Oil Veil Oil 
lHor Gas to Dir Gas 
2000 —%Hor/Dir
1.500 
1.000 
500 
0 
C' Oa. 41#0.O.O 4% 4. # # I # I& I I I / 1 North America Equity Research 
12 June 2014 
Halliburton on the Road J.P.Morgan 
After spending last week on the road in Europe with Halliburton CFO Mark 
McCollum, our conviction as one of the top names to own in services has only grown 
stronger. 
North America market may be tighter than you think. Not surprisingly, most 
investor questions centered on the state of the North American land market, which is 
clearly showing improvement across the board. Considering the U.S. onshore rig 
count at 1,787 (+6% Y-Y) is where they thought it would end the year (as did we), 
higher E&P spending in the Permian is the obvious driver. In March volumes 
pumped were 30% higher y-y on a 15% increase in the number of frac stages; 
however, the increased service intensity is limited to the Bakken, Eagle Ford, and 
Niobrara with the Permian in an earlier stage of development. 
Source: Baker Higbee and J.P. Megan. 
Despite its forecast for moderate 
+3% CAGR growth in wells spud 
and wells frac'ed in NAM from 
2013-2016, PacWest forecasts 
+12% CAGR in total stage 
counts driven by a continued 
shift to horizontal drilling 
(forecasts +12% CAGR for 
horizontal wells fracied), 
increased lateral lengths, and 
decreased stage widths. Figure 2:US Frac Stages (L-Axis) & US Wells Frac'ed (Rash Forecast 
85% 600.000 Frac Stages —Wells Frac'ed 
80% 500.000 
60% 1 1  I 100.000 1 
0 
2011 2012 2013 2014E 2015E 2016E 
Source: PecWesl andJ.P. Phnom 75% 400.000 
70% 300.000 
65% 200.000 35,000 
30,000 
25,000 
20,000 
15,000 
10,000 
5,000 
0 
Mr. McCollum estimates the pressure pumping market has about 10-12% excess 
capacity currently, cut in half from the 22% overcapacity seen a year ago. Notably, 
this contrasts the more bearish analysis from PacWest Consulting that estimates 
utilization at 81% in 2014, with the difference in views likely coming from two 
sources (see our June 4th note "Consultants Provide Frac Market Update: Modest 
Pricing Increases Offiet by Cost Recovely").  First, customers are demanding more 
horsepower on site from the second tier pressure pumpers. Second, while true 
horsepower attrition levels may have been overstated historically pressure pumping 
fleets require an overhaul every 2 to 3 years. Therefore, with an estimated 6.8mm net 
HHP in capacity added in NAM during the 2010.11 timeframe, effective capacity 
may be quite a bit less than the 17mm HHP is stated industry capacity. 
2 
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J. David Anderson. PE. CFA North America Equity Research 
12 June 2014 J.P.Morgan 
Figure 3: North America Pressure Pumping Capacity (Million HHP at Year End) 
25 
20 
15 
10 
5 
0 
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E 
Source: PacWesl ardJ.P. Morgan. "•6.8mm HHF, was added in 2010-2011 
or 1/3 of current capacity 
With promising pricing signs, will HAL put the Tier 2 players in their place? In 
describing the North American market, Mr. McCollum depicted a more stable 
pressure pumping market than in the past. While he does expect the market to 
overbuild again, it won't get to the point of 3O% overcapacity as in the past. This is 
partly because pricing increases won't be the "hockey stick" that drove the flurry of 
capacity additions from the smaller players, but it may also be a result of greater 
manufacturing capacity on pumps. But rather than showing concern about recent 
announcements of capacity additions (PacWest estimates 1.1mm of net HHP in 
NAM to be added in 2014), the company is more perplexed at the rationale behind 
the orders. Noting that Halliburton is the low cost operator in the market, the 
company is generating returns marginally above cost of capital (11%) on the current 
—15% EBIT margins. In other words, without substantial pricing increases, the 
market is adding capacity at sub-cost of capital returns, which could snuff out pricing 
improvements before it even takes hold. 
Figure 4: North America Operating Margins by Company 
SLB HAL BHI WFT —CJES 
40% 
35% 
30% 
25% -
20% 
15% 
10% 
5% 
0% 
2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015E 
Source: Company rapoils and J.P. Morgan esamales. 
With this backdrop, would it make sense for Halliburton to start adding material 
capacity to disincentivize the smaller players from adding more capacity? The 
answer may be yes. Until now, Halliburton hasn't been adding net capacity, instead 
replacing existing pumps with the new QIO design, which requires 30% less 
maintenance with a 2-1Ox longer wear life than competitor designs (PacWest 
estimates pumps generally last for about 5,000 hours). Currently, 20% of the fleet is 
outfitted with the Q 10, but now plans to reach 50% by year end 2015 may be 
3 
EFTA00301085
a David Anderson. PE. CFA North America Equity Research 
12 June 2010 J.PMorgan 
accelerated. While this is lowering HAL's operating costs and increasing effective 
capacity by reducing downtime from maintenance, larger scale capacity additions are 
now being considered. 
Over the next month, the company plans to start testing higher pricing as contracts 
roll over, with success likely resulting in new capacity additions. Signs are clearly 
pointing towards pricing moving higher in 2H 14 as Halliburton's utilization 
improved to 80% on 24-hour work in 1Q14 from 75% in 4Q13, and all of its 
horsepower is committed through October. The company indicated three signs for 
contractual pricing to move higher: 
• Cost recovery from customers. On the majority of contracts, Halliburton is now 
able to pass through higher labor and logistics costs. 
• Improvement in the transactional market. They are starting to see spot pricing 
moving higher — not only are we hearing it from the second tier players (CJES), 
but our quarterly survey of US E&Ps also confirms the trend. 
• Calendar leverage. When Halliburton starts to control the calendar and telling 
customers when they can schedule the job instead of being told, then pricing 
leverage is clearly taking hold. We're not there yet. 
Halliburton is wrestling with this question: can they add capacity but still benefit 
from pricing increases or at least hold pricing steady? From an internal standpoint, as 
long as returns remain above cost of capital, capacity should be built and market 
share should be gained. But looking more broadly at the market, would it be prudent 
for Halliburton to seek to drive the smaller players out by adding capacity and 
putting pressure on their returns? The risk is if it backfires because the Tier 2 players 
don't seem to care about returns in the first place and cheap financing is at their 
fingertips allowing them to build without recourse. 
Confident in hitting margin targets. Halliburton's analyst day last November was 
notable for the aggressive North American margin targets set for 2014 and over the 
next 3 years. Mr. McCollum acknowledged this year's targets were a bit of a stretch 
when first announced (and then reiterated on the following earnings conference 
calls), but they now appear to be well in hand. Notably, none of the 200bp Y-Y 
margin improvement by 3Q14 assumes any pricing improvement, instead 
accomplished through costs and supply chain: I. About half of the improvement is 
from improved supply chain, primarily guar pricing and potentially sand; 2. Realized 
cost savings from the internal mobility project that streamlines back office functions 
in the field; and 3. The ongoing Q10 pump rollout that reduces maintenance costs by 
30% (all expensed). Keeping in mind 1Q14 NAM results included 75bp of price 
degradation as contracts rolled over, any pricing increases in 2H will immediately 
result in higher incremental margins. Additional margin upside could come from 
Halliburton's ability to negotiate better proppant costs with suppliers. 
4 
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J navirlAndprgnn PF CFA North America Equity Research 
12 June 2014 
Figure 5: Halliburton's North American Operating Margins 
30% 
25% 
20% 
15% 
10% 
5% ISIw 16.3w 15:1% 
I 11 J.P.Morgan 
1012 2012 3012 4012 1013 2013 3013 4013 1014 2014 3014 4014 1015 2015 3015 4015 
Source: Company reports and J.P. Morgan esamales. 
The rest of the 300bp non-pricing margin improvement by 2016 will come from 
internal measures derived from the Frac of Future and Battle Red initiatives. As the 
US land market moves further into development mode, we expect superior logistics 
to play an increasing role in improved margins. According to Mr. McCollum, 
Halliburton had the fifth largest logistics operations in the United States (behind 
Coca Cola, Pepsi, and WalMart), with plans to expand significantly over the next 
several years. Halliburton currently owns 3,500 rail cars to transport proppant to well 
sites, which will double to 7,000 cars, while 2/3rds of the 18,000 new hires globally 
this year will be in North America. We believe this gives the diversified service 
companies (which includes Schlumberger and to a lesser extent Baker Hughes) a 
distinct advantage over the smaller players. In an isolated example, a customer in the 
Marcellus stopped using Halliburton over pricing, but struggled to replicate 
operations and had to hire 7 smaller companies instead. 
Not a lot of concerns about IOC slowdown. The biggest concern investors 
consistently voiced was the impact from the "capital discipline" mantra that many 
10Cs have repeated over the past 6 months. Despite 20-25% of total revenue 
generated from 10Cs, Halliburton continues to forecast low double digit spending 
growth out of the Eastern Hemisphere this year (consistent with our forecast) and has 
yet to see a reduction in spending or activity levels offshore. In fact, the deepwater 
market is progressing about how they thought it would: slow and steady. The 
company believes that most of the overcapacity in the deepwater rig market can be 
traced back to Brazil, which some had expected to reach 70 deepwater rigs by now. 
While there is a chance that Brazil could pick up the slack and start growing again in 
2016, Halliburton continues to model modest offshore growth the next several years 
and does not see excess service or equipment capacity in the market, other than rigs. 
Increasing 1PM opportunities with NOCs. One of the more compelling growth 
opportunities for Halliburton over the next several years is pursuing integrated 
project management (1PM) work outside the U.S. With one project underway 
(Malaysia), another poised to begin (Humapa in Mexico), and third under negotiation 
(Ecuador), national oil companies are getting creative, looking to use the large cap 
service companies' strong balance sheets as a means for funding activity. Mr. 
McCollum appeared comfortable that increases in working capital won't be onerous 
to Halliburton's balance sheet (will have to keep a close eye on receivables), but is 
clearly aware of the multitude of risks that 1PM projects bring. Risks that include 
commodity prices, currency, sovereign, reservoir, and environmental, each of which 
5 
EFTA00301087
J David Anderson PE. CFA North America Equity Research 
12 June 2010 J.P.Morgan 
need to be properly compensated in contracts and justify a measured pace. Perhaps 
the most challenging aspect of these contracts is establishing a base-line for 
measuring the incentive portion of the contract. In other words, assuming a field 
increases production, how much credit goes to Halliburton for the increased 
production versus what would normally be achieved? Another issue is establishing 
the base-line for environmental risk to assure the company is only responsible for 
what takes place under their scope and not taking on legacy environmental risk. 
Swirling currents in Latin America. Latin America is arguably the one "soft spot" 
in the Halliburton story as margins have disappointed in recent quarters. But while 
we believe the issues have been ring-fenced, the major countries in the region face 
unique sets of issues that will take some time to resolve. Brazil is the biggest 
concern with activity substantially below what was agreed upon when the drilling 
contract was signed in 2012. Recently, Petrobras has agreed to retender the contracts, 
but the timing is in question. Assuming the contracts are re-tendered in 2H14, 
Halliburton should see margin improvement by 2Q15 as costs are right-sized. The 
big issue will likely be around price as Halliburton presumably priced the initial 
contract lower based on the higher expected activity levels. With reforms waiting for 
secondary laws to pass over the next month or two, Mexico will be a growing 
opportunity for Halliburton, particularly if service companies are the first to be 
offered contracts in unconventional work. We note that our understanding was the 
offshore market would be the first to be offered with 1OC's partnering with Pemex in 
both shallow and deepwater. Lastly, Venezuela may be showing some signs of 
improvement with the recently negotiated deal with PDVSA. Together with 
Schlumberger and Weatherford, $2bn in work has been agreed upon, which will 
include payment on receivables. 
Many Options with Balance Sheet and Cash Flow. We believe free cash flow 
generation is becoming the defining topic among large cap service companies, and 
has contributed to the re-rating of the stock over the past 6 months (in addition to oil 
prices and North America, of course). Last fall, Halliburton recapitalized the balance 
sheet with a $3.0bn debt offering and subsequent $3.3bn share buyback, but with net 
debt/cap at 29% as of 1Q14, investors shouldn't expect a repeat re-cap this fall. 
Instead, share buybacks will be coming from operating free cash flow, essentially 
paying out anything in excess of the $1.5bn in cash needed to run the business. As of 
1Q14, Halliburton reported $2.1bn in cash on the balance sheet, with $1.2bn of it set 
aside for a Macondo settlement, which is expected to be resolved within the next 12 
months. 
Mr. McCollum noted that the dividend currently paying out the low end of a stated 
10-15% of net income, suggesting investors should expect an increase in the coming 
quarters (we model +20% to $0.18/qtr in 4Q14), with excess cash going towards 
share repurchases. With the company targeting 30-35% of operating cash to be paid 
out in total, this implies over $2bn in buybacks in 2014 (3/4.32mm shares at $70) and 
another 42.5bn in 2015, which would add --$0.15/sh to 2014 EPS and $0.35/sh to 
2015. 
Mr. McCollum expects capex to remain relatively flat over the next several years. He 
indicated North America is still the best place for the incremental dollar of spending 
for growth, but even if they dialed up pressure pumping capacity, it would only raise 
capex by 10% or so. Interestingly, one of his bigger balance sheet concerns is having 
available room for M&A, which would either focus on technologies or product lines 
6 
EFTA00301088
J. David Anderson_PE_CFA North America Equity Research 
12 June 2014 J.P.Morgan 
that complement the mature field business around artificial lift (ESPs or PCPs) or 
chemicals. That said, there was a sense of frustration that more deals haven't 
presented themselves...then again, with the business outlook as strong as its been in 
years (if not as long as we've covered the company), Halliburton doesn't need much 
external help. 
7 
EFTA00301089
J. David Anderson. PE. CFA 
Fi ure 6: Halliburton Model Summa 
Revenue 
North America $16.004 $3.706 $1802 $3.1131 $3.823 $15.212 $3.901 54.097 $4.191 $4.167 $16.356 $17.665 
Latin America 3.694 945 944 1.002 1.018 3.909 859 906 992 1.140 3.897 4.483 
EuropWAIricalCIS 4.510 1.187 1.299 1,340 1.399 5.225 1.299 1.455 1,447 1.567 5.768 6.202 
Middle EasVAsia 4,295 1.136 1,272 1,249 1.399 5.056 1.289 1.437 1,511 1.679 5.916 6.804 
Total Revenue $m,ses $8,974 $7,317 $7,472 $7,639 $20402 $7,348 $7,895 $8,142 $8,553 $31,938 $35,154 
Rev oleo Consensus 28.243 6.879 7.246 7.498 7.557 : 243 7.863 8.285 8.65' 
Completion 8 Produclon 17,380 4.100 4.363 4,501 4.542 17,506 4.100 4.405 4.543 4.772 17.821 19.615 
Drilling 8 Evaluahon 11,123 2,874 2.954 2,971 3.097 11,898 2.874 3,490 3.599 3.781 13.744 15.539 
COGS ($23,741) ($6.000) ($6.191) (56.230) ($t363) ($24,784) ($6.303) ($6.619) (*fiat) ($6,891) ($26.413) ($28237• 
SG8A (21S) (72) (87) (60) 194) (333) (75) (87) (90) (94) (345) (387: 
Total Costs & Expenses ($24,016) ($6,072) ($6.278) ($6,310) ($6,457) ($25,117) ($6,378) ($6,706) ($6,690) ($6,985) ($26,759) ($28,623) 
Total D&A ($1,628) ($448) ($474) ($481) ($497) ($1,900) ($510) ($525) ($540) ($555) ($2,130) ($2,420) 
EBIMA $6,115 51.350 $1.513 $1.643 $1,679 $6,185 $1,480 $1,715 $1,992 $2,123 $7,310 $8,951 
EBITDA Consensus 6.027 ti24 1.'59 6,174 1.483 1.714 1.953 
Operating Income 
North America $2,980 $605 $666 $891 $651 $2,613 $602 $716 $859 $854 $1031 63.66E 
Latin America 607 109 101 159 157 526 100 109 144 171 524 760 
EuropelAlricatiS 593 121 161 207 209 698 146 204 246 282 878 1.105 
Middle East/Asia 667 187 219 207 264 877 211 259 295 353 1.117 1.353 
Total Operating Income $4,487$902 $1,039 $1,162 $1,182 $4,285 $970 $1,190 $1,452 $1,568 $5,180 $6,531 
North America Margins 18.6% 16.3% 17.5% 17.8% 17.0% 17.2% 15.4% 17.5% 20.5% 20.5% 18.5% 20.8' 
Lalin America Margins 16.4% 11.5% 10.7% 15.9% 15.4% 13.5% 11.6% 12.0% 14.5% 15.0% 13.4% 17.6' 
EuropWAIricatIS Margins 111% 10.2% 12.4% 15.4% 14.9% 13.4% 11.2% 14.0% 17.0% 18.0% 15.2% 17.8" 
Middle East'Asia Margins 16.0% 16.5% 17.2% 16.6% 18.9% 17.3% 16.4% 18.0% 19.5% 21.0% 18.9% 19.8' 
Total Operating Margins 15.7% 12.9% 14.2% 15.6% 15.5% 14.6% 13.2% 15.1% 17.8% 18.3% 16.2% 18.6% 
Income Taxes ($1,355) ($191) ($276) ($312) ($278) ($1,057) ($229) M3101 ($384) ($417) ($1,341) ($1.681 
Tax Rale 33% 23% 29)6 29% 26% 27% 27% 29% 29% 29% 28% 28% 
Net Income $2,561($13) $677 $707 $798 $2,189 $623 $774 $961 $1,044 $3,403 $4,424 
Dluled Shares (Avg) 928 931 928 894 854 902 853 850 850 850 851 850 
EPS (Adjusted, Diluted) $3.00 $0.67 $0.73 $0.83 $0.93 $3.15 $0.73 $0.91 $1.13 $1.23 $4.00 $5.20 
EFS Consensus 2.97 0.57 0.72 0.82 0 En 0.91 1.11 
Dv Bend • r Share $0.36 $0.13 $0.13 $0.13 $0.15 $0.53 $0.15 $0.15 $0.15 $0.18 $0.63 $0.72 
Tolal Working Capital Changes ($1,026) ($864) (f219) $108 $538 (5437) l$172) ($116) ($492) $548 (6232) ($376) 
Cash from Operations $3,654 $349 $1,122 $1,078 $1,898 $4,447 $954 $1,183 $1,009 $2,147 $5,294 $6,468 
Capital Expendtures ($3,586) ($685) ($711) ($679) ($859) ($1934) ($643) ($750) ($773) ($813) ($2,979) 43252,
Cash from Investing ($3,688) ($651) ($540) (9876) ($1,003) ($2,870) ($674) ($750) ($773) ($813) ($3,010) ($3,252) 
Increase (decrease) in LT ChM SO $0 SO $2.968 SO $2,968 $0 $0 $0 $0 $0 $0 
Cash from Financing ($172) ($145) ($1,184) ($338) ($87) ($1,754) ($514) ($127) ($127) ($152) ($320) ($609) 
Cash at End of Period $2.484 $2,029 $1,412 $7.491 $2,356 ,2$356 $2,123 $2,429 $2,538 $3,721 $3,721 $6,328 
12.179 13.011 10257 Prosody. Pant & Equip. (Nei) 10.509 10.753 10.949 11.322 11.322 11.463 11.688 11.922 12.179 
Total Assets $27,410 $27.684 $27,418 $27,948 $29,223 $29,223 $29,256 $30,178 $30,970 $32,090 $32,090 $36,353 
Long-term Debt, Net of Current 4,820 4.820 4,820 7,816 7,816 7,818 7,816 7,816 7,816 7,816 7,816 7,816 
Stockholder Equity 15.765 15.710 15.337 12.788 13.581 13.581 13.725 14,372 15.207 16.099 16.099 19.914 
Cash Flow Metrics 
Free Cash Flow $88 ($336) $411 $399 $1,039 $1,513 $311 $433 $236 $1,335 $2,315 $3,216 
FCF/share (diluted) $0.09 $0.361 $0.44 $0.45 $1 .22 $1 .68 $0.36 $0.51 $0 .28 $1.57 $2.72 $3.78 
• ratin Free Cash Flow $1193 $741 $634 $859 ($182) $2,052 $598 $932 51.226 $369 $3,124 $4,255 
Men* et '17 ,P7.11 - a a Book Value (per stare) $16.98 $16.87 $16.53 $14.30 $15.90 $15.06 $16.09 $16.91 $17.89 $18.94 $18.92 $23.43 
Net Debt $2.336 52.791 $3,408 $6,325 $5,460 $5,460 15.693 15.387 $5,278 $4,095 $4,095 $1,488 
Tolal DebtCapital 23.4% 23.5% 23.9% 37.9% 36,5% 36.5% 36.3% 35.2% 33.9% 32.7% 32.7% 28.2% 
Nel Debblevital 12.9% 15.1% 18.2% 33.1% 28.7% 28.7% 29.3% 27.3% 25.8% 20.3% 20.3% 7.0% 
Return on equ0y 19.2% 15.9% 17.4% 21.2% 24 2% 19.4% 18.3% 22.0% 26.0% 26.7% 22.9% 24.6% 
Return on capital (Net Debt) 17.9% 14.8% 15.6% 17.1% 18.39. 1&6% 14.4% 17.2% 20.4% 21.8% 18.7% 22.6% 
Source: Company reports. Bloomberg. J.P. Morgan estrnams. North America Equity Research 
12 June 2014 J.P.Morgan 
8 
EFTA00301090
J. David Anderson, PE, CFA North America Equity Research 
12 June 2014 J.PMorgan 
Investment Thesis, Valuation and Risks 
Halliburton (Overweight: Price Target: $78.00) 
Investment Thesis 
We believe HAL is exhibiting its pressure pumping cost advantage with a fleet that is 
85% on long-term contracts and 75% working on 24-hour operations. With 2014 
earnings revisions likely to the upside going fonvard, we expect multiple expansion 
with more investors looking toward the considerable growth in 2014/2015 EPS amid 
conservative assumptions. We also think there is a free option for gas recovery, 
which could dramatically improve frac utilization and pricing. 
Valuation 
We continue to rate Halliburton Overweight but raised our Dec 2014 price target 
slightly to $78 (from $77) as we maintain our 15.0x target. Our target multiple is 
close to where HAL traded mid-stage last cycle. HAL currently trades at 12.9x our 
2015E EPS, a 19% discount to SLB and a 6% discount to BH1. Our target multiple 
for HAL is an 17% discount to SLB but a 5% premium to our target multiple for BH1 
as we expect HAL to see continued relative multiple expansion given its strong 
international growth and superior North America operations. Furthermore, expect the 
company to continue to buy back shares as free cash flow ramps, but don't include 
buybacks in our model. 
Risks to Rating and Price Target 
Potential liability from involvement in Macondo blowout 
Halliburton performed cementing services on the ill-fated Macondo well that led to 
one of the largest oil spills in history. While we continue to believe that Halliburton 
acted properly throughout the well construction process, Halliburton faces civil 
penalties resulting from its involvement in the disaster. Our expectation is for a 
settlement in the S300.500mm range. 
The possibility of a large acquisition could pressure shares 
In the wake of the Smith and RI acquisitions, M&A discussions naturally shifted to 
Halliburton. We do not believe Halliburton needs to get bigger, and it is unlikely to 
make a significant acquisition, but it could see shares under pressure on this thesis. 
We believe smaller, technology -focused acquisitions are more likely, particularly in 
artificial lift (ESPs) and well testing. 
EFTA00301091
J David Anderson PE CFA North America Equity Research 
12 June 2014 
Halliburton: Summary of Financials 
Income Statement • Annual 
Revenues 
Cosl of products sold 
Gross profil 
SOU 
DO8A 
Other cperafing expenses 
Operafing Inane 
EBIT 
EBITDA 
Net interest inutile/ (expense) 
Income applicable to minority interests 
Pretax income 
Taxes 
Tax rate (%) 
Reported net interne 
Ncnrecurring items. disc ops 
Adjusted net income 
Average diuted shares outslandng 
EPS 
EPS growth rale (%) 
Dividend per share 
WTI crude price (Stitt) 
Henry Hub natural gas price (Sind) 
Balance Sheet and Cash Flow Data 
Cash and cash anivalents 
Other careen assets 
Total current assets 
Net PP8E 
Other assets 
Total assets FY134 FY14E FY1SE FY16E Income Statement • Quarterly 
29.402 31.938 35.154 37.087 Revenues 
(24.784) (26.413) (28.237) (29331) Cost of prcducls sold 
4.618 5,525 6.917 7.756 Gross profit 
(333) (345) (387) (408) SGSA 
(1.900) (2.130) (2.420) (2.740) DMA 
  Other operating expenses 
4.285 5.180 6,531 7.348 Operating Income 
4.285 5.180 6.531 7.348 EBIT 
6,185 7,310 8251 10.088 EBITDA 
(331) (372) (368) (360) Net interest income! (expense) 
(10) (3) (12) (12) Income applicable to mbaity bterests 
3,911 4.747 6.119 6,944 Pretax income 
(1.057) (1.341) (1,683) (1.875) Taxes 
27.0% 28.2% 27.5% 27.0% Tax rate (%) 
2.169 3.403 1.424 5,267 Reported net income 
675 0 0 0 Nonrecurring items. dsc ops 
AcVusted net income 
Average dibted shares outslandng 
EPS 
EPS growth rate (%) 
Dividend per share 
WTI crude price ($ibbt) 
Henry Hub natural gas price (Strad) 
Ratio Analysis 
Valuation 
PIE (adjusted) 
PACE 
Enterprise valueiEBITDA 
EVIDACF 
Total debt 
Tolal labiltes 
Minority interests 
Preferred stock 
Shareholders equity 
Net income 
DO&A 
Deferred taxes 
Change in working capital 
Other 
Cash flow from operations 
Capex 
Other investing cashficras 
Dividends 
Share buybacks (net) 
Change in debt 
Other Manning cashfbws 
Change in cash 
Free cash flow 2.844 3.403 4.424 5.057 
902 851 850 260 
3.15 4.00 5.20 5.95 
5.1% 262% 30.1% 14.3% 
0.53 0.63 0/2 0.84 
FY134 FY14E FY1SE FY16E 
2.356 3.721 6.328 9.265 
11.348 11.883 12.707 13.103 
13/04 15.604 19.035 22.958 
11.322 12.179 13.011 13.701 
4.197 4.307 4.307 4.307 
29.223 32.090 36.353 40.967 
7.816 7.816 7.816 7.816 
15.608 15.964 16.412 16.679 
34 27 27 27 
13.581 16.099 19.914 24.260 
2.169 3.403 4.424 5.057 
1.900 2.130 2.420 2.740 
(437) (232) (376) (128) 
815 (7) 0 0 
4.447 
(2.934) 
64 
(465) 
(4.079) 
2,968 
E8)5294 6.468 
(2.979) (3.252) 
(31) 0 
(533) (609) 
(500) 0 
0 0 
113 0 7,669 
(3,431) 
0 
(711) 
0 
0 
0 
(128) 1.365 2.607 3.528 
1.755 2.582 3.483 4.501 J.P.Morgan 
10144 2011E 3011E 1014E 
7.348A 7.895 8.142 8.553 
(6.303)A (6.619) (6.601) (6.891) 
1.045A 1.277 1.541 1,662 
(75)A (871 (90) (94) 
(510)A (525) (540) (555) 
970A 
970A 
1.480A 
(93)A 
6A 
846A 
(229)A 
27.1%A
623A 
OA 1.190 
1.190 
1.715 
(931 
131
1,087 
(310) 
28.5% 
774 
0 1.452 
1.452 
1.992 
(93) 
(3)
1.349 
(384) 
28.5%
961 
0 1.568 
1.568 
2,123 
(93) 
(3)
1,465 
(417) 
28.5%
1.044 
0 
623A 774 961 1.044 
853A 850 850 260 
0.73A 0.91 1.13 1.23 
9.0%A 24.8% 35.7% 31.5% 
0.15A 0.15 0.15 0.18 
Ratios 
Nal debtequily 
Net delattapdal 
Net coverage rata 
ROE 
RDCE 
Yield and cash returns 
CEPS 
FCF yield 
DMdend yield 
Divdend payout ratio 
Buyback yield FY134 FY14E FY1SE FY16E 
212 16.7 12.9 11.3 
13.6 102 8.8 7.4 
8.2 6.8 5.2 4.3 
40.1% 25.4% 7.5% (8.4%) 
26.0% 18.1% 5.8% (6.8%) 
12.9 13.9 17.7 20.4 
19.4% 22.9% 24.6% 229% 
14.9% 16.4% 18.3% 17.9% 
4.93 6.22 7.61 9.02 
2.9% 4.5% 6.1% 7.9% 
0.8% 0.9% 1.1% 1.3% 
21.8% 15.8% 13.8% 14.1% 
7.0% 02% 0.0% 0.0% 
Source: Company reports and J.P. Morgan estimates. 
Nolo: Sin Sims (except par.share data).Fiscal year ends Dec 
10 
EFTA00301092
J. David Anderson, PE, CFA North America Equity Research 
12 June 2014 J.PMorgan 
Analyst Certification: The research analyst(s) denoted by an "AC— on the cover of this report certifies (or, where multiple research 
analysts are primarily responsible for this report, the research analyst denoted by an "AC— on the cover or within the document 
individually certifies, with respect to each security or issuer that the research analyst covers in this research) that (1) all of the views 
expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of 
any of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views 
expressed by the research analyst(s) in this report. For all Korea-based research analysts listed on the front cover, they also certify, as per 
KOFIA requirements, that their analysis was made in good faith and that the views reflect their own opinion, without undue influence or 
intervention. 
Important Disclosures 
• Lead or Co-manager: J.P. Morgan acted as lead or co-manager in a public offering of equity andfor debt securities for Halliburton 
within the past 12 months. 
• Client: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients: Halliburton. 
• Client/Investment Banking: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as investment 
banking clients: Hallibunon. 
• Cilent/Non-investment Banking, Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following 
company(ies) as clients, and the services provided were non-investment-banking, securities-related: Halliburton. 
• Client/Non-Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients, 
and the services provided were non-securities-related: Halliburton. 
• Investment Banking (past 12 months): J.P. Morgan received in the past 12 months compensation from investment banking 
Hallibunon. 
• Investment Banking (next 3 months): J.P. Morgan expects to receive, or intends to seek, compensation for investment banking 
services in the next three months from Hallibunon. 
• Non-Investment Banking Compensation: J.P. Morgan has received compensation in the past 12 months for products or services 
other than investment banking from Halliburton. 
Company -Specific Disclosures: Important disclosures, including price charts, are available for compendium reports and all J.P. Morgan-
rovertd toinnaniec by visitine huns.//ininm coin/research/disclosures,  calling 1-800477-0406, or e-mailing 
 kith your request. J.P. Morgan's Strategy, Technical, and Quantitative Research teams may 
screen companies not covered by J.P. Morgan. For important disclosures for these companies, please call 1-800477-0406 or e-mail 
research.disclosure.inauinesOinmorgan.com.
Hailburton (HAL, HAL US) Prim Chart Date Rating Share Price Price Target 
(S) (3) 
04-Feb-08 OW 34.71 
14-Jan-09 OW 17.20 25.00 
105 I OW $20 OW 05 ssi OW $77 27-Jan-09 OW 18.87 23.00 
04-Mar-09 OW 14.92 20.00 I 
OWS N828 OW 882 NL &A OW MAI 21-Apr-09 N 19.96 20.00 
02-Jul-09 
06-Apr-10 N 
OW 19.38 
32.20 28.00 
39.00 r It- I
OM N S20 OW 888 OW COOW IOW'S I OW 30.27 45.00 19-Jul-10 
07-Oct-10 OW 33.62 49.00 
27-Jan-11 OW 43.40 58.00 42 - 
25-Apr-11 OW 50.63 62.00 
23-May-11 OW 46.16 65.00 21 - 
24-Oct-11 OW 35.32 58.00 
30-Jan-12 OW 37.10 52.00 
0 23-Apr-12 OW 33.29 45.00 I 1 I I i 
Oct Apr Oct Apr Oct Aar 05-Jun-12 OW 29.12 44.00 08 08 09 1i 12 14 06-Jun-12 OW 28.13 42.00 
Source' Bloomberg and JP Morgan; price data adpsred for sea spells and divalends 31-Jul-12 OW 33.55 47.00 Break vo traverse Feb 04. 1008 -Jar Id. 2005 
11-Sep-12 OW 34.27 43.00 
27-Nov-12 OW 32.04 45.00 
11 
EFTA00301093
J. David Anderson. PE. CFA North America Equity Research 
12 June 2014 J.P.Morgan 
18-Dec-12 OW 34.80 44.00 
08-Jan-13 N 36.19 42.00 
28-Jan-13 N 40.28 45.00 
19-Feb-13 OW 42.81 52.00 
23-Apr-13 OW 39.29 53.00 
23-Jul-13 OW 45.08 54.00 
25-Jul-13 NR 45.98 --
26-Aug-13 OW 48.44 57.00 
11-Sep-13 OW 50.32 64.50 
22-Oct-13 OW 50.66 65.00 
08-Nov-13 OW 53.90 67.50 
22-Jan-14 OW 50.54 66.50 
26-Feb-14 OW 55.58 77.00 
The chart(s) show J.P. Morgan's continuing coverage of the stocks; the current analysts may or may not have covered it over the entire 
period. 
J.P. Morgan ratings or designations: OW Overweight, Ni• Neutral, UW Underweight, NR •• Not Rated 
Explanation of Equity Research Ratings, Designations and Analyst(s) Coverage Universe: 
J.P. Morgan uses the following rating system: Overweight (Over the next six to twelve months, we expect this stock will outperform the 
average total return of the stocks in the analyst's (or the analyst's team's) coverage universe.] Neutral [Over the next six to twelve 
months, we expect this stock will perform in line with the average total return of the stocks in the analyst's (or the analyst's team's) 
coverage universe.] Underweight (Over the next six to twelve months, we expect this stock will underperfomi the average total return of 
the stocks in the analyst's (or the analyst's team's) coverage universe] Not Rated (NR): J.P. Morgan has removed the rating and, if 
applicable, the price target, for this stock because of either a lack of a sufficient fundamental basis or for legal, regulatory or policy 
reasons. The previous rating and, if applicable, the price target, no longer should be relied upon. An NR designation is not a 
recommendation or a rating. In our Asia (ex-Australia) and U.K. small- and mid-cap equity research, each stock's expected total return is 
compared to the expected total return of a benchmark country market index, not to those analysts' coverage universe. If it does not appear 
in the Important Disclosures section of this report, the certifying analyst's coverage universe can be found on J.P. Morgan's research 
website, www.jpmorganniarkets.com. 
Coverage Universe: Anderson, David: Baker Hughes (BHI), Bristow Group (BRS), C&J Energy Services (CJES), CHC Group (HELI), 
Cameron Intl (CAM), Diamond Offshore (DO), Dresser-Rand (DRC), Dril-Quip (DRQ), Ensco plc (ESV), Exterran Holdings (EXH), 
FMC Technologies (Fro, Forum Energy Technologies (FET), Halliburton (HAL), Hornbeck Offshore (HOS), NOW Inc. (DNOW), 
National Oilwell Varco (NOV), Noble Corp. (NE), Rowan Companies (RDC), Schlumberger (SLB), Superior Energy Services (SPN), 
Transocean (RIG), Weatherford International (WFT) 
J.P. Morgan Equity Research Ratings Distribution, as of March 31, 
Overweight Neutral 2014 
Underweight 
(buy) (hold) (sell) 
J.P. Morgan Global Equity Research Coverage 44% 44% 11% 
IB clients* 58% 4We 40% 
JPMS Equity Research Coverage 45% 48% 7% 
IB clients° 78% 67% 60% 
*Percentage of investment banking clients in each rating category. 
For purposes only of FINRA'NYSE ratings distribution rules, our Overweight rating falls into a buy rating category: our Neutral rating falls into a hold 
rating category: and our Underweight rating falls into a sell rating category. Please note that stocks with an NR designation arc not included in the table 
above. 
Equity Valuation and Risks: For valuation methodology and risks associated with covered companies or price targets for covered 
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12 
EFTA00301094
J. David Anderson. PE. CFA North America Equity Research 
12 June 2014 J.P.Morgan 
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EFTA00301095
J. David Anderson. PE. CFA North America Equity Research 
12 June 2014 J.PMorgan 
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