Halliburton Announces First Quarter Earnings of $0.54 Per Diluted Share; Continuing Operations Contributed $0.52 Per Diluted Share

Halliburton (NYSE:HAL) announced today that net income for the first quarter of 2007 was $0.54 per diluted share, which includes the results of KBR, Inc. in discontinued operations. Income from continuing operations in the first quarter of 2007 was $529 million, or $0.52 per diluted share. This compares to income from continuing operations of $449 million, or $0.42 per diluted share, in the first quarter of 2006. Halliburton’s consolidated revenue in the first quarter of 2007 was $3.4 billion, up 17% from the first quarter of 2006. This increase was attributable to higher worldwide activity and the company’s focus on investing in and expanding Eastern Hemisphere operations. Consolidated operating income was $788 million in the first quarter of 2007 compared to $692 million in the first quarter of 2006. Results benefited from increased customer activity, pricing gains, and new international contract awards. "This quarter marks the start of a new chapter in Halliburton’s history as we completed the separation of KBR. I am encouraged by the prospects that await us,” said Dave Lesar, chairman, president, and chief executive officer. "We are now completely focused on the global growth opportunities in our energy services business. The first quarter saw many positives for Halliburton. Sperry Drilling Services, Wireline and Perforating, Cementing Services, and Baroid Fluid Services all posted revenue that met or exceeded their best quarters ever. Also, we saw revenue growth in the Middle East of 20% year-over-year and 8% sequentially. However, this was overshadowed by a challenging market in the United States for our Production Enhancement business where a combination of weather delays and lower commodity prices had a negative impact. We believe that with the actions we have already taken, coupled with improving market conditions, Production Enhancement operations should improve later this year.” 2007 First Quarter Results Production Optimization operating income for the first quarter of 2007 was $325 million, a decrease of $8 million or 2% from the first quarter of 2006. Production Enhancement services operating income fell 11%, primarily in Canada and the United States Rocky Mountains. These markets were impacted by increased costs related to lower-than-anticipated activity in the first quarter of 2007, driven by decreases in natural gas prices and weather delays. Completion Tools operating income grew 40%, led by increased product sales in the United States and Africa. The company’s intelligent well completions joint venture, however, experienced reduced results in the first quarter of 2007 due to manufacturing and supply chain constraints. Fluid Systems operating income for the first quarter of 2007 was $214 million, a $25 million or 13% increase over the first quarter of 2006, with Eastern Hemisphere operating income increasing 38%. Cementing services operating income increased 10% compared to the prior year’s first quarter. Cementing Services were negatively impacted in the first quarter of 2007 by the slowdown in Canada. Outside of North America, Cementing Services operating income grew 50% over the prior year’s quarter, reflecting new contract awards and improved pricing. Baroid Fluid Services operating income grew 23% from participation on deeper wells, increased activity, and improved pricing, particularly in the United States, northern Africa, and Mexico. Drilling and Formation Evaluation operating income for the first quarter of 2007 was $256 million, a $77 million or 43% increase over the prior year’s first quarter. Sperry Drilling Services operating income increased 49%, with over 65% of the operating income growth coming from the Eastern Hemisphere. Sperry Drilling Services operating income in the United States grew 36%, benefiting from new contracts in Alaska and increased directional drilling activity throughout the lower 48 states. Wireline and Perforating Services operating income increased 44%, with increased activity in the United States and the Middle East, as well as new contract wins in Africa and Asia Pacific. Security DBS Drill Bits operating income improved 19% over the prior year’s first quarter, reflecting strong fixed-cutter bit activity in the United States. Digital and Consulting Solutions operating income in the first quarter of 2007 was $50 million, essentially flat as compared to the prior year’s quarter. Landmark’s operating income grew due to improved sales of software in Europe and Asia Pacific. Technology and Significant Achievements Halliburton made a number of advances in technology, expansion, and business structure changes. Halliburton announced that it had completed the final separation of KBR, Inc. on April 5, 2007. Halliburton accepted 85,273,184 shares of Halliburton common stock in exchange for 135,627,000 shares of KBR, Inc. common stock. KBR’s results are presented as discontinued operations for all periods presented. Since the transaction occurred subsequent to the first quarter of 2007, Halliburton’s share count for purposes of the first quarter 2007 earnings per share calculation does not reflect the reduction in Halliburton shares. Halliburton won the 2007 Offshore Energy Achievement Award in Well Construction for its Sperry Drilling Services’ ReFlexRite® multilateral system. The ReFlexRite system technology is an important step toward extending the productive life of existing wells in mature fields in a cost-effective manner. The system makes it possible to convert a simple horizontal well into a multilateral well, while simultaneously maintaining the production from the original wellbore. Security DBS Drill Bits announced it has added a breakthrough technology to its suite of Hole Enlargement products and solutions. The XR™ reamer line of tools is designed for both conventional and rotary steerable applications, and it provides the industry’s only available concentric hole enlargement technology that is also capable of enlarging a pilot hole more than 40% while drilling. XR reamer tools offer activation and deactivation capabilities that allow the hole to be selectively enlarged based on existing casing-shoe and well-design parameters. Halliburton is opening a new manufacturing center in Monterrey, Mexico, to meet its customers’ increasing demands for energy services products. The 9,290-square-meter leased facility is expected to open in May 2007. Halliburton has announced that it has entered into a definitive agreement to purchase, subject to regulatory approvals, PSL Energy Services, Limited (PSLES), a leading Eastern Hemisphere provider of process, pipeline, and well intervention services. PSLES is headquartered in the United Kingdom and has approximately 1,000 employees with operations in the United Kingdom, Norway, the Middle East, Azerbaijan, Algeria, and Asia Pacific. Founded in 1919, Halliburton is one of the world’s largest providers of products and services to the energy industry. With more than 45,000 employees in nearly 70 countries, the company serves the upstream oil and gas industry throughout the lifecycle of the reservoir – from locating hydrocarbons and managing geological data, to drilling and formation evaluation, well construction and completion, and optimizing production through the life of the field. The company’s World Wide Web site can be accessed at www.halliburton.com. NOTE: The statements in this press release that are not historical statements, including statements regarding future financial performance, are forward-looking statements within the meaning of the federal securities laws. These statements are subject to numerous risks and uncertainties, many of which are beyond the company's control, which could cause actual results to differ materially from the results expressed or implied by the statements. These risks and uncertainties include, but are not limited to: consequences of audits and investigations by domestic and foreign government agencies and legislative bodies and related publicity; potential adverse proceedings by such agencies; protection of intellectual property rights; compliance with environmental laws; changes in government regulations and regulatory requirements, particularly those related to radioactive sources, explosives, and chemicals; compliance with laws related to income taxes and assumptions regarding the generation of future taxable income; unsettled political conditions, war, and the effects of terrorism, foreign operations, and foreign exchange rates and controls; weather-related issues including the effects of hurricanes and tropical storms; changes in capital spending by customers; changes in the demand for or price of oil and/or natural gas, structural changes in the oil and natural gas industry; increased competition for employees; availability of raw materials; and integration of acquired businesses and operations of joint ventures. Halliburton's Form 10-K for the year ended December 31, 2006, recent Current Reports on Form 8-K, and other Securities and Exchange Commission filings discuss some of the important risk factors identified that may affect the business, results of operations, and financial condition. Halliburton undertakes no obligation to revise or update publicly any forward-looking statements for any reason. HALLIBURTON COMPANY Condensed Consolidated Statements of Operations (Millions of dollars and shares except per share data) (Unaudited)   Three Months Three Months Ended Ended March 31 December 31   2007    2006  2006  Revenue: Production Optimization $ 1,337  $ 1,196  $ 1,454  Fluid Systems 993  836  964  Drilling and Formation Evaluation 917  725  877  Digital and Consulting Solutions 175    181  214  Total revenue $ 3,422    $ 2,938  $ 3,509  Operating income (loss): Production Optimization $ 325  $ 333  $ 455  Fluid Systems 214  189  217  Drilling and Formation Evaluation 256  179  238  Digital and Consulting Solutions 50  50  77  General corporate (57)   (59) (64) Total operating income 788    692  923  Interest expense (38) (42) (41) Interest income 38  23  35  Foreign currency, net (3) (1) (8) Other, net –    3  –  Income from continuing operations before income taxes and minority interest 785  675  909  Provision for income taxes (259) (223) (278) Minority interest in net (income) loss of subsidiaries 3    (3) (4) Income from continuing operations 529  449  627  Income from discontinued operations, net 23  (a) 39  31  Net income $ 552    $ 488  $ 658  Basic income per share: Income from continuing operations $ 0.53  $ 0.44  $ 0.63  Income from discontinued operations, net 0.02  (a) 0.04  0.03  Net income $ 0.55    $ 0.48  $ 0.66  Diluted income per share: Income from continuing operations $ 0.52  $ 0.42  $ 0.61  Income from discontinued operations, net 0.02  (a) 0.04  0.03  Net income $ 0.54    $ 0.46  $ 0.64  Basic weighted average common shares outstanding 992  1,024  996  Diluted weighted average common shares outstanding 1,025    1,068  1,030    (a) Income from discontinued operations, net, in the first quarter of 2007 included Halliburton’s 81% share of KBR, Inc.’s $28 million in net income in the first quarter of 2007.   See Footnote Table 1 for a list of significant items included in operating income.   All periods presented reflect the reclassification of KBR, Inc. to discontinued operations and the reclassification of certain expenses that were previously allocated to the segments and are now included in general corporate expenses.  HALLIBURTON COMPANY Condensed Consolidated Balance Sheets (Millions of dollars) (Unaudited)   March 31, December 31,   2007  2006  Assets Current assets: Cash and marketable investments $ 3,043  $ 2,938  Receivables, net 2,700  2,629  Inventories, net 1,430  1,235  Current assets of discontinued operations 4,012  3,898  Other current assets 560  490  Total current assets 11,745  11,190    Property, plant, and equipment, net 2,758  2,557  Noncurrent assets of discontinued operations 1,441  1,497  Other assets 1,771  1,616  Total assets $ 17,715  $ 16,860    Liabilities and Shareholders’ Equity Current liabilities: Accounts payable $ 739  $ 655  Current maturities of long-term debt 11  26  Current liabilities of discontinued operations 2,909  2,831  Other current liabilities 1,450  1,222  Total current liabilities 5,109  4,734    Long-term debt 2,785  2,783  Noncurrent liabilities of discontinued operations 1,000  981  Other liabilities 864  917  Total liabilities 9,758  9,415  Minority interest in consolidated subsidiaries 65  69  Shareholders’ equity (a) 7,892  7,376  Total liabilities and shareholders’ equity $ 17,715  $ 16,860    (a) Effective January 1, 2007, the company adopted Financial Accounting Standards Board Interpretation No. 48 (FIN 48), "Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109.” As a result of the adoption of FIN 48, the company recognized a $4 million decrease in the liability for unrecognized tax benefits and a $34 million increase in accrued interest and penalties, which were accounted for as a net reduction of $30 million to the January 1, 2007 balance of retained earnings. Of the $34 million increase in accrued interest and penalties, $10 million was attributable to KBR, Inc., which is reported as discontinued operations in the condensed consolidated financial statements for all periods presented. HALLIBURTON COMPANY Selected Cash Flow Information (Millions of dollars) (Unaudited)   Three Months Year Ended Three Months Ended Ended March 31, March 31, June 30, September 30, December 31, December 31,   2007  2006  2006  2006  2006  2006  Capital expenditures $ 303  $ 138  $ 201  $ 230  $ 265  $ 834                Depreciation, depletion, and amortization $ 131  $ 117  $ 117  $ 122  $ 124  $ 480  Year Three Months Ended Ended 2005  March 31 June 30 September 30 December 31 December 31 Capital expenditures $ 131  $ 129  $ 164  $ 151  $ 575              Depreciation, depletion, and amortization $ 110  $ 112  $ 111  $ 115  $ 448    All periods presented reflect the reclassification of KBR, Inc. to discontinued operations. HALLIBURTON COMPANY Revenue and Operating Income By Operating Segment (Millions of dollars) (Unaudited)   Year Three Months Ended Ended 2006  March 31 June 30 September 30 December 31 December 31 Revenue: Production Optimization $ 1,196  $ 1,292  $ 1,418  $ 1,454  $ 5,360  Fluid Systems 836  870  928  964  3,598  Drilling and Formation Evaluation 725  774  845  877  3,221  Digital and Consulting Solutions 181  180  201  214  776  Total revenue $ 2,938  $ 3,116  $ 3,392  $ 3,509  $ 12,955    Operating income: Production Optimization $ 333  $ 368  $ 417  $ 455  $ 1,573  Fluid Systems 189  201  217  217  824  Drilling and Formation Evaluation 179  194  233  238  844  Digital and Consulting Solutions 50  51  63  77  241  General corporate (59) (54) (60) (64) (237) Total operating income $ 692  $ 760  $ 870  $ 923  $ 3,245  Year Three Months Ended Ended 2005  March 31 June 30 September 30 December 31 December 31 Revenue: Production Optimization $ 834  $ 971  $ 1,032  $ 1,154  $ 3,991  Fluid Systems 631  699  731  776  2,837  Drilling and Formation Evaluation 555  641  663  693  2,552  Digital and Consulting Solutions 164  160  171  225  720  Total revenue $ 2,184  $ 2,471  $ 2,597  $ 2,848  $ 10,100    Operating income: Production Optimization $ 290  $ 240  $ 259  $ 306  $ 1,095  Fluid Systems 120  142  146  165  573  Drilling and Formation Evaluation 96  146  150  168  560  Digital and Consulting Solutions 29  16  36  66  147  General corporate (54) (59) (50) (48) (211) Total operating income $ 481  $ 485  $ 541  $ 657  $ 2,164    See Footnote Table 1 for a list of significant items included in operating income.   All periods presented reflect the reclassification of KBR, Inc. to discontinued operations and the reclassification of certain expenses that were previously allocated to the segments and are now included in general corporate expenses. HALLIBURTON COMPANY Revenue and Operating Income Comparison By Geographic Region (Millions of dollars) (Unaudited)   Three Months Year Ended Three Months Ended Ended March 31, March 31, June 30, September 30, December 31, December 31,   2007  2006  2006  2006  2006  2006  Revenue: North America $ 1,672  $ 1,513  $ 1,541  $ 1,738  $ 1,666  $ 6,458  Latin America 404  351  355  390  418  1,514  Europe/Africa/CIS 783  607  694  721  838  2,860  Middle East/Asia 563  467  526  543  587  2,123  Total revenue $ 3,422  $ 2,938  $ 3,116  $ 3,392  $ 3,509  $ 12,955    Operating income: North America $ 494  $ 493  $ 481  $ 571  $ 539  $ 2,084  Latin America 75  55  68  82  95  300  Europe/Africa/CIS 149  100  135  138  214  587  Middle East/Asia 127  103  130  139  139  511  General corporate (57) (59) (54) (60) (64) (237) Total operating income $ 788  $ 692  $ 760  $ 870  $ 923  $ 3,245  Year Three Months Ended Ended 2005  March 31 June 30 September 30 December 31 December 31 Revenue: North America $ 1,059  $ 1,136  $ 1,270  $ 1,354  $ 4,819  Latin America 314  334  323  373  1,344  Europe/Africa/CIS 469  570  595  640  2,274  Middle East/Asia 342  431  409  481  1,663  Total revenue $ 2,184  $ 2,471  $ 2,597  $ 2,848  $ 10,100    Operating income: North America $ 364  $ 299  $ 359  $ 400  $ 1,422  Latin America 48  42  43  70  203  Europe/Africa/CIS 66  110  107  127  410  Middle East/Asia 57  93  82  108  340  General corporate (54) (59) (50) (48) (211) Total operating income $ 481  $ 485  $ 541  $ 657  $ 2,164    See Footnote Table 2 for a list of significant items included in operating income.   All periods presented reflect the reclassification of certain expenses that were previously allocated to the segments and are now included in general corporate expenses. Also, the results for Sakhalin have been reclassified from Middle East/Asia to Europe/Africa/CIS. FOOTNOTE TABLE 1   HALLIBURTON COMPANY Items Included in Income by Operating Segment (Millions of dollars except per share data) (Unaudited)   Three Months Ended Three Months Ended Three Months Ended Dec. 31, 2006 Dec. 31, 2005 March 31, 2005   After Tax   After Tax   After Tax Operating Income per Share Operating Income per Share Operating Income per Share Production Optimization: Gain on sale of lift boats $ 48  $ 0.03  $ –  $ –  $ –  $ –  Subsea 7, Inc. gain on sale –  –  –  –  110  0.08  Drilling and Formation Evaluation: Intellectual property settlement –  –    24  0.02    –  –  FOOTNOTE TABLE 2   HALLIBURTON COMPANY Items Included in Income by Geographic Region (Millions of dollars except per share data) (Unaudited)   Three Months Ended Three Months Ended Three Months Ended Dec. 31, 2006 Dec. 31, 2005 March 31, 2005   After Tax   After Tax   After Tax Operating Income per Share Operating Income per Share Operating Income per Share North America: Intellectual property settlement $ –  $ –  $ 12  $ 0.01  $ –  $ –  Subsea 7, Inc. gain on sale –  –  –  –  107  0.08  Latin America: Intellectual property settlement –  –  2  –  –  –  Europe/Africa/CIS: Gain on sale of lift boats 48  0.03  –  –  –  –  Intellectual property settlement –  –  6  0.01  –  –  Subsea 7, Inc. gain on sale –  –  –  –  3  –  Middle East/Asia: Intellectual property settlement –  –    4  –    –  –