TEXT-S&P revises Halliburton outlook to stable

Overview
-- We view it as unlikely that Halliburton's aggregate losses
related to its role in the Macondo/Gulf of Mexico oil spill disaster of 2010
will approach levels that would significantly hurt the company.
-- Although Halliburton is experiencing some margin pressure in its core
North American oilfield services business, we expect its financial performance
to remain strong.
-- We have revised Halliburton's rating outlook to stable from negative
and affirmed the ratings on the company.
-- The stable outlook reflects our belief that court judgments or
litigation settlements related to the Macondo well incident are unlikely to
significantly affect the company and that it's unlikely Halliburton would
pursue large, debt financed acquisitions.

Rating Action
On May 17, 2012, Standard & Poor's Ratings Services affirmed its ratings on
Halliburton Co., including its 'A' corporate credit rating. We revised the
rating outlook to stable from negative.

Rationale
Halliburton faces significant potential exposure stemming from its role as a
contractor on the Deepwater Horizon drilling rig/Macondo well project that led
to the disastrous oil spill in the Gulf of Mexico in 2010--highlighting an
operating risk in the oilfield services business. The oil spill is the subject
of several ongoing government investigations, and Halliburton has also been
named in more than 400 civil suits. However, an affiliate of BP Ltd. and
certain other defendants in this litigation have in recent months entered into
settlement agreements for amounts that were significantly less than Standard &
Poor's initially assumed. Also, in January 2012, the court in the
multidistrict litigation proceeding held that BP is required to indemnify
Halliburton for certain third-party compensatory claims, or actual damages,
even if Halliburton were found to be grossly negligent. Moreover, at least to
date, the Department of Justice has not named Halliburton as a responsible
party in any civil or criminal action.

These matters continue to cast a shadow over Halliburton and the timing and
financial consequences of the ultimate resolution are highly uncertain. In our
view, Halliburton's total Macondo-related costs could ultimately significantly
exceed the $300 million loss contingency that the company recorded in the
first quarter of this year, but we believe that losses are unlikely to
approach the $3 billion that we had identified previously as a possible
trigger point for a downgrade.

The ratings on Houston-based Halliburton Co. reflect our view of the company's
"strong" business risk position within global oilfield services markets, owing
to its substantial geographic diversification, and broad and technologically
complex product and service offerings. The ratings also reflect our view of
the company's "modest" financial risk. The ratings take account of the
cyclical nature of the markets in which the company participates. As of March
31, 2012, Halliburton had about $5.6 billion in total adjusted debt, including
$800 million in Standard & Poor's adjustments for postretirement obligations
and operating lease obligations.

Halliburton is one of the three largest global oilfield service firms, in
terms of total revenues, competing closely with Schlumberger Ltd.
(A+/Stable/A-1) and Baker Hughes Inc. (A/Stable/A-1). The company offers a
comprehensive suite of products and services, encompassing pressure-pumping
services, integrated software and services, drilling tools and services,
logging and perforating technology, drill bits, fluids services, pressure
control services, and completion tools and services. The technology component
of its business is high, affording significant barriers to entry. Halliburton
provides services on both a discrete and integrated basis to customers that
include the majority of national, major, and independent oil companies
worldwide--with some degree of customer concentration being inevitable, given
the structure of the industry.

The key driver of demand in Halliburton's markets is the capital expenditure
of its customers, which in turn is mostly a function of customers'
expectations regarding oil and natural gas prices. Thus, Halliburton's
profitability was weaker from late 2008 through early 2010 than in prior
years--although profitability and cash flow metrics remained satisfactory.
Subsequently, its financial performance has rebounded significantly, in line
with higher crude oil prices.

Also, Halliburton has particularly benefited from rapidly growing demand in
the North American pressure-pumping market (well stimulation and cementing)
where it is the market share leader. This market--which has accounted for a
disproportionate share of Halliburton's growth in revenues over the past two
years--has been propelled by greatly expanded use of relatively new hydraulic
fracturing technology to exploit oil and gas shale deposits that previously
were not economical. The outlook for continuing demand growth remains
favorable. However, leading players in the hydraulic fracturing
business--including Halliburton--have been investing to expand their pressure
pumping capacity, raising the specter of overcapacity.

Given depressed natural gas prices, exploration and production customers are
undergoing a rapid shift toward a focus on oil-directed drilling. This is a
favorable longer-range development for Halliburton in that oil drilling
requires more intensive use of hydraulic fracturing than natural gas drilling.
However, the need to relocate equipment is hurting Halliburton's margins over
the short term. Cost inflation of certain critical raw materials, as well some
intensification of price competition, has also strained Halliburton's margins.
We believe this could continue, constraining the pace of Halliburton's
earnings compared with the past year. Moreover, hydraulic fracturing is
controversial, given allegations of ground water contamination, which
ultimately could result in stricter environmental regulations.

Broadly, recovery in Halliburton's international markets has lagged that in
North America, although trends have varied widely by country. Halliburton does
not bear country risk to the same extent as its integrated customers, given
the lesser degree of investment intensity for an oilfield services company
compared with a producer. However, the consequences of turmoil across North
Africa and the Middle East were nonetheless sufficient to impinge modestly on
Halliburton's financial results in 2011 and early 2012.

Even so, Halliburton's overall financial performance has continued to be very
strong. Halliburton's revenues increased 38% in 2011 compared with 2010, and
by a further 30% in the first quarter of 2012 compared with the same period in
2011. Its adjusted EBITDA totaled a robust $6.9 billion during the 12 months
ended March 31, 2012 (with a 26.3% EBITDA margin), up from $4.8 billion (24.6%
EBITDA margin) during the year-earlier period. We expect profitability and
cash flow in 2012 to remain robust, although some contraction in EBITDA
margins (perhaps by 300 to 400 basis points--to the low 20% range) could
offset the benefit of full-year revenue growth in excess of 10%. Halliburton
is benefiting from management's focus on enhancing operating efficiency,
including working capital management.

The company's financial risk profile benefits from moderate debt use. Thus, as
of March 31, 2012, adjusted debt to debt plus equity was 29%. Funds from
operations to total debt was 88% for the 12 months ended March 31, 2012; debt
to EBITDA was 0.8x; and EBITDA to interest was 22x--all indicative of a high
degree of earnings and cash flow protection for debtholders. Still, despite a
fairly low common dividend payout and a continuing hiatus in share
repurchases, surplus cash flow generation will likely be modest over the next
one to two years, given our expectation of relatively heavy capital
expenditures.

Liquidity
In our view, Halliburton's liquidity is "strong." Key elements of its
liquidity profile include:
-- Ready liquidity totaled $2.7 billion of cash and $100 million of
conservatively invested marketable securities as of March 31, 2012. These
amounts are larger than Halliburton typically holds, reflecting management's
caution regarding the Macondo matter. About $460 million of the cash was held
by foreign subsidiaries and would be subject to tax if repatriated.
-- An unsecured $2 billion revolving credit facility will mature in 2016.
As of March 31, 2012, the full amount of the revolving credit facility was
available. The company uses this facility, in part, to back up commercial
paper issuance, which has been minimal in recent years. This facility includes
no financial covenants or material adverse-change provisions.
-- There are no maturities of long-term debt over the next five years.
-- Operating cash flow should cover the budgeted capital expenditures of
about $3.5 billion to $4.0 billion in 2012 (in accordance with management's
most recent guidance).
-- The common stock dividend is relatively modest, consuming about $330
million per year at the recent payout rate. Halliburton has suspended share
repurchases amid the uncertainties of the Macondo situation, except in
conjunction with its employee stock programs.
-- Additional bolt-on acquisitions over the next one to two years could
necessitate some external funding or drawdown of liquidity reserves, as would
also be the case with larger acquisitions or sizeable Macondo-related payouts.
-- Related to its operations, Halliburton has agreements with financial
institutions under which approximately $1.8 billion of letters of credit, bank
guarantees, or surety bonds were outstanding as of March 31, 2012. Some of the
outstanding letters of credit have triggering events that would entitle banks
to require cash collateralization. We view material cash draws related to
these arrangements as highly unlikely.

Outlook
The outlook is stable. We believe that court judgments or litigation
settlements related to the Macondo well incident are unlikely to reach a level
that would lead us to lower the rating. Similarly, we consider it unlikely
that Halliburton would pursue large, debt financed acquisitions. Although,
particularly as uncertainties related to its Macondo exposure are resolved,
Halliburton could adopt a less conservative financial posture than previously
and resume share repurchases, we expect Halliburton to maintain adjusted funds
from operations to total debt well in excess of 60%. We would consider
lowering the rating if we came to expect funds from operations to total debt
to be less than 50% for a period greater than one year. Particularly given our
view that Halliburton's capital spending could well remain aggressive over the
next several years, and given the possibility that the company could undertake
a large debt-financed acquisition at some point, we believe there is little
upgrade potential.

Related Criteria And Research
-- Standard & Poor's Lowers Its U.S. Natural Gas Price Assumptions; Oil
Price Assumptions Are Unchanged, April 18, 2012
-- Liquidity Descriptors For Global Corporate Issuers, Sept. 28, 2011
-- Criteria Methodology: Business Risk/Financial Risk Matrix Expanded,
May 27, 2009
-- Corporate Ratings Criteria 2008, April 15, 2008

Ratings List
Ratings Affirmed; Outlook Action
To From
Halliburton Co.
Corporate Credit Rating A/Stable/A-1 A/Negative/A-1

Ratings Affirmed

Halliburton Co.
Senior Unsecured A
Commercial Paper A-1