Halliburton's Indonesia Deal Offers Minor Relief Amid Cautious International Guidance

What happened

Halliburton announced a partnership with Pertamina to revive aging oil fields in Indonesia, highlighting its advanced technologies in a key Asian market. However, recent SEC filings show international revenue fell 2% in 2025 and is guided to be flat in 2026, with declines in Saudi Arabia and Mexico offsetting growth in other regions. This deal, while strategically aligned with Halliburton's international growth bet, appears as a single project that does not reverse the broader trend of softening global E&P spending and competitive pricing pressures. Management has labeled 2026 a 'rebalancing' year, focusing on $400M in cost savings and a 30% capex cut to sustain free cash flow, even as North America revenue is expected to decline high-single digits. Investors should see this news as a modest positive that doesn't address core vulnerabilities, such as the need for FCF to hold above $1.8B to validate the current valuation.

Implication

In the near term, this deal may help support international revenue, potentially aiding in meeting the guided 'flat to modestly up' target for 2026. However, it fails to mitigate the significant headwinds from North America's projected decline and ongoing SAP-related expenses that compress margins. Halliburton's investment thesis relies heavily on delivering $400M in annualized cost savings and maintaining FCF around $1.7–1.9B, which this project alone cannot guarantee. Market optimism around such international wins risks overlooking the cautious filings that emphasize a rebalancing phase with limited earnings acceleration. Therefore, investors should remain patient, awaiting clearer signs of FCF durability and cost-savings flow-through before considering an entry, consistent with the WAIT rating.

Thesis delta

The Indonesia deal does not materially shift the investment thesis, as it is a single contract that doesn't alter the broader guidance for flat international revenue and declining North America activity. The core thesis remains that Halliburton's near-term upside depends on flawless execution of cost reductions and capital returns, not on isolated growth projects. This news reinforces the company's international focus but underscores the need for sustained FCF performance to drive value, rather than signaling a structural turnaround.