Halliburton's Indonesia Partnership Reinforces Strategy Amid Cautious Outlook

What happened

Halliburton announced a partnership with Pertamina to deploy advanced drilling, AI, and automation technologies to revive Indonesia's aging oil fields and boost output. This aligns with Halliburton's focus on international growth and technology-enabled services, as emphasized in the DeepValue report. However, the report indicates that international revenue faced declines in 2025 and is guided to be 'flat to modestly up' in 2026, with overall revenue in a 'rebalancing' year. While this deal could support modest growth in the Middle East/Asia region, it is unlikely to significantly offset projected high-single-digit declines in North America or alter near-term free cash flow dependencies. Thus, the news confirms strategic execution but does not change the cautious investment stance of waiting for better entry points or proof of sustained cost savings.

Implication

The deal with Pertamina showcases Halliburton's ability to secure international contracts, yet it represents only one project in a region with mixed performance and doesn't address broader revenue stability concerns. It fails to mitigate key risks from the DeepValue report, such as international revenue declining more than 3% in 2026 or the $400 million cost savings not translating into higher FCF. Free cash flow generation, critical for shareholder returns, still hinges on overall execution rather than isolated partnerships. Market sentiment might see a short-term boost, but at ~$34, the stock already prices in a mid-cycle recovery with limited near-term upside. Investors should await evidence that cost reductions lift FCF above $1.9 billion or a pullback to the ~$27 attractive entry before considering a position change.

Thesis delta

The news does not materially shift the investment thesis; it reinforces Halliburton's commitment to international growth but doesn't alleviate near-term concerns over revenue declines and FCF sustainability. The 'WAIT' rating and attractive entry at $27 remain appropriate, as the partnership lacks scale to significantly impact 2026 guidance or de-risk thesis breakers.