Edgar Filing: HALLIBURTON CO

ed10k2008_final.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2008

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ______ to ______

Commission File Number 001-03492

HALLIBURTON COMPANY

(Exact name of registrant as specified in its charter)

Delaware	75-2677995
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
5 Houston Center
1401 McKinney, Suite 2400
Houston, Texas 77010
(Address of principal executive offices)
Telephone Number – Area code (713) 759-2600

Securities registered pursuant to Section 12(b) of the Act:

	Name of each exchange on
Title of each class	which registered
Common Stock par value $2.50 per share	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes X No ______

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes No X

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes X No ______

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.:

Large accelerated filer [X]	Accelerated filer [ ]
Non-accelerated filer [ ]	Smaller reporting company [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No X

The aggregate market value of Common Stock held by nonaffiliates on June 30, 2008, determined using the per share closing price on the New York Stock Exchange Composite tape of $53.07 on that date was approximately $46,371,000,000.

As of February 13, 2009, there were 897,174,201 shares of Halliburton Company Common Stock, $2.50 par value per share, outstanding.

Portions of the Halliburton Company Proxy Statement for our 2009 Annual Meeting of Stockholders (File No. 001-03492) are incorporated by reference into Part III of this report.

HALLIBURTON COMPANY

Index to Form 10-K

For the Year Ended December 31, 2008

PART I		PAGE
Item 1.	Business	1
Item 1(a).	Risk Factors	6
Item 1(b).	Unresolved Staff Comments	6
Item 2.	Properties	6
Item 3.	Legal Proceedings	6
Item 4.	Submission of Matters to a Vote of Security Holders	6
EXECUTIVE OFFICERS OF THE REGISTRANT		7
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters,
	and Issuer Purchases of Equity Securities	10
Item 6.	Selected Financial Data	11
Item 7.	Management’s Discussion and Analysis of Financial Condition and
	Results of Operations	11
Item 7(a).	Quantitative and Qualitative Disclosures About Market Risk	11
Item 8.	Financial Statements and Supplementary Data	12
Item 9.	Changes in and Disagreements with Accountants on Accounting and
	Financial Disclosure	12
Item 9(a).	Controls and Procedures	12
Item 9(b).	Other Information	12
MD&A AND FINANCIAL STATEMENTS
Management’s Discussion and Analysis of Financial Condition and Results of Operations		13
Management’s Report on Internal Control Over Financial Reporting		52
Reports of Independent Registered Public Accounting Firm		53
Consolidated Statements of Operations		55
Consolidated Balance Sheets		56
Consolidated Statements of Shareholders’ Equity		57
Consolidated Statements of Cash Flows		58
Notes to Consolidated Financial Statements		59
Selected Financial Data (Unaudited)		93
Quarterly Data and Market Price Information (Unaudited)		94
PART III
Item 10.	Directors, Executive Officers, and Corporate Governance	95
Item 11.	Executive Compensation	95
Item 12(a).	Security Ownership of Certain Beneficial Owners	95
Item 12(b).	Security Ownership of Management	95
Item 12(c).	Changes in Control	96
Item 12(d).	Securities Authorized for Issuance Under Equity Compensation Plans	96
Item 13.	Certain Relationships and Related Transactions, and Director
	Independence	96
Item 14.	Principal Accounting Fees and Services	96
PART IV
Item 15.	Exhibits and Financial Statement Schedules	97
SIGNATURES		107

(i)

PART I

Item 1. Business.

General description of business

Halliburton Company’s predecessor was established in 1919 and incorporated under the laws of the State of Delaware in 1924. Halliburton Company provides a variety of services and products to customers in the energy industry. We operate under two divisions, which form the basis for the two operating segments we report: the Completion and Production segment and the Drilling and Evaluation segment. See Note 4 to the consolidated financial statements for financial information about our business segments.

In November 2006, KBR, Inc. (KBR) which at the time was our wholly-owned subsidiary, completed an initial public offering. During the second quarter of 2007, we completed the separation of KBR from us and recorded a gain on the disposition of KBR of approximately $933 million, net of tax and the estimated fair value of the indemnities and guarantees provided to KBR, which is included in income from discontinued operations in the consolidated statements of operations for prior years. See Note 2 to the consolidated financial statements for further information relating to the specific indemnities and guarantees provided to KBR upon separation. During 2008, we recorded $420 million, net of tax, as a loss from discontinued operations to reflect the resolution of the Department of Justice (DOJ) and Securities and Exchange Commission (SEC) investigations related to the Foreign Corrupt Practices Act (FCPA) and our most recent assumptions regarding the value of other indemnities and guarantees provided to KBR. See Note 10 to the consolidated financial statements for further information related to the FCPA investigations.

Description of services and products

We offer a broad suite of services and products to customers through our two business segments for the exploration, development, and production of oil and gas. We serve major, national, and independent oil and gas companies throughout the world. The following summarizes our services and products for each business segment.

Completion and Production

Our Completion and Production segment delivers cementing, stimulation, intervention, and completion services. This segment consists of production enhancement services, completion tools and services, and cementing services.

Production enhancement services include stimulation services, pipeline process services, sand control services, and well intervention services. Stimulation services optimize oil and gas reservoir production through a variety of pressure pumping services, nitrogen services, and chemical processes, commonly known as hydraulic fracturing and acidizing. Pipeline process services include pipeline and facility testing, commissioning, and cleaning via pressure pumping, chemical systems, specialty equipment, and nitrogen, which are provided to the midstream and downstream sectors of the energy business. Sand control services include fluid and chemical systems and pumping services for the prevention of formation sand production. Well intervention services enable live well intervention and continuous pipe deployment capabilities through the use of hydraulic workover systems and coiled tubing tools and services.

Completion tools and services include subsurface safety valves and flow control equipment, surface safety systems, packers and specialty completion equipment, intelligent completion systems, expandable liner hanger systems, sand control systems, well servicing tools, and reservoir performance services. Reservoir performance services include testing tools, real-time reservoir analysis, and data acquisition services.

Cementing services involve bonding the well and well casing while isolating fluid zones and maximizing wellbore stability. Our cementing service line also provides casing equipment.

Drilling and Evaluation

Our Drilling and Evaluation segment provides field and reservoir modeling, drilling, evaluation, and well construction solutions that enable customers to model, measure, and optimize their well placement, stability, and reservoir evaluation activities. This segment consists of fluid services, drilling services, drill bits, wireline and perforating services, software and asset solutions, and project management services.

Fluid services provides drilling fluid systems, performance additives, completion fluids, solids control, specialized testing equipment, and waste management services for oil and gas drilling, completion, and workover operations.

Drilling services provides drilling systems and services. These services include directional and horizontal drilling, measurement-while-drilling, logging-while-drilling, surface data logging, multilateral systems, underbalanced applications, and rig site information systems. Our drilling systems offer directional control for precise wellbore placement while providing important measurements about the characteristics of the drill string and geological formations while drilling wells. Real-time operating capabilities enable the monitoring of well progress and aid decision-making processes.

Drill bits provides roller cone rock bits, fixed cutter bits, hole enlargement and related downhole tools and services used in drilling oil and gas wells. In addition, coring equipment and services are provided to acquire cores of the formation drilled for evaluation.

Wireline and perforating services include open-hole wireline services that provide information on formation evaluation, including resistivity, porosity, density, rock mechanics, and fluid sampling. Also offered are cased-hole and slickline services, which provide cement bond evaluation, reservoir monitoring, pipe evaluation, pipe recovery, mechanical services, well intervention, perforating, and borehole seismic services. Perforating services include tubing-conveyed perforating services and products. Borehole seismic services include fracture analysis and mapping.

Software and asset solutions is a supplier of integrated exploration, drilling, and production software information systems, as well as consulting and data management services for the upstream oil and gas industry.

The Drilling and Evaluation segment also provides oilfield project management and integrated solutions to independent, integrated, and national oil companies. These offerings make use of all of our oilfield services, products, technologies, and project management capabilities to assist our customers in optimizing the value of their oil and gas assets.

Acquisitions and dispositions

In July 2008, we acquired the remaining 49% equity interest in WellDynamics from Shell Technology Ventures Fund 1 B.V. (STV Fund), resulting in our 100% ownership of WellDynamics. WellDynamics is a provider of intelligent well completion technology and its results of operations are included in our Completion and Production segment.

In July 2007, we acquired the entire share capital of PSL Energy Services Limited (PSLES), a leading eastern hemisphere provider of process, pipeline, and well intervention services. PSLES has operational bases in the United Kingdom, Norway, the Middle East, Azerbaijan, Algeria, and Asia Pacific. We paid $335 million for PSLES, consisting of $331 million in cash and $4 million in debt assumed. We have recorded goodwill of $158 million and intangible assets of $61 million associated with the acquisition. Beginning in August 2007, PSLES’s results of operations are included in our Completion and Production segment.

As a part of our sale of Dresser Equipment Group in 2001, we retained a small equity interest in Dresser Inc.’s Class A common stock. Dresser Inc. was later reorganized as Dresser, Ltd., and we exchanged our shares for shares of Dresser, Ltd. In May 2007, we sold our remaining interest in Dresser, Ltd. We received $70 million in cash from the sale and recorded a $49 million gain.

In January 2007, we acquired all intellectual property, current assets, and existing business associated with Calgary-based Ultraline Services Corporation (Ultraline), a division of Savanna Energy Services Corp. Ultraline is a provider of wireline services in Canada. We paid approximately $178 million for Ultraline and recorded goodwill of $124 million and intangible assets of $41 million. Beginning in February 2007, Ultraline’s results of operations are included in our Drilling and Evaluation segment.

Business strategy

Our business strategy is to secure a distinct and sustainable competitive position as a pure-play oilfield service company by delivering products and services to our customers that maximize their production and recovery and realize proven reserves from difficult environments. Our objectives are to:

create a balanced portfolio of products and services supported by global infrastructure and anchored by technology innovation with a well-integrated digital strategy to further differentiate our company;

reach a distinguished level of operational excellence that reduces costs and creates real value from everything we do;

preserve a dynamic workforce by being a preferred employer to attract, develop, and retain the best global talent; and

uphold the ethical and business standards of the company and maintain the highest standards of health, safety, and environmental performance.

Markets and competition

We are one of the world’s largest diversified energy services companies. Our services and products are sold in highly competitive markets throughout the world. Competitive factors impacting sales of our services and products include:

price;

service delivery (including the ability to deliver services and products on an “as needed, where needed” basis);

health, safety, and environmental standards and practices;

service quality;

global talent retention;

knowledge of the reservoir;

product quality;

warranty; and

technical proficiency.

We conduct business worldwide in approximately 70 countries. The business operations of our divisions are organized around four primary geographic regions: North America, Latin America, Europe/Africa/CIS, and Middle East/Asia. In 2008, based on the location of services provided and products sold, 43% of our consolidated revenue was from the United States. In 2007 and 2006, 44% and 45% of our consolidated revenue was from the United States. No other country accounted for more than 10% of our consolidated revenue during these periods. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Business Environment and Results of Operations” and Note 4 to the consolidated financial statements for additional financial information about geographic operations in the last three years. Because the markets for our services and products are vast and cross numerous geographic lines, a meaningful estimate of the total number of competitors cannot be made. The industries we serve are highly competitive, and we have many substantial competitors. Largely all of our services and products are marketed through our servicing and sales organizations.

Operations in some countries may be adversely affected by unsettled political conditions, acts of terrorism, civil unrest, expropriation or other governmental actions, exchange control problems, and highly inflationary currencies. We believe the geographic diversification of our business activities reduces the risk that loss of operations in any one country would be material to the conduct of our operations taken as a whole.

Information regarding our exposure to foreign currency fluctuations, risk concentration, and financial instruments used to minimize risk is included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Instrument Market Risk” and in Note 14 to the consolidated financial statements.

Customers

Our revenue from continuing operations during the past three years was derived from the sale of services and products to the energy industry. No customer represented more than 10% of consolidated revenue in any period presented.

Raw materials

Raw materials essential to our business are normally readily available. Market conditions can trigger constraints in the supply of certain raw materials, such as sand, cement, and specialty metals. We are always seeking ways to ensure the availability of resources, as well as manage costs of raw materials. Our procurement department is using our size and buying power through several programs designed to ensure that we have access to key materials at competitive prices.

Research and development costs

We maintain an active research and development program. The program improves existing products and processes, develops new products and processes, and improves engineering standards and practices that serve the changing needs of our customers. Our expenditures for research and development activities were $326 million in 2008, $301 million in 2007, and $254 million in 2006, of which over 96% was company-sponsored in each year.

Patents

We own a large number of patents and have pending a substantial number of patent applications covering various products and processes. We are also licensed to utilize patents owned by others. We do not consider any particular patent to be material to our business operations.

Seasonality

On an overall basis, our operations are not generally affected by seasonality. Weather and natural phenomena can temporarily affect the performance of our services, but the widespread geographical locations of our operations serve to mitigate those effects. Examples of how weather can impact our business include:

the severity and duration of the winter in North America can have a significant impact on gas storage levels and drilling activity for natural gas;

the timing and duration of the spring thaw in Canada directly affects activity levels due to road restrictions;

typhoons and hurricanes can disrupt coastal and offshore operations; and

severe weather during the winter months normally results in reduced activity levels in the North Sea and Russia.

In addition, due to higher spending near the end of the year by customers for software and completion tools and services, software and asset solutions and completion tools results of operations are generally stronger in the fourth quarter of the year than at the beginning of the year.

Employees

At December 31, 2008, we employed approximately 57,000 people worldwide compared to approximately 51,000 at December 31, 2007. At December 31, 2008, approximately 14% of our employees were subject to collective bargaining agreements. Based upon the geographic diversification of these employees, we believe any risk of loss from employee strikes or other collective actions would not be material to the conduct of our operations taken as a whole.

Environmental regulation

We are subject to numerous environmental, legal, and regulatory requirements related to our operations worldwide. In the United States, these laws and regulations include, among others:

the Comprehensive Environmental Response, Compensation, and Liability Act;

the Resource Conservation and Recovery Act;

the Clean Air Act;

the Federal Water Pollution Control Act; and

the Toxic Substances Control Act.

In addition to the federal laws and regulations, states and other countries where we do business may have numerous environmental, legal, and regulatory requirements by which we must abide. We evaluate and address the environmental impact of our operations by assessing and remediating contaminated properties in order to avoid future liabilities and comply with environmental, legal, and regulatory requirements. On occasion, we are involved in specific environmental litigation and claims, including the remediation of properties we own or have operated, as well as efforts to meet or correct compliance-related matters. Our Health, Safety, and Environment group has several programs in place to maintain environmental leadership and to prevent the occurrence of environmental contamination.

We do not expect costs related to these remediation requirements to have a material adverse effect on our consolidated financial position or our results of operations.

Working capital

We fund our business operations through a combination of available cash and equivalents, short-term investments, and cash flow generated from operations. In addition, our revolving credit facilities are available for additional working capital needs.

Web site access

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act of 1934 are made available free of charge on our internet web site at www.halliburton.com as soon as reasonably practicable after we have electronically filed the material with, or furnished it to, the SEC. The public may read and copy any materials we have filed with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington, DC 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains an internet site that contains our reports, proxy and information statements, and our other SEC filings. The address of that site is www.sec.gov. We have posted on our web site our Code of Business Conduct, which applies to all of our employees and Directors and serves as a code of ethics for our principal executive officer, principal financial officer, principal accounting officer, and other persons performing similar functions. Any amendments to our Code of Business Conduct or any waivers from provisions of our Code of Business Conduct granted to the specified officers above are disclosed on our web site within four business days after the date of any amendment or waiver pertaining to these officers. There have been no waivers from provisions of our Code of Business Conduct for the years presented, 2008, 2007, or 2006. The CEO and CFO certifications required by Section 302 of the Sarbanes-Oxley Act of 2002 have been filed as exhibits to our Form 10-K. We have also submitted the Annual CEO Certification to the New York Stock Exchange.

Item 1(a). Risk Factors.

Information related to risk factors is described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations— Forward-Looking Information and Risk Factors.”

Item 1(b). Unresolved Staff Comments.

None.

Item 2. Properties.

We own or lease numerous properties in domestic and foreign locations. The following locations represent our major facilities and corporate offices.

Location	Owned/Leased	Description
Operations:
Completion and Production segment:
Johor, Malaysia	Leased	Manufacturing facility
Monterrey, Mexico	Leased	Manufacturing facility
Sao Jose dos Campos, Brazil	Leased	Manufacturing facility
Stavanger, Norway	Leased	Research and development laboratory

Drilling and Evaluation segment:
Alvarado, Texas	Owned/Leased	Manufacturing facility
Houston, Texas	Owned	Manufacturing, technology, and campus facilities
Singapore	Leased	Manufacturing and technology facility
The Woodlands, Texas	Leased	Manufacturing facility

Shared facilities:
Carrollton, Texas	Owned	Manufacturing facility
Duncan, Oklahoma	Owned	Manufacturing, technology, and campus facilities
Houston, Texas	Owned	Campus facility
Houston, Texas	Leased	Campus facility
Pune, India	Leased	Technology facility

Corporate:
Houston, Texas	Leased	Corporate executive offices
Dubai, United Arab Emirates	Leased	Corporate executive offices

All of our owned properties are unencumbered.

In addition, we have 133 international and 103 United States field camps from which we deliver our services and products. We also have numerous small facilities that include sales offices, project offices, and bulk storage facilities throughout the world.

We believe all properties that we currently occupy are suitable for their intended use.

Item 3. Legal Proceedings.

Information related to various commitments and contingencies is described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Forward-Looking Information and Risk Factors” and in Note 10 to the consolidated financial statements.

Item 4. Submission of Matters to a Vote of Security Holders.

There were no matters submitted to a vote of security holders during the fourth quarter of 2008.

Executive Officers of the Registrant

The following table indicates the names and ages of the executive officers of Halliburton Company as of February 13, 2009, including all offices and positions held by each in the past five years:

Name and Age	Offices Held and Term of Office
Evelyn M. Angelle	Vice President, Corporate Controller, and Principal Accounting Officer of
(Age 41)	Halliburton Company, since January 2008
	Vice President, Operations Finance of Halliburton Company,
	December 2007 to January 2008
	Vice President, Investor Relations of Halliburton Company,
	April 2005 to November 2007
	Assistant Controller of Halliburton Company, April 2003 to March 2005

James S. Brown	President, Western Hemisphere of Halliburton Company, since January 2008
(Age 54)	Senior Vice President, Western Hemisphere of Halliburton Company,
	June 2006 to December 2007
	Senior Vice President, United States Region of Halliburton Company,
	December 2003 to June 2006
	Vice President, Western Area of Halliburton Company, November 2003
	to December 2003

* Albert O. Cornelison, Jr.	Executive Vice President and General Counsel of Halliburton Company,
(Age 59)	since December 2002
	Director of KBR, Inc., June 2006 to April 2007

C. Christopher Gaut	President, Drilling and Evaluation Division of Halliburton Company,
(Age 52)	since January 2008
	Director of KBR, Inc., March 2006 to April 2007
	Executive Vice President and Chief Financial Officer of Halliburton Company,
	March 2003 to December 2007

Name and Age	Offices Held and Term of Office
David S. King	President, Completion and Production Division of Halliburton Company,
(Age 52)	since January 2008
	Senior Vice President, Completion and Production Division of Halliburton
	Company, July 2007 to December 2007
	Senior Vice President, Production Optimization of Halliburton Company,
	January 2007 to July 2007
	Senior Vice President, Eastern Hemisphere of Halliburton Energy Services
	Group, July 2006 to December 2006
	Senior Vice President, Global Operations of Halliburton Energy Services
	Group, July 2004 to July 2006
	Vice President, Production Optimization of Halliburton Energy Services
	Group, May 2003 to July 2004

* David J. Lesar	Chairman of the Board, President, and Chief Executive Officer of Halliburton
(Age 55)	Company, since August 2000

Ahmed H. M. Lotfy	President, Eastern Hemisphere of Halliburton Company, since January 2008
(Age 54)	Senior Vice President, Eastern Hemisphere of Halliburton Company,
	January 2007 to December 2007
	Vice President, Africa Region of Halliburton Company, January 2005 to
	December 2006
	Vice President, North Africa Region of Halliburton Company,
	June 2002 to December 2004

* Mark A. McCollum	Executive Vice President and Chief Financial Officer of Halliburton Company,
(Age 49)	since January 2008
	Director of KBR, Inc., June 2006 to April 2007
	Senior Vice President and Chief Accounting Officer of Halliburton Company,
	August 2003 to December 2007

Craig W. Nunez	Senior Vice President and Treasurer of Halliburton Company,
(Age 47)	since January 2007
	Vice President and Treasurer of Halliburton Company, February 2006
	to January 2007
	Treasurer of Colonial Pipeline Company, November 1999 to January 2006

Name and Age	Offices Held and Term of Office
* Lawrence J. Pope	Executive Vice President of Administration and Chief Human Resources Officer
(Age 40)	of Halliburton Company, since January 2008
	Vice President, Human Resources and Administration of Halliburton Company,
	January 2006 to December 2007
	Senior Vice President, Administration of Kellogg Brown & Root, Inc.,
	August 2004 to January 2006
	Director, Finance and Administration for Drilling and Formation Evaluation
	Division of Halliburton Energy Services Group, July 2003 to August 2004

* Timothy J. Probert	Executive Vice President, Strategy and Corporate Development of Halliburton
(Age 57)	Company, since January 2008
	Senior Vice President, Drilling and Evaluation of Halliburton Company,
	July 2007 to December 2007
	Senior Vice President, Drilling Evaluation and Digital Solutions of Halliburton
	Company, May 2006 to July 2007
	Vice President, Drilling and Formation Evaluation of Halliburton Company,
	January 2003 to May 2006

* Members of the Policy Committee of the registrant.

There are no family relationships between the executive officers of the registrant or between any director and any executive officer of the registrant.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities.

Halliburton Company’s common stock is traded on the New York Stock Exchange. Information related to the high and low market prices of common stock and quarterly dividend payments is included under the caption “Quarterly Data and Market Price Information” on page 94 of this annual report. Cash dividends on common stock in the amount of $0.09 per share were paid in March, June, September, and December of 2008 and June, September, and December of 2007. Cash dividends on common stock in the amount of $0.075 per share were paid in March of 2007. Our Board of Directors intends to consider the payment of quarterly dividends on the outstanding shares of our common stock in the future. The declaration and payment of future dividends, however, will be at the discretion of the Board of Directors and will depend upon, among other things, future earnings, general financial condition and liquidity, success in business activities, capital requirements, and general business conditions.

The following graph and table compare total shareholder return on our common stock for the five-year period ended December 31, 2008, with the Standard & Poor’s 500 Stock Index and the Standard & Poor’s Energy Composite Index over the same period. This comparison assumes the investment of $100 on December 31, 2003, and the reinvestment of all dividends. The shareholder return set forth is not necessarily indicative of future performance.

	December 31
	2003		2004		2005		2006		2007		2008
Halliburton	$	100.00	$	153.28	$	244.43	$	247.14	$	304.79	$	147.95
Standard & Poor’s 500 Stock Index		100.00		110.88		116.33		134.70		142.10		89.53
Standard & Poor’s Energy Composite Index		100.00		131.54		172.80		214.63		288.47		187.88

At February 13, 2009, there were 18,585 shareholders of record. In calculating the number of shareholders, we consider clearing agencies and security position listings as one shareholder for each agency or listing.

Following is a summary of repurchases of our common stock during the three-month period ended December 31, 2008.

					Total Number of Shares
					Purchased as Part of
	Total Number of Shares		Average Price Paid per		Publicly Announced
Period	Purchased (a)		Share		Plans or Programs
October 1-31		36,642	$	26.20		–
November 1-30		12,264	$	18.46		–
December 1-31		66,986	$	15.32		–
Total		115,892	$	19.09		–

(a)

All of the 115,892 shares purchased during the three-month period ended December 31, 2008 were acquired from employees in connection with the settlement of income tax and related benefit withholding obligations arising from vesting in restricted stock grants. These shares were not part of a publicly announced program to purchase common shares.

Item 6. Selected Financial Data.

Information related to selected financial data is included on page 93 of this annual report.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation.

Information related to Management’s Discussion and Analysis of Financial Condition and Results of Operations is included on pages 13 through 51 of this annual report.

Item 7(a). Quantitative and Qualitative Disclosures About Market Risk.

Information related to market risk is included in Management’s Discussion and Analysis of Financial Condition and Results of Operations under the caption “Financial Instrument Market Risk” on page 37 of this annual report.

Item 8. Financial Statements and Supplementary Data.

	Page No.
Management’s Report on Internal Control Over Financial Reporting	52
Reports of Independent Registered Public Accounting Firm	53
Consolidated Statements of Operations for the years ended December 31, 2008, 2007, and 2006	55
Consolidated Balance Sheets at December 31, 2008 and 2007	56
Consolidated Statements of Shareholders’ Equity for the years ended	57
December 31, 2008, 2007, and 2006
Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2007, and 2006	58
Notes to Consolidated Financial Statements	59
Selected Financial Data (Unaudited)	93
Quarterly Data and Market Price Information (Unaudited)	94

The related financial statement schedules are included under Part IV, Item 15 of this annual report.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9(a). Controls and Procedures.

In accordance with the Securities Exchange Act of 1934 Rules 13a-15 and 15d-15, we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2008 to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Our disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

There has been no change in our internal control over financial reporting that occurred during the three months ended December 31, 2008 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

See page 52 for Management’s Report on Internal Control Over Financial Reporting and page 54 for Report of Independent Registered Public Accounting Firm on its assessment of our internal control over financial reporting.

Item 9(b). Other Information.

None.

HALLIBURTON COMPANY

Management’s Discussion and Analysis of Financial Condition and Results of Operations

EXECUTIVE OVERVIEW

Organization

We are a leading provider of products and services to the energy industry. We serve 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. Activity levels within our operations are significantly impacted by spending on upstream exploration, development, and production programs by major, national, and independent oil and natural gas companies. We report our results under two segments, Completion and Production and Drilling and Evaluation:

our Completion and Production segment delivers cementing, stimulation, intervention, and completion services. The segment consists of production enhancement services, completion tools and services, and cementing services; and

our Drilling and Evaluation segment provides field and reservoir modeling, drilling, evaluation, and precise wellbore placement solutions that enable customers to model, measure, and optimize their well construction activities. The segment consists of fluid services, drilling services, drill bits, wireline and perforating services, software and asset solutions, and project management services.

The business operations of our segments are organized around four primary geographic regions: North America, Latin America, Europe/Africa/CIS, and Middle East/Asia. We have significant manufacturing operations in various locations, including, but not limited to, the United States, Canada, the United Kingdom, Continental Europe, Malaysia, Mexico, Brazil, and Singapore. With approximately 57,000 employees, we operate in approximately 70 countries around the world, and our corporate headquarters are in Houston, Texas and Dubai, United Arab Emirates.

Financial results

During 2008, we produced revenue of $18.3 billion and operating income of $4.0 billion, reflecting an operating margin of 22%. Revenue increased $3.0 billion or 20% over 2007, while operating income improved $512 million or 15% over 2007. Consistent with our initiative to grow our non-North America operations, we experienced 22% revenue growth and 26% operating income growth outside of North America in 2008 compared to 2007. Revenue from our Latin America region increased 35% to $2.4 billion, and operating income increased 49% to $521 million in 2008 compared to 2007. Our Middle East/Asia region also returned revenue and operating income growth in excess of 20% in 2008 compared to 2007.

Business outlook

We continue to believe in the strength of the long-term fundamentals of our business. However, due to the financial crisis that developed in mid-2008, the ensuing negative impact on credit availability, and the current excess supply of oil and natural gas, the near- and mid-term outlook for our business and the industry remains uncertain. Forecasting the depth and length of the current recession and its impact on the declining demand for energy is challenging due to the many factors involved.

Although prices and margins had started to stabilize in North America during the first nine months of 2008, a significant reduction in activity beginning in December of 2008 and a corresponding drop in the United States rig count from the end of the third quarter of 2008 have reversed this trend. Pricing declines are now occurring due to excess equipment and customer requests for discounts on existing work. In 2009, rig counts have continued to fall and as of February 13, 2009 are approximately 34% below 2008 highs. Capital expenditure adjustments from our customers remain fluid as they adjust their spending in response to a continued drop in commodity price fundamentals and lack of readily available credit. As a result, we are seeing activity declines intensify and expect activity declines for North America land to accelerate in the first quarter of 2009. We also anticipate severe margin contraction to occur worldwide throughout 2009. Outside of North America, declining oil prices have caused our customers to defer many of their new projects. Operators have announced a decline in spending in 2009, and we anticipate severe margin contraction throughout 2009. Several areas have been affected by capital access issues that have constrained the ability of some of our independent, upstream customers to fund their programs. Our larger customers are deferring several platform-based projects until they see commodity price stabilization.

In 2009, we will focus on:

minimizing discretionary spending;

lowering our costs from vendors;

reducing headcount in locations experiencing significant activity declines;

focusing on working capital management and managing our balance sheet to maximize our financial flexibility;

- continuing the globalization of our manufacturing and supply chain processes;

leveraging our technologies to provide our customers with the ability to more efficiently drill and complete their wells. To that end, we opened one international research and development center with global technology and training missions in 2007 and two in 2008;

continuing to deploy our packaged services strategy that creates an efficiency model for our customers in the development of their assets;

expanding our business with national oil companies, including preparing for a shift to increased use of our integrated project management services;

continuing to pursue strategic acquisitions that enhance our technological position and our product and service portfolio in key areas, such as the following acquisitions in 2008:

in October 2008, we acquired the assets of Pinnacle Technologies, Inc. (Pinnacle), including the Pinnacle brand from CARBO Ceramics Inc. Pinnacle is a provider of microseismic fracture mapping services and tiltmeter mapping services;

in July 2008, we acquired the remaining 49% equity interest in WellDynamics B.V. (WellDynamics) from Shell Technology Ventures Fund 1 B.V. (STV Fund). We now own 100% of WellDynamics, a provider of intelligent well completion technology;

in June 2008, we acquired all the intellectual property and assets of Protech Centerform, a provider of casing centralization services; and

in May 2008, we acquired all intellectual property, assets, and existing business of Knowledge Systems Inc. (KSI), a leading provider of combined geopressure and geomechanical analysis software and services.

Our operating performance is described in more detail in “Business Environment and Results of Operations.”

Financial markets, liquidity, and capital resources

In the latter half of 2008 and so far in 2009, the equity, credit, and commodity markets have seen unprecedented volatility. While this has created certain additional risks for our business, we believe we have invested our cash balances conservatively, reduced our leverage, and secured sufficient short-term credit capacity to help mitigate any near-term, negative impact on our operations. During the third quarter of 2008, we issued an aggregate amount of $1.2 billion in senior notes and settled the principal and conversion premium on our 3.125% convertible senior notes. For additional information, see “Liquidity and Capital Resources”, “Risk Factors”, Note 9 to our consolidated financial statements, and “Business Environment and Results of Operations.”

Foreign Corrupt Practices Act (FCPA) investigations

Resolution of the DOJ and SEC FCPA investigations has resulted in additional charges in 2008 to discontinued operations. See Note 10 to our consolidated financial statements and “Risk Factors” for further information.

LIQUIDITY AND CAPITAL RESOURCES

We ended 2008 with cash and equivalents of $1.1 billion compared to $1.8 billion at December 31, 2007.

Significant sources of cash

Cash flows from operating activities contributed $2.7 billion to cash in 2008. Growth in revenue and operating income was attributable to higher customer demand and increased service intensity due to a trend toward exploration and exploitation of more complex reservoirs.

In September 2008, we issued senior notes due 2038 totaling $800 million and senior notes due 2018 totaling $400 million, which were used to pay the principal amount of our 3.125% convertible senior notes.

Early in 2008, we sold approximately $388 million of marketable securities, consisting of auction-rate securities and variable-rate demand notes.

Further available sources of cash. We have an unsecured $1.2 billion five-year revolving credit facility expiring in 2012 to provide commercial paper support, general working capital, and credit for other corporate purposes. There were no cash drawings under the facility as of December 31, 2008.

In October of 2008, we entered into an additional unsecured, six-month revolving credit facility, with current commitments of $400 million, in order to give us additional liquidity and for other general corporate purposes. There were no cash drawings under the facility as of December 31, 2008.

Significant uses of cash

Our 3.125% convertible senior notes due July 2023 became redeemable at our option on July 15, 2008. On July 30, 2008, we gave notice of redemption on the convertible notes. In lieu of redemption, the holders of the convertible notes could convert each $1,000 principal amount of convertible notes into 53.4069 shares of our common stock. Substantially all of the holders timely elected to convert during the third quarter of 2008. Upon conversion, we settled the principal amount of our convertible notes in cash and the premium on our notes with a combination of $693 million in cash and approximately $840 million, or 20 million shares, of our treasury stock.

Capital expenditures were $1.8 billion in 2008, with increased focus toward building infrastructure and adding service equipment in support of our expanding operations outside of North America. Capital expenditures were predominantly made in the drilling services, production enhancement, cementing, and wireline and perforating product service lines.

During 2008, we repurchased approximately 13 million shares of our common stock under our share repurchase program at a cost of approximately $481 million at an average price of $36.61 per share.

We paid $319 million in dividends to our shareholders in 2008.

We repaid $150 million of medium term notes, which matured in December 2008.

Future uses of cash. We have approximately $1.8 billion remaining available under our share repurchase authorization, which may be used for open market share purchases.

In 2009, we believe we will maintain our capital expenditures up to 2008 levels but will monitor our customers' activity and make reductions as necessary. The capital expenditures plan for 2009 is primarily directed toward our production enhancement, drilling services, wireline and perforating, and cementing product service lines and toward retiring old equipment to replace it with new equipment to improve our fleet reliability. We are currently exploring opportunities for acquisitions that will enhance or augment our current portfolio of products and services, including those with unique technologies or distribution networks in areas where we do not already have large operations.

As a result of the resolution of the DOJ and SEC FCPA investigations, we will pay a total of $559 million over the next two years under the settlements and indemnities provided to KBR upon separation. See Notes 2 and 10 to our consolidated financial statements for more information.

Subject to Board of Directors approval, we expect to pay dividends of approximately $80 million per quarter in 2009.

The following table summarizes our significant contractual obligations and other long-term liabilities as of December 31, 2008:

	Payments Due
Millions of dollars	2009		2010		2011		2012		2013		Thereafter		Total
Long-term debt	$	26	$	749	$	–	$	–	$	–	$	1,837	$	2,612
Interest on debt (a)		168		168		127		127		126		3,578		4,294
Operating leases		183		161		130		84		66		175		799
Purchase obligations		1,501		65		32		16		5		8		1,627
Pension funding obligations (b)		48		–		–		–		–		–		48
DOJ and SEC settlement and indemnity		373		186		–		–		–		–		559
Other long-term liabilities		9		9		9		9		9		–		45
Total	$	2,308	$	1,338	$	298	$	236	$	206	$	5,598	$	9,984

(a)	Interest on debt includes 88 years of interest on $300 million of debentures at 7.6% interest that become due in 2096.

(b)

Amount based on assumptions that are subject to change. Also, we may choose to make additional discretionary contributions. We are currently not able to reasonably estimate our contributions for years after 2009. See Note 15 to the consolidated financial statements for further information regarding pension contributions.

We had $343 million of gross unrecognized tax benefits at December 31, 2008, of which we estimate $79 million may require a cash payment. We estimate that $38 million may be settled within the next 12 months, although the amounts are not agreed with tax authorities. We are not able to reasonably estimate in which future periods the remaining amounts will ultimately be settled and paid.

Other factors affecting liquidity

Letters of credit. In the normal course of business, we have agreements with banks under which approximately $2.2 billion of letters of credit, surety bonds, or bank guarantees were outstanding as of December 31, 2008, including approximately $828 million that relate to KBR. These KBR letters of credit, surety bonds, or bank guarantees are being guaranteed by us in favor of KBR’s customers and lenders. KBR has agreed to compensate us for these guarantees and indemnify us if we are required to perform under any of these guarantees. Some of the outstanding letters of credit have triggering events that would entitle a bank to require cash collateralization.

Financial position in current market. In recent years, we have reduced our leverage and improved our liquidity by focusing on debt reduction and improvement to our credit profile. Our debt maturities extend over a long period of time. We have no financial covenants or material adverse change provisions in our bank agreements, and we are working to continue to improve our short-term credit capacity. We currently have a total of $1.6 billion of committed bank credit under revolving credit facilities to support our operations and any commercial paper we may issue in the future. Currently, there are no borrowings under these revolving credit facilities.

In addition, we manage our cash investments by investing principally in United States Treasury securities and repurchase agreements collateralized by United States Treasury securities.

Credit ratings. Credit ratings for our long-term debt remain A2 with Moody’s Investors Service and A with Standard & Poor’s. The credit ratings on our short-term debt remain P-1 with Moody’s Investors Service and A-1 with Standard & Poor’s.

Customer receivables. In most cases, we bill our customers for our services in arrears and are, therefore, subject to our customers delaying or failing to pay our invoices. In weak economic environments, we may experience increased delays and failures due to, among other reasons, a reduction in our customer’s cash flow from operations and their access to the credit markets. If our customers delay in paying or fail to pay us a significant amount of our outstanding receivables, it could have a material adverse effect on our liquidity, consolidated results of operations, and consolidated financial condition.

BUSINESS ENVIRONMENT AND RESULTS OF OPERATIONS

We operate in approximately 70 countries throughout the world to provide a comprehensive range of discrete and integrated services and products to the energy industry. The majority of our consolidated revenue is derived from the sale of services and products to major, national, and independent oil and gas companies worldwide. We serve the upstream oil and natural 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 throughout the life of the field. Our two business segments are the Completion and Production segment and the Drilling and Evaluation segment. The industries we serve are highly competitive with many substantial competitors in each segment. In 2008, based upon the location of the services provided and products sold, 43% of our consolidated revenue was from the United States. In 2007 and 2006, 44% and 45% of our consolidated revenue was from the United States. No other country accounted for more than 10% of our revenue during these periods.

Operations in some countries may be adversely affected by unsettled political conditions, acts of terrorism, civil unrest, force majeure, war or other armed conflict, expropriation or other governmental actions, inflation, exchange control problems, economic recessions, and highly inflationary currencies. We believe the geographic diversification of our business activities reduces the risk that loss of operations in any one country would be material to our consolidated results of operations.

Activity levels within our business segments are significantly impacted by spending on upstream exploration, development, and production programs by major, national, and independent oil and gas companies. Also impacting our activity is the status of the global economy, which impacts oil and natural gas consumption. See “Risk Factors—Worldwide recession and effect on exploration and production activity” for further information related to the effect of the current recession.

Some of the more significant barometers of current and future spending levels of oil and gas companies are oil and natural gas prices, the world economy, and global stability, which together drive worldwide drilling activity. Our financial performance is significantly affected by oil and natural gas prices and worldwide rig activity, which are summarized in the following tables.

This table shows the historical average prices for West Texas Intermediate (WTI) and United Kingdom Brent crude oil and Henry Hub natural gas:

Average Oil Prices (dollars per barrel)	2008		2007		2006
West Texas Intermediate	$	99.37	$	71.91	$	66.17
United Kingdom Brent	$	96.86	$	72.21	$	65.35

Average United States Gas Prices (dollars per million British
thermal units, or mmBtu)
Henry Hub	$	8.79	$	6.97	$	6.81

The historical yearly average rig counts based on the Baker Hughes Incorporated rig count information were as follows:

Land vs. Offshore	2008		2007		2006
United States:
Land		1,812		1,694		1,558
Offshore (incl. Gulf of Mexico)		128		144		176
Total		1,940		1,838		1,734
Canada:
Land		378		341		467
Offshore		1		3		3
Total		379		344		470
International (excluding Canada):
Land		784		719		656
Offshore		295		287		269
Total		1,079		1,006		925
Worldwide total		3,398		3,188		3,129
Land total		2,974		2,754		2,681
Offshore total		424		434		448

Oil vs. Natural Gas	2008		2007		2006
United States (incl. Gulf of Mexico):
Oil		381		300		278
Natural Gas		1,559		1,538		1,456
Total		1,940		1,838		1,734
Canada:
Oil		160		128		110
Natural Gas		219		216		360
Total		379		344		470
International (excluding Canada):
Oil		825		784		709
Natural Gas		254		222		216
Total		1,079		1,006		925
Worldwide total		3,398		3,188		3,129
Oil total		1,366		1,212		1,097
Natural Gas total		2,032		1,976		2,032

Our customers’ cash flows, in most instances, depend upon the revenue they generate from the sale of oil and natural gas. Lower oil and natural gas prices usually translate into lower exploration and production budgets. The opposite is true for higher oil and natural gas prices.

WTI oil spot prices have fallen from a high of $145 per barrel in July to an average of $41 per barrel in the month of December, according to the Energy Information Administration (EIA). As of February 10, 2009, the WTI oil spot price was $37.54 per barrel. According to the International Energy Agency’s (IEA) February 2009 “Oil Market Report,” the outlook for world petroleum demand is expected to contract for the first time since the 1980s, with the decrease in demand of North America and the Pacific only partially offset by the increase in demand in Asia, the Middle East, and Latin America. The IEA forecasts world petroleum demand in 2009 to decrease approximately 1% over 2008, but there are other forecasts that indicate that demand contraction could be more severe. Despite the decline in oil and gas prices and reduction in our customers’ capital spending, we believe that, over the long-term, any major macroeconomic disruptions may ultimately correct themselves as the underlying trends of smaller and more complex reservoirs, high depletion rates, and the need for continual reserve replacement should drive the long-term need for our services.

North America operations. Volatility in natural gas prices can impact our customers' drilling and production activities, particularly in North America. As we enter 2009, capital expenditure adjustments from our customers remain fluid as they adjust their spending in response to a continued drop in commodity price fundamentals and lack of readily available credit. In 2009, rig counts have fallen sharply and as of February 13, 2009 are approximately 34% below 2008 highs. Our customers’ capital expenditure cuts have intensified especially related to conventional and shallower drilling activity.

As noted in the table above, the Henry Hub spot price averaged $8.79 per mmBtu in 2008. However, as of February 11, 2009, the Henry Hub spot price had fallen to $4.68 per mmBtu. We began to see signs of pricing weakness in our services beginning in December of 2008 due to excess equipment and customer requests for discounts on existing work. We expect activity declines in United States land to accelerate in the first quarter of 2009. In addition, due to these volume declines and pricing adjustments, we expect severe margin contraction to occur worldwide starting in the first quarter of 2009.

Focus on international operations. Consistent with our long-term strategy to grow our operations outside of North America, we expect to continue to invest capital and increase manufacturing capacity to bring new tools online to serve the need for our services. However, operators have announced a decline in spending in 2009, and we expect to see contraction of our business, at least in the near term. Declining oil prices have caused customers to defer several of their new and platform-based projects and slowdown their existing projects. Several areas have also been affected by capital access issues that have constrained the ability of some of our independent, upstream customers to fund their programs. We continue to believe in the long-term prospects of the international market and will align our business accordingly.

As our customers award work in this environment of declining commodity prices, pricing competition in the international arena has intensified. Following is a brief discussion of some of our recent and current initiatives:

minimizing discretionary spending;

lowering our costs from vendors;

reducing headcount in locations experiencing significant activity declines;

focusing on working capital management and managing our balance sheet to maximize our financial flexibility;

making our research and development efforts more geographically diverse in order to continue to supply our customers with leading-edge services and products and to provide our customers with the ability to more efficiently drill and complete their wells. To that end, we opened a technology center in India in 2007 and in Singapore in the first quarter of 2008 and a research and development laboratory in Norway in the third quarter of 2008;

continuing to deploy our packaged services strategy that creates an efficiency model for our customers in the development of their assets;

continuing the globalization of our manufacturing and supply chain processes. In 2007 and 2008, we opened four new regional manufacturing facilities in Asia and Latin America. These new centers will enable us to be more responsive to our international customers while building regional supply networks that support local economies;

as our workforce becomes more global, the need for regional training centers increases. As a result, we have expanded our number of regional training centers to meet this need. We now have 12 training centers worldwide that integrate new workers and advance the technical skills of our workforce;

expanding our business with national oil companies, including preparing for a shift to increased use of our integrated project management services; and

continuing to pursue strategic acquisitions that enhance our technological position and our product and service portfolio in key areas, such as the following acquisitions in 2008:

in October 2008, we acquired the assets of Pinnacle, including the Pinnacle brand from CARBO Ceramics Inc. Pinnacle is a leading provider of microseismic fracture mapping services and tiltmeter mapping services;

in July 2008, we acquired the remaining 49% equity interest of WellDynamics from STV Fund. We now own 100% of WellDynamics, a provider of intelligent well completion technology;

in June 2008, we acquired all the intellectual property and assets of Protech Centerform in Houston, Ravenna, Italy, and Aberdeen, Scotland. Protech Centerform is a provider of casing centralization service;

in May 2008, we acquired all intellectual property, assets, and existing business of KSI, a leading provider of combined geopressure and geomechanical analysis software and services;

Contract wins positioning us to grow our international operations over the long term include:

a contract to manage the drilling and completion of 58 onshore wells in the southern region of Mexico;

a contract to perform workover and sidetrack services in the United Kingdom;

a contract to provide completion equipment and services, tubing conveyed perforating services and SmartWell® completion technology for numerous oil and natural gas fields on the Norwegian continental shelf. The contract also allows for the provision of other products and services;

a three-year contract to provide directional drilling, logging-while-drilling, cementing, wireline and perforating, coiled tubing, and stimulation services in support of the offshore portion of the Manifa mega-project in Saudi Arabia;

a three-year contract to provide a range of completion equipment for onshore oil and gas wells in Abu Dhabi; and

a three-year contract to provide special cased-hole services in support of our work in Indonesia’s Mahakam Delta.

RESULTS OF OPERATIONS IN 2008 COMPARED TO 2007

REVENUE:							Percentage
Millions of dollars	2008		2007		Increase		Change
Completion and Production	$	9,935	$	8,386	$	1,549		18	%
Drilling and Evaluation		8,344		6,878		1,466		21
Total revenue	$	18,279	$	15,264	$	3,015		20	%

By geographic region:
Completion and Production:
North America	$	5,348	$	4,655	$	693	15	%
Latin America		1,084		756		328	43
Europe/Africa/CIS		2,065		1,767		298	17
Middle East/Asia		1,438		1,208		230	19
Total		9,935		8,386		1,549	18
Drilling and Evaluation:
North America		2,992		2,478		514	21
Latin America		1,341		1,042		299	29
Europe/Africa/CIS		2,281		1,933		348	18
Middle East/Asia		1,730		1,425		305	21
Total		8,344		6,878		1,466	21
Total revenue by region:
North America		8,340		7,133		1,207	17
Latin America		2,425		1,798		627	35
Europe/Africa/CIS		4,346		3,700		646	17
Middle East/Asia		3,168		2,633		535	20

OPERATING INCOME:							Increase			Percentage
Millions of dollars	2008			2007			(Decrease)			Change
Completion and Production	$	2,409		$	2,199		$	210			10	%
Drilling and Evaluation		1,865			1,485			380			26
Corporate and other		(264	)		(186	)		(78	)		(42	)
Total operating income	$	4,010		$	3,498		$	512			15	%

By geographic region:
Completion and Production:
North America	$	1,404	$	1,404	$	—	—	%
Latin America		260		170		90	53
Europe/Africa/CIS		409		330		79	24
Middle East/Asia		336		295		41	14
Total		2,409		2,199		210	10
Drilling and Evaluation:
North America		701		552		149	27
Latin America		261		179		82	46
Europe/Africa/CIS		448		414		34	8
Middle East/Asia		455		340		115	34
Total		1,865