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Risk Management University of Houston. March 2011. Business Overview & 2011 Results . Risk Management. Q&A. Halliburton Overview. Provides a broad suite of products and services to help explore for and produce oil and gas 2010 sales of $18 billion

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halliburton overview
Halliburton Overview
  • Provides a broad suite of products and services to help explore for and produce oil and gas
  • 2010 sales of $18 billion
  • Equity market capitalization of over $37 billion, as of December 31, 2010
  • 2010 return on capital employed of 14%(1)
  • Three business segments
    • Drilling & Evaluation
    • Completion & Production
    • Consulting & Project Management

(1) Return on capital employed defined as: (net income attributable to company) / (total shareholders’ equity + total debt)

why halliburton
Why Halliburton?

Halliburton Locations

Halliburton Headquarters

Halliburton Research Centers

2010FASTFACTS

OperationalCountries

ResearchCenters

Corporate Headquarters

Founded:

Employees

Customers

1919

50,000+

70+

14

Houston

Dubai

National,

International and

Independent entities worldwide

drilling and evaluation
Drilling and Evaluation

Drilling and Evaluation

Consulting

and Project Management

Completion and Production

Landmark

Sperry Drilling

Testing

and Subsea

Drill Bits

and Services

Baroid

Wireline and

Perforating

Product Service Line (PSL)

completion and production
Completion and Production

Drilling and Evaluation

Consulting

and Project Management

Completion and Production

Cementing

CompletionTools

ProductionEnhancement

Boots & CootsWell Intervention

Product Service Line (PSL)

consulting and project management
Consulting and Project Management

Drilling and Evaluation

Consulting

and Project Management

Completion and Production

Consulting

Project

Management

Product Service Line (PSL)

halliburton divisions 2010 revenue
Halliburton Divisions – 2010 Revenue

Year Ended

December 31, 2008

(in millions)

Drilling and

Evaluation

Completion and Production

Sperry

Production Enhancement

($ billions)

Wireline

Cementing

Baroid

Completion Tools

Security DBS Drill Bits

Software & Asset Solutions

Testing & Subsea

slide9

Global Operations – 2010 Revenue

International

North America

north america vs international
North America vs International

Spectrum of extremes

North America

Efficient (immediate response to commodity price changes)

Transactional

Extreme volatility

International

Longer terms

Less transactional

Dampens extremes

10

2010 acquisitions risk management due diligence
2010 Acquisitions – Risk Management Due Diligence

Boots & Coots, Inc. – Well intervention services and pressure control products

Location: International

Employees: 700

Professional Wireline Rentals LLC – Various wellhead and subsurface rental equip

Location: U.S.

Employees: 300

Wellbore Energy Solutions, Inc. – Wellbore cleaning services

Location: U.S.

Employees: 30

Diamond Rotating Heads Inc. – Low pressure rotating control heads for drilling

Location: U.S.

Employees: 14

Evans Engineering, Inc. – Downhole rental jars

Location: U.S.

Employees: 17

Permedia Research Group – Modeling software and services

Location: Canada

Employees: 20

slide12

Business Overview & Results

Risk Management

Q&A

enterprise risk management
Enterprise Risk Management
  • Methods, framework, and processes utilized to manage risks by taking an integrated and holistic view of the various uncertainties involved across the organization. It is the process whereby an organization optimizes the manner in which it controls risks.
      • Required by SEC and NYSE
      • Evaluated and rated by rating agencies based on effectiveness of program.
  • ERM sponsored at highest levels of Halliburton
  • Direct and independent reporting to Audit Committee of BOD
  • Sustainable monitoring plans for risks and controls
  • Cultural permeation

Develop & Refine

Risk Assessment

Processes

Initial Risk

Assessments

Completed

Senior

Leadership

Established

Formal Strategy

For

Sustainability

Assessments

Updated &

Validated

Monitoring

Processes

Established

Global

Awareness

2005

2006

2007

2008

2009

2010

erm leadership
ERM Leadership

Board of Directors

Halliburton Senior Management

RM Committee

Chairman: Sr VP & Treasurer

Director Risk Management

VP Internal Audit & Controls

Chief Ethics & Compliance Officer

Corporate Advisory Committee

VP & Controller

EVP Administration

VP and Deputy General Counsel

CIO

VP Supply Chain

VP Tax

Operations Advisory Committee

President Global Business Lines

President Western Hemisphere

President Eastern Hemisphere

Sr Director Intellectual Asset Management

Sr Director Operations Finance

Subject Matter Experts (“SME”)

Determined as needed

Working Team

Risk Management, Internal Controls, Treasury, Audit, Law

risk management organization
Risk Management Organization
  • Functional reporting to Treasury and CFO
    • Insurance Programs
      • Insurance and self-insurance procurement
      • Fronting programs and captives
      • Brokerage relationships
    • Global Claims
      • Occupational injury administration
      • Insurance recovery (all lines)
      • Claim services vendor relationships
    • Risk Management Information Systems
      • Data Management
      • Financial and executive reporting
    • Risk Management Accounting
      • Budget control
      • Cost allocation
      • Reserve management
risk management responsibilities
Risk Management Responsibilities
  • Identify exposures to risk of loss
  • Determine desired means of managing exposures to risk of loss
  • Support SEC risk compliance
  • Obtain insurance required by and in accordance with applicable laws
  • Negotiate customer insurance terms and assure compliance
  • Support pursuit of new business opportunities
  • Support due diligence for acquisitions and mergers
  • Provide surety services
  • Maximize insurance assets through efficient claim recovery
insurance purchasing philosophy
Insurance Purchasing Philosophy
  • Utilize insurance risk transfer only in the following circumstances:
    • Required by law or contract and fronting is not possible/practicable
    • Catastrophic exposures, i.e. materially adverse impact to company
    • Premium is lower than expected losses
insurance program
Insurance Program

Excess Liability

Summary of Insurance

GL / AL / EL

ACE (Bermuda)

Onshore Property

Swiss Re

Liberty / Zurich

Lloyds

AIG / Zurich / ACE

Arch / XL / Allied

D&O

Liability

Lloyds

Liberty Mutual

Side A DIC

Munich Re / Arch

Lloyds

ACE

Arch

AIG

Hartford

AWAC

RLI

HCC

Endurance

ACE

Lexington

XL

Fiduciary Liability

Work

Comp

Air

Craft

Vessels

Well

Control

Offshore

Property

Cargo

Arch

AWAC

AWAC

AIG

XL (Bermuda)

RSUI

CNA

Statutory Limits

Ace

USAIG

Lloyds

Lloyds

Lloyds

Ace

Max Re

Crime

Axis

AWAC

AISLIC

ELU

HCC

AIG

AIG

AIG

Lloyds

Hartford

HCC

Deductible

Type of Coverage

case study cargo risk
Case study - Cargo Risk
  • Thousands of shipments annually to over 100 countries
  • CIF sales require third party insurer
  • Maximum value any one shipment $15mm
  • 5 year average loss approximately $2.2mm
    • Average includes 2010 loss of $3mm in single shipment
  • Loss ratio exceeding 100% for last 5 years
  • Expected renewal premium $2.5mm