HALLIBURTON COHAL
HALLIBURTON CO Fair Value Disclosure
Financial Instruments and Risk Management
The total fair value of our debt decreased during 2025 primarily as a result of the retirement of the outstanding
The carrying amount of cash and equivalents, receivables, and accounts payable, as reflected in the Consolidated
Balance Sheets, approximates fair value due to the short maturities of these instruments.
The carrying amount and fair value of our total debt is as follows:
December 31, 2025 | December 31, 2024 | ||||||||
Millions of dollars | Level 1 | Level 2 | Total fair value | Carrying value | Level 1 | Level 2 | Total fair value | Carrying value | |
Total debt | $6,722 | $357 | $7,079 | $7,158 | $4,503 | $2,825 | $7,328 | $7,541 | |
principal of our 3.8% senior notes at their scheduled maturity, as discussed in Notes to Consolidated Financial Statements, Note
10.
Our debt categorized within level 1 on the fair value hierarchy is calculated using quoted prices in active markets for identical liabilities with transactions occurring on the last two days of period-end. Our debt categorized within level 2 on the
fair value hierarchy is calculated using significant observable inputs for similar liabilities where estimated values are
determined from observable data points on our other bonds and on other similarly rated corporate debt or from observable data
points of transactions occurring prior to two days from period-end and adjusting for changes in market conditions. Differences
between the periods presented in our level 1 and level 2 classification of our long-term debt relate to the timing of when third-
party market transactions on our debt are executed. We have no debt categorized within level 3 on the fair value hierarchy.
We are exposed to market risk from changes in foreign currency exchange rates, interest rates, and credit risk. We selectively manage these exposures through the use of derivative instruments, including forward foreign exchange contracts,
foreign exchange options, interest rate swaps, and CDS’s. The objective of our risk management strategy is to minimize the
volatility from fluctuations in foreign currency and interest rates. We do not use derivative instruments for trading purposes.
The fair value of our forward contracts, options, and interest rate swaps was not material as of December 31, 2025 or
December 31, 2024. The counterparties to our derivatives are primarily global commercial and investment banks.
Foreign currency exchange risk
We have operations in many international locations and are involved in transactions denominated in currencies other
than the U.S. dollar, our functional currency, which exposes us to foreign currency exchange rate risk. Techniques in managing
foreign currency exchange risk include, but are not limited to, foreign currency borrowing and investing, and the use of
currency exchange instruments. We attempt to selectively manage significant exposures to potential foreign currency exchange
losses based on current market conditions, future operating activities, and the associated cost in relation to the perceived risk of
loss. The purpose of our foreign currency risk management activities is to minimize the risk that our cash flows from the
purchase and sale of products and services in foreign currencies will be adversely affected by changes in exchange rates.
We use forward contracts and options to manage our exposure to fluctuations in the currencies of certain countries in
which we do business internationally. These instruments are not treated as hedges for accounting purposes, generally have an
expiration date of one year or less, and are not exchange traded. While these instruments are subject to fluctuations in value, the
fluctuations are generally offset by the value of the underlying exposures being managed. The use of some of these instruments
may limit our ability to benefit from favorable fluctuations in foreign currency exchange rates.
Derivatives are not utilized to manage exposures in some currencies due primarily to the lack of available markets,
cost considerations, or immaterial exposures (non-hedged currencies). We attempt to minimize foreign currency exposure in
non-hedged currencies and recognize that pricing for the services and products offered in these countries should account for the
cost of exchange rate devaluations.
The notional amounts of open foreign exchange derivatives were $840 million at December 31, 2025 and $781 million
at December 31, 2024. The notional amounts of these instruments do not generally represent amounts exchanged by the parties,
and thus are not a measure of our exposure or of the cash requirements related to these contracts. The fair value of our foreign
exchange derivatives as of December 31, 2025 and December 31, 2024 is included in both "Other current assets" and in "Other
current liabilities" in our Consolidated Balance Sheets and was immaterial. The fair value of these instruments is categorized
within level 2 on the fair value hierarchy and was determined using a market approach with certain inputs, such as notional
amounts hedged, exchange rates, and other terms of the contracts that are observable in the market or can be derived from or
corroborated by observable data.
Interest rate risk
We are subject to interest rate risk on our debt and investment portfolios. We had fixed rate long-term debt totaling
$7.2 billion at December 31, 2025 and December 31, 2024. We maintain an interest rate management strategy that is intended
to mitigate the exposure to changes in interest rates.Credit riskFinancial instruments that potentially subject us to concentrations of credit risk are primarily cash equivalents and net trade receivables. It is our practice to place our cash equivalents in high quality investments with various institutions. Our net
trade receivables are from a broad and diverse group of customers and are generally not collateralized. As of December 31,
2025, 31% of our net trade receivables were from customers in the United States and 8% were from customers in Mexico. As of
December 31, 2024, 30% of our net trade receivables were from customers in the United States and 11% were from customers
in Mexico. We maintain an allowance for credit losses based upon several factors, including historical collection experience,
current aging status of the customer accounts and financial condition of our customers. See Notes to Consolidated Financial
Statements, Note 5 for further information on receivables.
We have entered into CDSs with third-party financial institutions that had an aggregate notional amount outstanding as of December 31, 2025 of $592 million, compared to an aggregate notional amount outstanding as of December 31, 2024 of
$739 million, related to borrowings provided by the financial institutions to one of our primary customers in Mexico, of which a
portion of the proceeds were then utilized by this customer to pay certain of our outstanding receivables. Approximately $455
million of the outstanding amount of the CDSs reduces monthly over its remaining 9-month term and $75 million reduces
monthly over its remaining 6-month term. The remaining $62 million outstanding amount reduces monthly over its remaining
2-month term.
The fair value of the derivative liabilities was not material to our financial condition as of December 31, 2025.
We do not have any significant concentrations of credit risk with any individual counterparty to our derivative contracts. We select counterparties to those contracts based on our belief that each counterparty’s profitability, balance sheet,
and capacity for timely payment of financial commitments is unlikely to be materially adversely affected by foreseeable events.
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.