J. P Morean poh ~via Equity Research . . = lune Overweight HAL, HAL US Price: $66.94 4 Price Target: $78.00 Previous: $77.00 Halliburton Few Holes in a Story That Keeps Getting Better We spent last week on the road in Europe with CFO Mark McCollum, which Oil Services and Equipment reinforced our view that the bull case on ‘Halliburton continues to strongly J. David Anderson, PE, CFA “° outweigh any of the bear arguments, of which there are few. With the North American pressure pumping market tightening, HAL is going to be testing pricing Fe in the coming months, providing upside to margin targets. We edged up Bloomberg JPMA ANDERSON <GO> 2014/2015 EPS above consensus to $4.00/$5.20, with an additional $0.15/$0.35 in William S Thompson EPS upside from share buybacks. Our detailed note begins on Page 2. e With the North America market tightening, HAL is starting to push Samantha Hoh. CFA pricing...will they put Tier 2 players in their place with new capacity? With only 10-12% excess industry capacity and 80% of HAL’s hp on 24 hrs, the time is now to start pushing pricing. If successful, HAL likely starts adding capacity J.P. Morgan Securities LLC in addition to accelerating the Q10 pump rollout, which should make the tier 2 a . . : Price Performance players nervous in light of HAL's considerable cost advantage. e Few concerns about an IOC slowdown, emerging IPM opportunities with wo J NOCs. A lot of talk about IOC capital discipline, but Halliburton isn’t seeing a * a slowdown in the offshore market, nor do they see excess service capacity. 1, NOCs are getting more creative in looking to fund activity with service i company balance sheets, creating a growing opportunity set for HAL that must _ an - pee “wn be balanced against higher project risk. SAPS50O (rebased) YID___im 3m 12m e Swirling currents in Latin America. The one soft spot is LatAm where Abs | 339% 54% 2.1% 59.258 . : . Rel | 284% 25% 162% 39.2% margins should appreciably improve in 2015. Petrobras has agreed to re-tender ate the drilling contracts on lower activity levels, with costs right-sizing by 2Q15. Mexico reform is getting close and onshore service contracts could materialize in 2H14 followed by IOC offshore tenders in 1H15. Even Venezuela is improving with a recent agreement on receivables and additional activity. « Raising EPS estimates slightly, more upside from buybacks. We raised 2014/2015 EPS to $4.00/$5.20 from $3.95/5.10 primarily on modest tweaks to our NAM margin and revenue progression, but could see upside on buybacks. We expect HAL to raise its dividend in the coming quarters (we model +20% to $0.18/qtr in 4Q14) to stay within 10-15% of net income but with plans to distribute 30-35% of operating cash flows, we could see ~$2bn in buybacks in 2014 (would add ~$0.15 to our *14 EPS) and another ~$2.5bn in 2015 (adds ~$0.35 to our "15 EPS). Halliburton Company (HAL;HAL US) FYE Dec 2013A 2014E 2014E 2015E 2015E Company Data (Prev) (Curr) (Prev) (Cum) Price ($) 66.94 EPS ($) Date Of Price 11 Jun 14 Q1 (Mar) 0.67 0.73A 0.73A 1.12 1.14 52-week Range ($) 67.35-40.12 Q2 (Jun) 0.73 0.91 0.91 1.22 1.24 Market Cap ($ mn) 62,321.14 Q3 (Sep) 0.83 1.13 1.13 1.32 1.35 Fiscal Year End Dec Q4 (Dec) 0.93 1.18 1.23 1.44 1.48 Shares O/S (mn) 931 FY 3.15 3.95 4.00 5.10 5.20 Price Target ($) 78.00 Bloomberg EPS FY ($) 3.10 - 3.98 : 5.10 Price Target End Date 31-Dec-14 Source: Company data, Bloomberg, J.P. Morgan estimates. See page 11 for analyst certification and important disclosures. J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. www.jpmorganmarkets.com EFTA00301083

--=PAGE_BREAK=--

J. David Anderson, PE. CFA Figure 1: US Land Rig Count North America Equity Research 12 June 2014 J.P. Morgan Halliburton on the Road After spending last week on the road in Europe with Halliburton CFO Mark McCollum, our conviction as one of the top names to own in services has only grown stronger. North America market may be tighter than you think. Not surprisingly, most investor questions centered on the state of the North American land market, which is clearly showing improvement across the board. Considering the U.S. onshore rig count at 1,787 (+6% Y-Y) is where they thought it would end the year (as did we), higher E&P spending in the Permian is the obvious driver. In March volumes pumped were 30% higher y-y on a 15% increase in the number of frac stages; however, the increased service intensity is limited to the Bakken, Eagle Ford, and Niobrara with the Permian in an earlier stage of development. Figure 2:US Frac Stages (L-Axis) & US Wells Frac’ed (R-Axis) Forecast 2,500 > Sammut Hor Oil mmm Vert Oil mum Dir OF 85% 4 — Hor Qa Di Gas Vert Gas 600,000 lms Frac Stages Wells Frac'ed 35,000 2,000 | Misc —= %HorDir 80% 500,000 + a wt 30,000 25,000 1,500 75% 400,000 + 20,000 1,000 70% 00,000 15,000 soo 5x, 200.000 10,000 100,000 0 60% ean eS FFP KHL EP Ke ’ ° Source: Baker Hughes and J.P. Morgan. Despite its forecast for moderate +3% CAGR growth in wells spud and wells frac’ed in NAM from 2013-2016, PacWest forecasts +12% CAGR in total stage counts driven by a continued shift to horizontal drilling (forecasts +12% CAGR for horizontal wells frac'ed), increased lateral lengths, and decreased stage widths. 2011 «2012, 2013 Q014E = Q015E = 2016E Source: PacWest and J.P. Morgan. Mr. McCollum estimates the pressure pumping market has about 10-12% excess capacity currently, cut in half from the 22% overcapacity seen a year ago. Notably, this contrasts the more bearish analysis from PacWest Consulting that estimates utilization at 81% in 2014, with the difference in views likely coming from two sources (see our June 4" note “Consultants Provide Frac Market Update: Modest Pricing Increases Offset by Cost Recovery”). First, customers are demanding more horsepower on site from the second tier pressure pumpers. Second, while true horsepower attrition levels may have been overstated historically pressure pumping fleets require an overhaul every 2 to 3 years. Therefore, with an estimated 6.8mm net HHP in capacity added in NAM during the 2010-11 timeframe, effective capacity may be quite a bit less than the 17mm HHP is stated industry capacity. EFTA00301084

--=PAGE_BREAK=--

J. David Anderson, PE, CFA North America Equity Research 12 June 2014 J.P Morgan Figure 3: North America Pressure Pumping Capacity (Million HHP at Year End) % ~6.8mm HHP was added in 2010-2011 20 or 1/3 of current Nn 15 10 : mi are a. i i i 2004 2006 2007 2008 2010 ot 2012 2013 “DOME Source: PacWest and J.P. Morgan. With promising pricing signs, will HAL put the Tier 2 players in their place? In describing the North American market, Mr. McCollum depicted a more stable pressure pumping market than in the past. While he does expect the market to overbuild again, it won't get to the point of 30% overcapacity as in the past. This is partly because pricing increases won't be the "hockey stick” that drove the flurry of capacity additions from the smaller players, but it may also be a result of greater manufacturing capacity on pumps. But rather than showing concern about recent announcements of capacity additions (PacWest estimates 1.1mm of net HHP in NAM to be added in 2014), the company is more perplexed at the rationale behind the orders. Noting that Halliburton is the low cost operator in the market, the company is generating returns marginally above cost of capital (11%) on the current ~15% EBIT margins. In other words, without substantial pricing increases, the market is adding capacity at sub-cost of capital returns, which could snuff out pricing improvements before it even takes hold. Figure 4: North America Operating Margins by Company SLB HAL eee BH] mm WET mmm CUES 40% 35% 5 30% 25% 20% 15% + 10% 5% 2008 ©2007-2008) «2009S 2010011 012201 OI4E = NISE Source: Company reports and J.P. Morgan estimates. With this backdrop, would it make sense for Halliburton to start adding material capacity to disincentivize the smaller players from adding more capacity? The answer may be yes. Until now, Halliburton hasn't been adding net capacity, instead replacing existing pumps with the new Q10 design, which requires 30% less maintenance with a 2-10x longer wear life than competitor designs (PacWest estimates pumps generally last for about 5,000 hours). Currently, 20% of the fleet is outfitted with the Q10, but now plans to reach 50% by year end 2015 may be EFTA00301085

--=PAGE_BREAK=--

J. David Anderson, PE. CFA North America Equity Research J.P Morgan 12 June 2014 accelerated. While this is lowering HAL's operating costs and increasing effective capacity by reducing downtime from maintenance, larger scale capacity additions are now being considered. Over the next month, the company plans to start testing higher pricing as contracts roll over, with success likely resulting in new capacity additions. Signs are clearly pointing towards pricing moving higher in 2H14 as Halliburton’s utilization improved to 80% on 24-hour work in 1Q14 from 75% in 4Q13, and all of its horsepower is committed through October. The company indicated three signs for contractual pricing to move higher: « Cost recovery from customers. On the majority of contracts, Halliburton is now able to pass through higher labor and logistics costs. ¢ Improvement in the transactional market. They are starting to see spot pricing moving higher — not only are we hearing it from the second tier players (CJES), but our quarterly survey of US E&Ps also confirms the trend. e Calendar leverage. When Halliburton starts to control the calendar and telling customers when they can schedule the job instead of being told, then pricing leverage is clearly taking hold. We're not there yet. Halliburton is wrestling with this question: can they add capacity but still benefit from pricing increases or at least hold pricing steady? From an internal standpoint, as long as returns remain above cost of capital, capacity should be built and market share should be gained. But looking more broadly at the market, would it be prudent for Halliburton to seek to drive the smaller players out by adding capacity and putting pressure on their returns? The risk is if it backfires because the Tier 2 players don't seem to care about returns in the first place and cheap financing is at their fingertips allowing them to build without recourse. Confident in hitting margin targets. Halliburton’s analyst day last November was notable for the aggressive North American margin targets set for 2014 and over the next 3 years. Mr. McCollum acknowledged this year’s targets were a bit of a stretch when first announced (and then reiterated on the following earnings conference calls), but they now appear to be well in hand. Notably, none of the 200bp Y-Y margin improvement by 3Q14 assumes any pricing improvement, instead accomplished through costs and supply chain: |. About half of the improvement is from improved supply chain, primarily guar pricing and potentially sand; 2. Realized cost savings from the internal mobility project that streamlines back office functions in the field; and 3. The ongoing QO pump rollout that reduces maintenance costs by 30% (all expensed). Keeping in mind 1Q14 NAM results included 75bp of price degradation as contracts rolled over, any pricing increases in 2H will immediately result in higher incremental margins. Additional margin upside could come from Halliburton’s ability to negotiate better proppant costs with suppliers. EFTA00301086

--=PAGE_BREAK=--

North America E: Ri h Figure 5: Halliburton's North American Operating Margins 17.5% 17.8% . oe 17.0% 1012 2012 3012 4012 1013 2013 3013 4013 1014 2014 3014 4014 1015 2015 3015 4015 Source: Company reports and J.P. Morgan estimates. The rest of the 300bp non-pricing margin improvement by 2016 will come from internal measures derived from the Frac of Future and Battle Red initiatives. As the US land market moves further into development mode, we expect superior logistics to play an increasing role in improved margins. According to Mr. McCollum, Halliburton had the fifth largest logistics operations in the United States (behind Coca Cola, Pepsi, and WalMart), with plans to expand significantly over the next several years. Halliburton currently owns 3,500 rail cars to transport proppant to well sites, which will double to 7,000 cars, while 2/3rds of the 18,000 new hires globally this year will be in North America. We believe this gives the diversified service companies (which includes Schlumberger and to a lesser extent Baker Hughes) a distinct advantage over the smaller players. In an isolated example, a customer in the Marcellus stopped using Halliburton over pricing, but struggled to replicate operations and had to hire 7 smaller companies instead. Not a lot of concerns about IOC slowdown. The biggest concern investors consistently voiced was the impact from the “capital discipline” mantra that many IOCs have repeated over the past 6 months. Despite 20-25% of total revenue generated from IOCs, Halliburton continues to forecast low double digit spending growth out of the Eastern Hemisphere this year (consistent with our forecast) and has yet to see a reduction in spending or activity levels offshore. In fact, the deepwater market is progressing about how they thought it would: slow and steady. The company believes that most of the overcapacity in the deepwater rig market can be traced back to Brazil, which some had expected to reach 70 deepwater rigs by now. While there is a chance that Brazil could pick up the slack and start growing again in 2016, Halliburton continues to model modest offshore growth the next several years and does not see excess service or equipment capacity in the market, other than rigs. Increasing IPM opportunities with NOCs. One of the more compelling growth opportunities for Halliburton over the next several years is pursuing integrated project management (IPM) work outside the U.S. With one project underway (Malaysia), another poised to begin (Humapa in Mexico), and third under negotiation (Ecuador), national oil companies are getting creative, looking to use the large cap service companies’ strong balance sheets as a means for funding activity. Mr. McCollum appeared comfortable that increases in working capital won't be onerous to Halliburton’s balance sheet (will have to keep a close eye on receivables), but is clearly aware of the multitude of risks that IPM projects bring. Risks that include commodity prices, currency, sovereign, reservoir, and environmental, each of which EFTA00301087

--=PAGE_BREAK=--

North America Equity Research J.P Morgan 12 June 2014 need to be properly compensated in contracts and justify a measured pace. Perhaps the most challenging aspect of these contracts is establishing a base-line for measuring the incentive portion of the contract. In other words, assuming a field increases production, how much credit goes to Halliburton for the increased production versus what would normally be achieved? Another issue is establishing the base-line for environmental risk to assure the company is only responsible for what takes place under their scope and not taking on legacy environmental risk. Swirling currents in Latin America. Latin America is arguably the one “soft spot” in the Halliburton story as margins have disappointed in recent quarters. But while we believe the issues have been ring-fenced, the major countries in the region face unique sets of issues that will take some time to resolve. Brazil is the biggest concern with activity substantially below what was agreed upon when the drilling contract was signed in 2012. Recently, Petrobras has agreed to retender the contracts, but the timing is in question. Assuming the contracts are re-tendered in 2H14, Halliburton should see margin improvement by 2Q15 as costs are right-sized. The big issue will likely be around price as Halliburton presumably priced the initial contract lower based on the higher expected activity levels. With reforms waiting for secondary laws to pass over the next month or two, Mexico will be a growing opportunity for Halliburton, particularly if service companies are the first to be offered contracts in unconventional work. We note that our understanding was the offshore market would be the first to be offered with IOC's partnering with Pemex in both shallow and deepwater. Lastly, Venezuela may be showing some signs of improvement with the recently negotiated deal with PDVSA. Together with Schlumberger and Weatherford, $2bn in work has been agreed upon, which will include payment on receivables. Many Options with Balance Sheet and Cash Flow. We believe free cash flow generation is becoming the defining topic among large cap service companies, and has contributed to the re-rating of the stock over the past 6 months (in addition to oil prices and North America, of course). Last fall, Halliburton recapitalized the balance sheet with a $3.0bn debt offering and subsequent $3.3bn share buyback, but with net debt/cap at 29% as of 1Q14, investors shouldn’t expect a repeat re-cap this fall. Instead, share buybacks will be coming from operating free cash flow, essentially paying out anything in excess of the $1.5bn in cash needed to run the business. As of 1Q14, Halliburton reported $2.1bn in cash on the balance sheet, with $1.2bn of it set aside for a Macondo settlement, which is expected to be resolved within the next 12 months. Mr. McCollum noted that the dividend currently paying out the low end of a stated 10-15% of net income, suggesting investors should expect an increase in the coming quarters (we model +20% to $0.18/gtr in 4Q14), with excess cash going towards share repurchases. With the company targeting 30-35% of operating cash to be paid out in total, this implies over $2bn in buybacks in 2014 (~32mm shares at $70) and another ~$2.5bn in 2015, which would add ~S0.15/sh to 2014 EPS and $0.35/sh to 2015. Mr. McCollum expects capex to remain relatively flat over the next several years. He indicated North America is still the best place for the incremental dollar of spending for growth, but even if they dialed up pressure pumping capacity, it would only raise capex by 10% or so. Interestingly, one of his bigger balance sheet concerns is having available room for M&A, which would either focus on technologies or product lines EFTA00301088

--=PAGE_BREAK=--

J. David Anderson, PE. CFA North America Equity Research 2 12 June 2014 J.PMorgan that complement the mature field business around artificial lift (ESPs or PCPs) or chemicals. That said, there was a sense of frustration that more deals haven't presented themselves. ..then again, with the business outlook as strong as its been in years (if not as long as we've covered the company), Halliburton doesn’t need much external help. EFTA00301089

--=PAGE_BREAK=--

J_ David Anderson, PE. CFA North America Equity Research 1Q13 2013 3Q13 2013 Income Statement ($, mm) North America $16,004 $3, $3,802 $3,881 $3,623 $15,212 $4,097 $4, $4,167 Latin America 3,694 44 «1,002 1,018 =. 3.908 906 1140 3,897 Europe/Africa/CIS 4510 1, 1,299 1,340 «1399 © 6.2251, 1465 1, 1,567 5,768 Middle EastAsia 4295 1, 1,272 1249 «1999 ©6056 1, 14371 1,679 5,916 Total Revenue $28,503 $7,317 $7,472 $7,639 $29,402 $7,895 $8,553 $31,938 Rev enue Consensus 28243 «6,879 7,246 7,498 7,557 29,337) 7 1863 8,651 32,081 Completon & Producton 17,9804, 4363 4501 4542 17506 4, 4405 4; 4772 17,821 Drilling & Evaluation 11,123 2,954 2971 3,097 11,696 3,490 3,781 13,744 ($23,741) ($6,000) ($6,191) ($6,230) ($6,363) ($24,784) ($6.303) ($6,619) ($6,891) ($26,413) (275) (72) (87) (80) (94) (333) (75) (87) {90} (94) (345) ($24,016) ($6,072) ($6,278) ($6,310) ($6,457) ($25,117) ($6,378) ($6,706) ($6,690) ($6,985) ($26,759) ($1,628) ($448) ($474) ($481) ($497) ($1,900) ($510) ($525) ($540) ($555) ($2,130) $6,115 $1,350 $1,513 $1,643 $1,679 $6,185 $1,480 $1,715 $1,992 $2,123 $7,310 6027, 1.294 1485 1,624 1,669 6174 1483) 1,714 «1959 |= 2117 7,249 Operating Income North America $2980 $605 $666 $691 $651 $2613 $602 $76 $854 $3,031 Latin America 607 109 101 159 157 526 100 109 171 524 Europe/AfricaCIS 593 121 161 207 698 146 204 262 878 Middle EastAsia 687 187 219 207 877 211 259 36300 1,117 Total Operating Income $4487 = $902 $1,039 $1,162 $4,285 $970 $1,190 $1,568 $5,180 North America Margins 16.3% 17.5% 17.8% A 17.2% 154% 17.5% I 20.5% 18.5% Latin America Margins 11.5% 10.7% 15.9% 195% (116% 120% 4 15.0% 13.4% Europe/Africa/CIS Margins 10.2% 12.4% 15.4% : 194% 11.2% 14.0% A 18.0% 15.2% Middle East/Asia Margins 16.5% 17.2% 16.6% 17.3% 164% 18.0% I 21.0% 18.9% Total Operating Margins 12.9% 14.2% 15.6% 146% (13.2% 15.1% f 18.3% 16.2% Income Taxes ($191) ($312) ($1,057) ($229) ($310) ($417) ($1,941) Tax Rate 23% 29% 27% «27% 29% 28% Net Income ($13) $707 $2,169 $1,044 = $3,403 Diluted Shares (Avg) 928 931 902 850 851 EPS (Adjusted, Diluted) $0.67 . . $3.15 5 $1.23 $4.00 EPS Consensus i 0.57 0.72 0.82 0.89 3.10 11 1.23 3.98 Cividend per Share . $0.13 . ; ; . i : 5 $0.63 Cash Flow Statement ($,mm) Total Working Capital Changes ($864) Cash from Operations $349 $1,122 Capital Expenditures ($685) ($711) Cash from Investing ($651) ($540) Increase (decrease) in LT Dabt 5) $0 Cash from Financing ($145) ($1,184) Cash at End of Period Balance Sheet ($,mm) Properly. Plant, & Equip. (Net) Total Assets Long-term Debt, Net of Current Stockholder Equity Cash Flow Metrics Free Cash Flow FCFishare (diluted) perating Free Cash Flow Balance Sheet Metrics Book Value (per share) Net Debt Total DebtCapital Net Debt/Capital Return on equity Return on capital (Net Debt} Source: Company reparts, Bloomberg, J.P. Morgan estimates. EFTA00301090

--=PAGE_BREAK=--

J_ David Anderson, PE. CFA North America Equity Research Investment Thesis, Valuation and Risks Halliburton (Overweight; Price Target: $78.00) Investment Thesis We believe HAL is exhibiting its pressure pumping cost advantage with a fleet that is 85% on long-term contracts and 75% working on 24-hour operations. With 2014 earnings revisions likely to the upside going forward, we expect multiple expansion with more investors looking toward the considerable growth in 2014/2015 EPS amid conservative assumptions. We also think there is a free option for gas recovery, which could dramatically improve frac utilization and pricing. Valuation We continue to rate Halliburton Overweight but raised our Dec 2014 price target slightly to $78 (from $77) as we maintain our 15.0x target. Our target multiple is close to where HAL traded mid-stage last cycle. HAL currently trades at 12.9x our 2015E EPS, a 19% discount to SLB and a 6% discount to BHI. Our target multiple for HAL is an 17% discount to SLB but a 5% premium to our target multiple for BHI as we expect HAL to see continued relative multiple expansion given its strong international growth and superior North America operations. Furthermore, expect the company to continue to buy back shares as free cash flow ramps, but don’t include buybacks in our model. Risks to Rating and Price Target Potential liability from involvement in Macondo blowout Halliburton performed cementing services on the ill-fated Macondo well that led to one of the largest oil spills in history. While we continue to believe that Halliburton acted properly throughout the well construction process, Halliburton faces civil penalties resulting from its involvement in the disaster. Our expectation is for a settlement in the $300-500mm range. The possibility of a large acquisition could pressure shares In the wake of the Smith and BJ acquisitions, M&A discussions naturally shifted to Halliburton. We do not believe Halliburton needs to get bigger, and it is unlikely to make a significant acquisition, but it could see shares under pressure on this thesis. We believe smaller, technology-focused acquisitions are more likely, particularly in artificial lift (ESPs) and well testing. EFTA00301091

--=PAGE_BREAK=--

North America Equity Research 12 June 2014 Halliburton: Summary of Financials J.P.Morgan Income Statement - Annual FY13A FY14E FY15E FY16GE Income Statement - Quarter! 1Q14A 2Q14E 3Q14E 4Q14E Revenues 29,402 31,938 35,154 37,087 Revenues 748A «7895 8142 8,553 Cost of products sold 24.784) (26.413) (28.237) (29.331) Cost of products soki (6,303) (6,619) (6,601) (6.891) Gross profit 4618 5525 6917 7,756 Gross profit 10454 1.277) 1,541 1,682 SG&A (333) (345) (387} (408) SG&A (75)A (87} (90) (94) 0044 (1,900) (2,130) (2,420) (2.740) DD&A (S10)A = {525} = (540) = (585) Other operating expanses Other operating expenses Operating Income 4,285 = 5,180 6.531 7,348 Operating Income 970A 1.190 1452 1,568 EsiT 4,285 5.180 6,531 748 EBIT S70A 1,190 1452 1,588 EBITDA 6,185 7.310 6951 10,088 EBITDA 1480A 1715 1992 2,123 Net interest income / (expanse) (331) (372) (368) ~—=«(3B0) Net interest income / (expense) (33)A (93), —= (93) ¢83) Income applicable to minority interests {10) (12) (12) Income applicable to minority interests 3} } Pretax income 3,911 4747 6119 6,944 Pretax income BEA «1087 1049 1,465 Taxes (1,057) (1,341) (1,683) (1,875) Taxes {229)4 (310) (384)—«(417) Tax rate (%) 27.0% 282% 27.5% 27.0% Taxrate (%) 27A%A 28.5% 28.5% 28.5% Reported nat income 2,169 3,403 4424 5,057 Reported net income 6234 774 961 «1,044 Non-recurring items, disc ops 675 t] 0 Q Non-recurring items, disc ops oA 0 0 Q Adjusted net income 2844 3403 4424 5,057 Adjusted net income 6234 774 961 = 1,044 Average diluted shares outstanding 902 851 850 850 Average diluted shares outstanding 8534 850 850 850 EPS 3.15 400 §.20 5.95 EPS 073A 80.91 1.13 123 EPS growth rate (%6) 5.1% 268% 30.1% 14.3% EPS growth rate (%) B0%A 24.8% 35.7% 31.5% Dividend per share 053 063 0.72 0.84 — Dividend per share 015A 015 0.15 0.18 WTI crude price ($/bbl) - - - - WTicrude price ($/bbt) - - - - Henry Hub natural gas price (Smet) Henry Hub natural gas price ($/mef} Balance Sheet and Cash Flow Data FY13A_FY14E FY15E FY16E Ratio Analysis FY13A FY14E FY15E FY16E Cash and cash equivalents 2356 3,721 6.328 9,855 Valuation Other current assets 11,348 «11,883 «12707 13,103 P/E (adjusted) 21.2 167 129 11.3 Total current assets 13,704 «15.604 19,035 22,958 PICF 13.6 10.8 88 74 Net PP&E 11,322) 12,179 «13,011 13,701 ~~ Enterprise value/EBITDA 82 63 52 43 Other assets 4197 4307) «4307 9=4,307 - EV/DACF - : : - Total assets 29,223 «32.090 36,353 40,967 Ratios Total debt 7816 7816 7816 7,816 Net debtiequity 40.1% 25.4% 7.5% (84%) Total liabilities 15608 15964 16412 16,679 Net debticapital 26.0% 18.1% 58% (68%) Minority interests uu a a 27 ~~ Nat coverage ratio 12.9 13.9 177 204 Preferred stock - : : - ROE 19.4% 229% 246% 229% Shareholders’ equity 13,581 16.099 19914 24260 ROCE 149% 164% 183% 17.9% Net income 2,189 3.403 4424 5,057 Yield and cash returns 0084 1,900 2130 2420 2,740 CFPS 49 6.22 7.61 9.02 Deferred taxes - - - - Change in working capital (437) (232)—=«(3 76) ~—(128) FCF yield 29% 45% 61% 7.9% Other 815 (7) 0 Q Dividend yieki 08% O9% 11% 13% Cash flow from operations 4Aq7 5.294 6468 7,689 Dividend payout ratio 21.8% 158% 138% 141% Capex (2,934) (2,979) (3,252) (3,431) Buyback yield 7.0% 08% 0.0% 0.0% Other investing cashflows 64 (31) 0 0 Dividends (465) (533) (609) (711) ‘Share buybacks (net) (4,079) (500) 0 0 Change in debt 2,988 0 0 0 Other financing cashflows (178) 113 0 0 Change in cash (128) 1,365 2607 3,528 Free cash flow 1,755 2582 3483 4501 Source: Company reports and J.P. Morgan estimates. Note: $ in millions (except per-share data).Fiscal year ends Dec EFTA00301092

--=PAGE_BREAK=--

J. David Anderson, PE. CFA North America Equity Research = vores Analyst Certification: The research analyst(s) denoted by an “AC” on the cover of this report certifies (or, where multiple research analysts are primarily responsible for this report, the research analyst denoted by an “AC” on the cover or within the document individually certifies, with respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report. For all Korea-based research analysts listed on the front cover, they also certify, as per KOFIA requirements, that their analysis was made in good faith and that the views reflect their own opinion, without undue influence or intervention. Important Disclosures © Lead or Co-manager: J.P. Morgan acted as lead or co-manager in a public offering of equity and/or debt securities for Halliburton within the past 12 months. © Client: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients: Halliburton. © Client/Investment Banking: JP. Morgan currently has, or had within the past 12 months, the following company(ies) as investment banking clients: Halliburton. © Client/Non-Investment Banking, Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients, and the services provided were non-investment-banking, securities-related: Halliburton. © Client/Non-Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following company/(ies) as clients, and the services provided were non-securities-related: Halliburton. © Investment Banking (past 12 months): J.P. Morgan received in the past 12 months compensation from investment banking Halliburton. © Investment Banking (next 3 months): J.P. Morgan expects to receive, or intends to seek, compensation for investment banking services in the next three months from Halliburton. © Non-Investment Banking Compensation: J.P. Morgan has received compensation in the past 12 months for products or services other than investment banking from Halliburton. Company-Specific Disclosures: Important disclosures, including price charts, are available for compendium reports and all J.P. Morgan covere: m/research/disclosures, calling 1-800-477-0406, or e-mailing ith your request. J.P. Morgan's Strategy, Technical, and Quantitative Research teams may screen companies not covered by J.P. Morgan. For important disclosures for these companies, please call 1-800-477-0406 or e-mail research disclosure. inquiries@jpmorgan.com. Date Rating Share Price Price Target Halliburton (HAL, HAL US) Price Chart (Ss) (s) 04-Feb-08 OW 34.71 - 14-Jan-09 OW 17.20 26.00 27-Jan-09 OW 18.87 23.00 04-Mar-09 OW 14.92 20.00 21-Apr-09 =N 19.96 20.00 02-Jul-09 oN 19.38 28.00 06-Apr-10 OW 32.20 39.00 19-Jul-10 OW 30.27 45.00 07-Oct-10 OW 33.62 49.00 27-Jan-11 OW 43.40 58.00 25-Apr-11 OW 50.63 62.00 23-May-11 OW 46.16 65.00 24-Oct-11 OW 35.32 58.00 -Jan-12 OW 37.10 52.00 23-Apr-12 OW 33.29 45.00 Oct Apr Oct Apr ‘Oct Apr 05-Jun-12 OW 29.12 44.00 °° e ° " " “ 06-Jun-12 OW 28.13 42.00 Source: Bloomberg and JP, Morgan: price data adjusted for stock splits and dividends, 31-Jul-12 OW 33.55 47.00 Bronk in coverage Feb 04, 2008 - Jan 14, 2008. 11-Sep-12 OW 34.27 43.00 27-Nov-12 OW 32.04 45.00 11 EFTA00301093

--=PAGE_BREAK=--

J. David Anderson, PE, CFA North America Equity Research 12 June 2014 J.PMorgan 18-Dec-12 OW 34.80 44.00 08-Jan-13 N 36.19 42.00 28-Jan-13 N 40.28 45.00 19-Feb-13 OW 4281 $2.00 23-Apr-13. OW 39.29 $3.00 23-Jul-13 OW 45.08 54.00 25-Jul-13. NR 45.98 - 26-Aug-13 OW 48.44 57.00 11-Sep-13 OW 50.32 64.50 22-Oct-13 OW 50.66 65.00 08-Nov-13 OW 53.90 67.50 22-Jan-14 OW 50.54 66.50 26-Feb-14 OW 55.58 77.00 The chart(s) show J.P. Morgan's continuing coverage of the stocks; the current analysts may or may not have covered it over the entire period. J.P. Morgan ratings or designations: OW = Overweight, Nw Neutral, UW = Underweight, NR = Not Rated Explanation of Equity Research Ratings, Designations and Analyst(s) Coverage Universe: J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the average total return of the stocks in the analyst's (or the analyst's team’s) coverage universe.] Neutral [Over the next six to twelve months, we expect this stock will perform in line with the average total return of the stocks in the analyst's (or the analyst's team’s) coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of the stocks in the analyst's (or the analyst's team’s) coverage universe.) Not Rated (NR): J.P. Morgan has removed the rating and, if applicable, the price target, for this stock because of either a lack of a sufficient fundamental basis or for legal, regulatory or policy reasons. The previous rating and, if applicable, the price target, no longer should be relied upon. An NR designation is not a recommendation or a rating. In our Asia (ex-Australia) and U.K. small- and mid-cap equity research, each stock’s expected total return is compared to the expected total return of a benchmark country market index, not to those analysts’ coverage universe. If it does not appear in the Important Disclosures section of this report, the certifying analyst's coverage universe can be found on J.P. Morgan’s research website, www_jpmorganmarkets.com. Coverage Universe: Anderson, David: Baker Hughes (BHI), Bristow Group (BRS), C&J Energy Services (CJES), CHC Group (HELI), Cameron Int'l (CAM), Diamond Offshore (DO), Dresser-Rand (DRC), Dril-Quip (DRQ), Ensco ple (ESV), Exterran Holdings (EXH), FMC Technologies (FTI), Forum Energy Technologies (FET), Halliburton (HAL), Hornbeck Offshore (HOS), NOW Inc. (DNOW), National Oilwell Varco (NOV), Noble Corp. (NE), Rowan Companies (RDC), Schlumberger (SLB), Superior Energy Services (SPN), Transocean (RIG), Weatherford International (WFT) J.P. Morgan Equity Research Ratings Distribution, as of March 31, 2014 Overweight Neutral Underweight (buy) (hold) (sell) LP. Morgan Global Equity Research Coverage 44% 11% IB clients* AIM 40% JPMS Equity Research Coverage 48% T% IB clients* 67% 60% *Percentage of investment banking clients in cach rating category. For purposes only of FINRA/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold rating category; and our Underweight rating falls into a sell rating category. Please note that stocks with an NR designation are not included in the table above. Equity Valuation and Risks: For valuation methodology and risks associated with covered companies or price targets for covered companies, please see the most recent company-specific research report at htt /w.jpmorganmarkets.com, contact the primary analyst or your J.P. Morgan representative, or email Equity Analysts' Compensation: The equity research analysts responsible for the preparation of this report receive compensation based upon various factors, including the quality and accuracy of research, client feedback, competitive factors, and overall firm revenues. Other Disclosures J.P. Morgan ("JPM") is the global brand name for J.P. Morgan Securities LLC ("JPMS") and its affiliates worldwide. J.P. Morgan Cazenove is a marketing name for the U.K. investment banking businesses and EMEA cash equities and equity research businesses of JPMorgan Chase & Co. and its subsidiaries. EFTA00301094

--=PAGE_BREAK=--

J. David Anderson, PE. CFA North America Equity Research oe ne J.P Morgan All research reports made available to clients are simultaneously available on our clignt website, J-P. Morgan Markets. Not all research content is redistributed, e-mailed or made available to third-party aggregators. For all research reports available on a particular stock, please contact your sales representative. Options related research: If the information contained herein regards options related research, such information is available only to persons who have received the proper option risk disclosure documents. For a copy of the Option Clearing Corporation's Characteristics and Risks of Standardized Options, please contact your J.P. Morgan Representative or visit the OCC's website at https//www.optionsclearing._com/publications/risks/riskstoc. pdf Legal Entities Disclosures US.: JPMS is a member of NYSE, FINRA, SIPC and the NFA. JPMorgan Chase Bank, N.A. is a member of FDIC. U.K.: JPMorgan Chase N.A., London Branch, is authorised by the Prudential Regulation Authority and is subject to regulation by the Financial Conduct Authority and to limited regulation by the Prudential Regulation Authority. Details about the extent of our regulation by the Prudential Regulation Authority are available from J.P. Morgan on request. J.P. Morgan Securities plc (JPMS plc) is a member of the London Stock Exchange and is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England & Wales No. 2711006. Registered Office 25 Bank Street, London, E14 5JP. South Africa: J.P. Morgan Equities South Africa Proprictary Limited is a member of the Johannesburg Securities Exchange and is regulated by the Financial Services Board. Hong Kong: J.P. Morgan Sccurities (Asia Pacific) Limited (CE number AAJ321) is regulated by the Hong Kong Monetary Authority and the Securities and Futures Commission in Hong Kong and/or J.P. Morgan Broking (Hong Kong) Limited (CE number AAB027) is regulated by the Securities and Futures Commission in Hong Kong. Korea: J.P. Morgan Securities (Far East) Ltd, Seoul Branch, is regulated by the Korea Financial Supervisory Service. Australia: J.P. Morgan Australia Limited (JPMAL) (ABN 52 002 888 O11/AFS Licence No: 238188) is regulated by ASIC and J_P. Morgan Securities Australia Limited (JPMSAL) (ABN 61 003 245 234/AFS Licence No: 238066) is regulated by ASIC and is a Market, Clearing and Settlement Participant of ASX Limited and CHI-X. Taiwan: J.P.Morgan Securities (Taiwan) Limited is a participant of the Taiwan Stock Exchange (company-type) and regulated by the Taiwan Securities and Futures Bureau. India: J_P. Morgan India Private Limited, having its registered office at J.P. Morgan Tower, Off. C_S.T. Road, Kalina, Santacruz East, Mumbai - 400098, is a member of the National Stock Exchange of India Limited (SEBI Registration Number - INB 230675231/INF 23067523 1/INE 230675231) and Bombay Stock Exchange Limited (SEBI Registration Number - INB 010675237/INF 010675237) and is regulated by Securities and Exchange Board of India. For non local research reports, this material is not distributed in India by J.P. Morgan India Private Limited. Thailand: This material is issued and distributed in Thailand by JPMorgan Securities (Thailand) Ltd., which is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission and its registered address is 3rd Floor, 20 North Sathorn Road, Silom, Bangrak, Bangkok 10500. Indonesia: PT J.P. Morgan Securities Indonesia is a member of the Indonesia Stock Exchange and is regulated by the OJK a.k.a. BAPEPAM LK. Philippines: J.P. Morgan Securities Philippines Inc. is a Trading Participant of the Philippine Stock Exchange and a member of the Securities Clearing Corporation of the Philippines and the Securities Investor Protection Fund. It is regulated by the Securities and Exchange Commission. Brazil: Banco J.P. Morgan S.A. is regulated by the Comissao de Valores Mobiliarios (CVM) and by the Central Bank of Brazil. Mexico: J.P. Morgan Casa de Bolsa, S.A. de C.V_, J.P. Morgan Grupo Financicro is a member of the Mexican Stock Exchange and authorized to act as a broker dealer by the National Banking and Securities Exchange Commission. Singapore: This matcrial is issued and distributed in Singapore by or through J.P. Morgan Securities Singapore Private Limited (JPMSS) [MCI (P) 199/03/2014 and Co. Reg. No.: 199405335R] which is a member of the Singapore Exchange Securities Trading Limited and is regulated by the Monetary Authority of Singapore (MAS) and/or JPMorgan Chase Bank, N.A., Singapore branch (JPMCB Singapore) which is regulated by the MAS. This material is provided in Singapore only to accredited investors, expert investors and institutional investors, as defined in Section 4A of the Securities and Futures Act, Cap. 289. Recipients of this document are to contact JPMSS or JPMCB Singapore in respect of any matters arising from, or in connection with, the document. Japan: JPMorgan Sccurities Japan Co., Ltd. is regulated by the Financial Services Agency in Japan. Malaysia: This material is issued and distributed in Malaysia by JPMorgan Sccuritics (Malaysia) Sdn Bhd (18146-X) which is a Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets Services License issued by the Securities Commission in Malaysia. Pakista P. Morgan Pakistan Broking (Pvt.) Ltd is a member of the Karachi Stock Exchange and regulated by the Securities and Exchange Commission of Pakistan. Saudi Arabia: J.P. Morgan Saudi Arabia Ltd. is authorized by the Capital Market Authority of the Kingdom of Saudi Arabia (CMA) to carry out dealing as an agent, arranging, advising and custody, with respect to securities business under licence number 35-07079 and its registered address is at 8th Floor, Al-Faisaliyah Tower, King Fahad Road, P.O. Box 51907, Riyadh 11553, Kingdom of Saudi Arabia. Dubai: JPMorgan Chase Bank, N.A., Dubai Branch is regulated by the Dubai Financial Services Authority (DFSA) and its registered address is Dubai International Financial Centre - Building 3, Level 7, PO Box 506551, Dubai, UAE. Country and Region Specific Disclosures U.K. and European Economic Area (EEA): Unless specified to the contrary, issued and approved for distribution in the U.K. and the EEA by JPMS ple. Investment research issued by JPMS ple has been prepared in accordance with JPMS plc's policies for managing conflicts of interest arising as a result of publication and distribution of investment research. Many European regulators require a firm to establish, implement and maintain such a policy. This report has been issued in the U.K. only to persons of a kind described in Article 19 (5), 38, 47 and 49 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (all such persons being referred to as “relevant persons"). This document must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this document relates is only available to relevant persons and will be engaged in only with relevant persons. In other EEA countries, the report has been issued to persons regarded as professional investors (or equivalent) in their home jurisdiction. Australia: This material is issued and distributed by JPMSAL in Australia to "wholesale clients" only. This material docs not take into account the specific investment objectives, financial situation or particular needs of the recipient. The recipient of this material must not distribute it to any third party or outside Australia without the prior written consent of JPMSAL. For the purposes of this paragraph the term "wholesale client" has the meaning given in section 761G of the Corporations Act 2001. Germany: This material is distributed in Germany by J.P. Morgan Securities ple, Frankfurt Branch and J.P.Morgan Chase Bank, N.A_, Frankfurt Branch which are regulated by the Bundesanstalt fiir Finanzdienstlcistungsaufsicht. Hong Kong: The 1% ownership disclosure as of the previous month end satisfies the requirements under Paragraph 16.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission. (For research published within the first ten days of the month, the disclosure may be based on the month end data from two months prior.) J.P. Morgan Broking (Hong Kong) Limited is the liquidity provider/market maker for derivative warrants, callable bull bear contracts and stock options listed on the Stock Exchange of Hong Kong Limited. An updated list can be found on HKEx website: http2//www.hkex.com_hk. Japan: There is a risk that a loss may occur due to a change in the price of the shares in the case of share trading, and that a loss may occur due to the exchange rate in the case of foreign share trading. In the case of share trading, JPMorgan Securities Japan Co., Ltd., will be receiving a brokerage fee and consumption tax (shouhizci) calculated by multiplying the executed price by the commission rate which was individually 13 EFTA00301095

--=PAGE_BREAK=--

J. David Anderson, PE, CFA North America Equity Research 12 June 2014 JP. Morgan agreed between JPMorgan Securities Japan Co., Ltd, and the customer in advance. Financial Instruments Firms: JPMorgan Securities Japan Co., Ltd., Kanto Local Finance Bureau (kinsho) No. 82 Participating Association / Japan Securities Dealers Association, The Financial Futures Association of Japan, Type II Financial Instruments Firms Association and Japan Investment Advisers Association. Korea: This report may have been edited or contributed to from time to time by affiliates of J.P. Morgan Sccurities (Far East) Ltd, Scoul Branch. Singapore: JPMSS and/or its affiliates may have a holding in any of the securities discussed in this report; for securities where the holding is 1% or greater, the specific holding is disclosed in the Important Disclosures section above. India: For private circulation only, not for sale. Pakistan: For private circulation only, not for sale. New Zealand: This material is issued and distributed by JPMSAL in New Zealand only to persons whose principal business is the investment of money or who, in the course of and for the purposes of their business, habitually invest money. JPMSAL does not issue or distribute this material to members of "the public" as determined in accordance with section 3 of the Securities Act 1978. The recipient of this material must not distribute it to any third party or outside New Zealand without the prior written consent of JPMSAL. Canada: The information contained herein is not, and under no circumstances is to be construed as, a prospectus, an advertisement, a public offering, an offer to sell securities described herein, or solicitation of an offer to buy securities described herein, in Canada or any province or territory thereof. Any offer or sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevant Canadian securities regulators and only by a dealer properly registered under applicable securities laws or, alternatively, pursuant to an exemption from the dealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made. The information contained herein is under no circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient. To the extent that the information contained hercin references securities of an issuer incorporated, formed or created under the laws of Canada or a province or territory of Canada, any trades in such securities must be conducted through a dealer registered in Canada. No securities commission or similar regulatory authority in Canada has reviewed or in any way passed judgment upon these materials, the information contained herein or the merits of the securities described herein, and any representation to the contrary is an offence. Dubai: This report has been issued to persons regarded as professional clients as defined under the DFSA rules. Brazil: Ombudsman J.P. Morgan: 0800-7700847 / ouvidoria.jp.morgan@jpmorgan.com. General: Additional information is available upon request. Information has been obtained from sources believed to be reliable but JPMorgan Chase & Co. or its affiliates and/or subsidiaries (collectively J.P. Morgan) do not warrant its completeness or accuracy except with respect to any disclosures relative to JPMS and/or its affiliates and the analyst's involvement with the issuer that is the subject of the research. All pricing is as of the close of market for the securities discussed, unless otherwise stated. Opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The opinions and recommendations herein do not take into account individual client circumstances, objectives, or needs and are not intended as recommendations of particular securities, financial instruments or strategies to particular clients. The recipient of this report must make its own independent decisions regarding any securities or financial instruments mentioned herein. JPMS distributes in the U.S. research published by non-U.S. affiliates and accepts responsibility for its contents. Periodic updates may be provided on companies/industries based on company specific developments or announcements, market conditions or any other publicly available information. Clients should contact analysts and execute transactions through a J.P. Morgan subsidiary or affiliate in their home jurisdiction unless governing law permits otherwise. “Other Disclosures” last revised April 5, 2014. Copyright 2014 JPMorgan Chase & Co. All rights reserved. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan. EFTA00301096