Jeff Miller
Chairman, President, and Chief Executive Officer at Halliburton
Thank you, David and good morning everyone. 2021 finished strong for Halliburton and I'm excited about the accelerating up cycle as we entered 2022. We have an effective value proposition and benefit from increasing activity both in North America and international markets. At the same time, we see improving service pricing in both markets. Throughout this up cycle, I expect Halliburton to grow profitably, accelerate free cash flow generation, strengthen our balance sheet and increase cash returns to shareholders. But first, I want to take a minute and recognize the men and women of Halliburton for their execution on every dimension of our business, safety, service quality and financial results. In spite of global complexity in 2021, you outperformed, so to all of our employees, thank you.
I believe 2022 will be a strong year for our industry and especially for Halliburton. While global energy demand and economic growth demonstrated resilience, global energy supply has shown it's fragility. The impacts of several years of under-investment in new production is now apparent and the structural requirement to invest around the wellbore is crystal clear.
We see increasing customer urgency and a pivot back to what creates value for Halliburton. Our customers demand reliable execution, dependable supply chains, effective technology and a collaborative service provider to maximize asset value and this is at the core of Halliburton's unique value proposition. But first I'll highlight some of our 2021 accomplishments.
We finished the year with total company revenue of $15.3 billion and operating income of $1.8 billion. Both of Halliburton's divisions grew revenue and margins this year. Our Completion and Production division finished the year with 15% operating margin, driven by activity improvement, despite inflationary pressures. We expect to build on this margin growth in 2022, as global activity and pricing improve.
Our Drilling and Evaluation division margins remained firmly in double digits throughout 2021 and achieved full year margins of 12% for the first time since 2014. This is a good demonstration of our steady march forward and we are not done. I'm pleased with the trajectory of our international business. International revenue and operating income increased every quarter in 2021. In North America, Halliburton achieved 36% incrementals year-on-year, as US land activity rebounded and we maximized the value of our business.
We announced our science based emission reduction targets added 11 new participating companies to Halliburton Labs and were named to the Dow Jones Sustainability Index, which highlights the top 10% most sustainable companies in each industry. Finally, we generated strong free cash flow of $1.4 billion and ended the year with $3 billion of cash on hand, even after the retirement of $685 million of long-term debt in 2021.
Next let me share a few highlights from our fourth quarter performance. Total company revenue increased 11% and operating income grew 20% sequentially. Our Completion and Production division revenue increased 10% sequentially and operating income increased 8% with completion tool sales showing the highest third to fourth improvement in the last 15 years. Equally important, our current completion tool order book has more than doubled from a year ago, signaling strong growth and profitability again in 2022.
Our Drilling and Evaluation division grew revenue 11%, which outperformed the global rig count growth for the quarter and delivered over 300 basis points of sequential margin improvement. International and North America revenue grew 11% and 10% respectively due to strong year end sales and activity increases across all regions. Building on the strong foundation of disciplined execution, today we announced two important strategic steps we are taking to further create value for our shareholders.
First, our Board of Directors increased our quarterly dividend to $0.12 per share in the first quarter of 2022. This action reflects our confidence and Halliburton's strong cash generation capacity. Second, in order to accelerate debt retirement and strengthen our balance sheet, we are redeeming $600 million of our $1 billion in debt maturing in 2025. When these notes are redeemed in February, we will have retired $1.8 billion of debt since the beginning of 2020.
These steps demonstrate my confidence in our business, customers, employees and value proposition. As I discussed with you on recent earnings calls, I expect the macro industry environment to remain supportive and as we saw in 2021, the International and North America markets will continue their simultaneous growth. This is momentum that I have not seen in a long time. With this momentum, we plan to execute our unique strategic priorities, deliver profitable growth internationally, maximize value in North America, accelerate digital and automation deployment, improve capital efficiency and advance a sustainable energy future.
Let's discuss how we plan to do this. First, internationally, our strategy is to deliver profitable growth. We allocate capital to the highest returns opportunities which means we are selective on what we bid for and win. Our D&E margin performance in 2021 has a demonstration of this discipline. We continue to invest in technology both digital and hardware that maximizes asset value. In 2021, we brought to market over 50 new technologies, including our iStar Intelligent Formation Evaluation platform and the next generation of our iCruise system for harsh drilling environments.
Our multi-year investment in Drilling Technologies is paying off and we expect to outgrow the market as international drilling activity ramps up. We have unique international growth opportunities in specialty chemicals and artificial lift. As Halliburton expands the international footprint of these businesses, we have a pipeline of opportunities that are longer cycle and should be margin accretive. Halliburton's size, scale and sophisticated supply chain and HR teams reliably execute for our customers in the face of supply shortages and labor tightness.
Second in the structurally smaller North American market, our strategy is to maximize cash flow and it dictates how we approach our North America business. Strong cash flow starts with strong margins and Halliburton's margins are the best-in-class. We completed the most aggressive set of structural cost reductions in our history. We also made significant changes to our processes that drive higher contribution margin, for example, how we perform equipment maintenance and provide engineering support. These changes give us meaningful operating leverage as North American activity accelerates.
We consistently replace equipment as it wears out and avoid outsized recapitalization requirements and we have the right type of equipment. We are the leaders in the low emissions equipment segment. We believe this gives us a structural pricing advantage as operators are willing to pay a premium for differentiated, more environmentally friendly solutions.
Our second-generation Zeus electric fracturing technology is working in the field today and delivers results for a growing list of customers. Importantly, in addition to emissions reduction, electric fracturing technology provides unprecedented operational control and precision. For example, Zeus makes pumping rate adjustments at least four times faster than a diesel pump, allowing us to respond to surface and subsurface changes more quickly than with a conventional frac spread and precisely execute the job design.
We expect fully electric locations to become a larger share of the market. Halliburton has the right kit including our Zeus electric pumping unit, the ExpressBlend blending system, the E Winch Electric wireline unit and the electric tech command center to meet the market demand for lower emitting fracturing operations.
We develop differentiated technologies to focus around the wellbore. As the oil price and customer urgency increase these technologies become more valuable to operators. For example, our SmartFleet intelligent fracturing solution helps customers optimize fracturing performance and maximize production. Several large operators will have SmartFleet working on multi-pad completion programs this year. Additionally, SmartFleet delivers fully automated frac operations, which ensures more consistent fracture placement on every stage, improves cluster uniformity and manages offset frac hits.
Finally, I want to highlight the importance of our well construction and production service lines. They each have unique competitive advantage and technology to maximize value in North America. Third, our strategy is to advance digitalization and automation in all aspects of our business. Our digital investments drive higher margins through customer purchases of software, smarter tools and answer products and cost savings for Halliburton.
Let me give you an example. Currently, 100% of Halliburton's drilling jobs run on a cloud-based real time system to deliver data and visualization to our customers around the world. Close to 60% of iCruise operations are fully automated, allowing for up to a 70% reduction in headcount per rig. Automation alleviates health and safety concerns by removing personnel from rigs, accelerates service delivery improvements and reduces the environmental footprint of oil and gas operations.
Our fourth strategic priority is to drive capital efficiency across the balance sheet. This positioned Halliburton to generate industry leading returns and strong free cash flow as markets grow. We will optimize the working capital required to grow our business and maintain our Capex in the range of 5% to 6% of revenue. Our business thrives in this range because of our research and development efforts and process changes. These allow us to build tools cheaper, lengthen their run life and move assets quicker to where they make the most money.
Our final strategic priority is to advance a sustainable energy future. Our clean energy accelerator, Halliburton Labs, continues to add new participants. We help these early-stage companies achieve important scaling milestones and significantly increase their enterprise value. Through Halliburton Labs, we are actively participating in the clean energy space, without committing shareholder capital.
Halliburton will evolve as energy evolves and we will add to our already expanding opportunities to participate as clean energy value chains mature. However, we will do so consistent with our capital allocation strategy and mindful of our commitment to deliver industry-leading returns and free cash flow generation. We will proceed with patience, discipline and resolve.
Now let's review our fourth quarter 2021 performance and expectations for 2022. As OPEC pluses spare capacity returns to normalized levels this year, we believe sufficient pent up oil demand will support a call on both international and US production and lead to increased activity. International activity accelerated in most markets in the second half of the year and finished strong in the fourth quarter with a 23% rig count increase year-on-year.
All Halliburton regions grew revenue, led by Asia-Pacific, the Middle East and Africa, with both of our divisions contributing to the revenue and margin expansion. I'm excited about our future international growth. Despite typical first quarter seasonality, we are starting 2022 a lot higher than where we entered 2021. I expect our customers international spend increase by mid-teens this year.
We anticipate projects in the Middle East, Russia and Latin America to attract the most investment with activity increases in Africa and Europe limited to a few markets. Asset owners are eager to reverse base production declines caused by multiple years of under-investment. We expect that operators will focus on shorter cycle production opportunities to meet increasing oil demand. This disproportionately benefits Halliburton, as these short cycle barrels require higher service intensity and spending directly focused on the wellbore, as opposed to long cycle infrastructure investments.
In 2022, we expect to deliver steady, profitable growth across the international markets. Our tender pipeline is strong. We anticipate higher utilization for our existing equipment in busy markets like the Middle East, Russia and Latin America. We plan to allocate our capital dollars to the opportunities that generate the highest return. Given the tool tightness that exist today in some product lines and geographies, we intend to strategically reallocate assets to drive improved utilization and returns.
A tightening market focuses our ongoing pricing discussions with customers. We see pricing traction on new work and contract renewals including integrated contracts. Additionally, we have introduced pay for performance models, negotiated favorable terms and conditions and applied price escalation clauses. Our large tenders remain competitive, we are consistent with our strategy to pursue profitable growth.
Turning to North America. In 2021, the recovery in North America was faster and more pronounced than in the international markets. In the fourth quarter, US land rig count increased 84% year-on-year and drilling activity outpaced completions, as operators prepared well inventory for 2022 programs. Completed stage count growth moderated slightly due to the holidays, sand supply tightness and lower efficiency levels typically experienced in the winter months.
In the fourth quarter, we finished the plant upgrade of all fracturing fleets to the next generation fluid end technology that extends the life of our equipment and helps reduce maintenance cost. We expect a busy 2022 in North America, given a strong commodity price environment, we anticipate North America customer spending to grow more than 25% year-on-year. We believe the highest increase will come from private operators, public E&Ps will continue to prioritize returns, while delivering production into a supportive market.
In North America, Halliburton uniquely benefits as the largest oilfield services provider in the largest oilfield services market in the world. We anticipate solid net pricing gains in North America throughout 2022. Here's why? The North America completions market is approaching 90% utilization and Halliburton is sold out. Pricing for our fracturing fleets is moving higher across the board, both for our market-leading low emissions equipment and our Tier four diesel fleets.
As a result, we expect to see over 30% incrementals in our hydraulic fracturing business in the first quarter. Anticipated demand growth for equipment provides a runway for us to increase pricing throughout the year. We expect some market-wide operational efficiencies afforded by completing a backlog of ducks in 2021 to reverse as frac fleets return to the usual mode of following drilling rigs. This will further increase the call on equipment as operators add rigs throughout the year.
Finally, during the tendering season, we secured net pricing increases across several different non-frac product service lines drilling, cementing, fluids, drill bids and artificial lift. As activity accelerates, the market is seeing tightness related to trucking, labor, sand and other inputs. While we pass these increased costs on to operators, Halliburton has effective solutions that minimize the operational impact of this tightness and provide reliable execution for our customers.
As an example, in 2021, we expanded our collaboration with Vorto and now benefit from 5F, the largest integrated transportation platform in the oil and gas industry. This platform has several thousand drivers, hundreds of carriers and a chain of asset maintenance yards. It allows us to effectively manage trucking inflation and availability constraints and significantly reduce logistics-related non-productive time.
Our human resources team and systems effectively mitigate local labor tightness. We recruit nationally and hire, train and manage a commuter workforce that makes up to 80% of our personnel in some areas. There is no doubt, the much-anticipated multi-year up cycle is now underway. North America production growth remains capped by operators' capital discipline, while meaningful international production growth is challenged by years of under-investment.
Energy demand has proven its resilience fueled by pent up economic growth and a global desire to return to normalcy. This is a fantastic set of conditions for Halliburton and a strong commodity price environment with limited production growth options, operators turn to short cycle barrels and increased spend around the wellbore. Our value proposition works. We have the right strategies for both international and North American markets. We are leaders in digital and automation and we drive capital efficiency, while advancing a sustainable energy future.
I fully expect that Halliburton will accelerate cash flow generation, strengthen our balance sheet and increase cash returns to shareholders in this upcycle.
Now, I will turn the call over to Lance to provide more details on our fourth quarter financial results. Lance?
