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CORPORATE SUSTAINABILITY

REPORT 2006

HALLIBURTON

Index

Introductioninside front cover

Chief Executive’s Message1

Halliburton at a Glance2

Accomplishments and Challenges

3

Sustainable Relationships4

Sustainable Technology9

Sustainable Sourcing10

AngolaOpportunities for

Sustainability13

Transparency14

GRI Indexinside back cover

Welcome to the 2006 Halliburton Corporate Sustainability Report.

This report is part of Halliburton’s continuing drive to report our progress in support of globally recognized sustainability topics and challenges. With this report, we are using the Global Reporting Initiative (GRI) and guidance of the American Petroleum Institute as models to improve our sustainability reporting, more directly address the concerns of our stakeholders and more clearly represent our business goals.

As a consequence of the November initial public offering of our KBR business, the report primarily contains data from the Energy Services Group and summarizes our progress in 2006.

This report is organized around the four elements of Halliburton’s Energy Services Group global sustainability strategy. These elements reflect our greatest opportunities as a company operating globally: sustainable relationships, sustainable technologies, sustainable sourcing and transparency. We will publish more extensive reports every other year. This report and other corporate sustainability information may be viewed online at www.halliburton.com.

Major Operating Hubs

A MESSAGE FROM OUR CHIEF EXECUTIVE

As an oilfield services company

with operations around the world,

our first priority will always be to

offer competitive, safe and

superior-quality services to our

customers. But, as corporate

citizens of our increasingly

interconnected planet, we know

that the sustainability of our

business also depends to a great

extent on how we interact with our

stakeholders – our employees, our

customers, our suppliers, our host

governments and our neighbors. Our

approach to sustainable development

is shaped by this understanding and

by our global Sustainable

Development strategy. It is also

guided by our goals: To be welcomed

as a good corporate neighbor in our

communities; to do no harm to the

environment; to provide

demonstrable social and economic

benefits; and to validate our progress

through transparency and reporting.

At Halliburton, 2006 was a historic

year. The Energy Services Group

achieved its best-ever financial

performance, recording revenues

of $12.95 billion and generating

operating income of $3.38 billion.

Perhaps the most significant event

of the year was the initial public

offering of common stock in KBR,

our engineering, construction and

government services business unit.

The separation of KBR will enable

Halliburton to concentrate on its

growth strategy as a world-leading

oilfield services company. Our

vision is to be the preferred

upstream service company for the

development of global oil and

gas assets.

The key to implementing our

strategy will be our focus on hiring

and retaining a high-performing

global workforce. Our total Energy

Services Group employee number

increased by 5,900 since Jan. 1,

2006, and we are projecting

significant additional increases in

2007. As we add new people, it is

critical that we maintain our culture

of safety performance, operational

excellence, technology innovation

and ethical conduct and values.

Our 2006 employee survey to assess

our employees’ attitudes will serve

as a benchmark and help us

monitor our progress.

Secondly, we will focus on delivering

the innovative new technology our

customers need to meet their

business challenges and to lessen

our footprint at the wellsite. We will

also expand our technology

platform to leverage the global

talent pool that is available to us.

We know that our long-term

sustainability as a business depends

on how we do business around the

world. As Halliburton’s

sustainability efforts continue to

develop, we will be looking more

closely at the risks and opportunities

to our business from climate change

and the increasing scarcity of fresh

water. In 2007 we will be developing

a public position on climate change

and addressing our uses of fresh

water through technological

innovations.

In our 2006 employee survey,

82 percent of employees surveyed

believe that the Company is

committed to the economic, social

and environmental welfare of the

communities where we work. And

85 percent believe that our

commitment to sustainability has a

positive impact on our reputation

and profitability. This tells us that

we are making strides in

communicating our sustainability

commitment internally. We will

continue to rely on our core values,

code of conduct, internal

governance and sustainability

development framework to steer

our course.

With this, our second comprehensive

sustainability report, we have

added statistics on employee

distribution, Dow Jones

Sustainability Index data and

employee survey information. It is

part of our continuing effort to

engage with our stakeholders and

to share our own aspirations, our

progress and our challenges in

support of our commitments.

David J. Lesar

Chairman of the Board, President and Chief Executive Officer of Halliburton

Halliburton Corporate Sustainability Report 2006 1

Halliburton Corporate Sustainability Report 2006

Halliburton Energy Services Group

is a global oilfield services company

with 45,000 employees in 70

countries. The majority of our

revenue is derived from the sale of

services and products to major,

national and independent oil and

gas companies from the earliest

phases of exploration through the

development and production of oil

and gas. The Energy Services

Group is organized into three main

divisions and eight product service

lines (PSLs), and in geographic

regions that reflect how we serve

our customers.

We are investing in capital spending

for equipment and infrastructure

and in developing new technology

that will make finding and

producing oil more efficient and

safer and also minimize the

footprint we leave behind.

We are also investing in high-

growth areas in the Americas,

Asia Pacific, the Middle East and

Africa, and we are developing

local sourcing and strategic

manufacturing capabilities in

Singapore, Malaysia, Mexico and

Brazil to support that business.

2

ENERGY SERVICES GROUP AT A GLANCE

Energy Services GroupDivisions and Product Service Lines

Production Optimization Production Enhancement Halliburton Completion Tools

Drilling, Evaluation and Digital Solutions Sperry Drilling Services Security DBS Drill Bits Landmark Wireline and Perforating Services

Fluid Systems Cementing Baroid Fluid Services

20062004 2005

$7,998

$10,100

$12,955

Energy Services GroupRevenuesin millions of U.S. dollars

20062004 2005

$1,266

$2,279

$3,383

Energy Services Group Operating Incomein millions of U.S. dollars

North America

Latin America

Europe/Africa/CIS

Middle East/Asia

$6,458

$1,514

$2,798

$2,185

Energy Services Group Revenues by Regionin millions of U.S. dollars

3

KBR separation. On Nov. 16, 2006,

we held an initial public offering of

approximately 19 percent, or

32,016,000 shares, of KBR common

stock, which sold at $17 a share. We

are now working toward the final

separation of KBR, which we expect

to complete no later than April 2007.

Global manufacturing strategy. We implemented a manufacturing

strategy, including identifying the

location of four new manufacturing

facilities to be built in 2007. The

strategy will enable the Energy

Services Group to mitigate supply

risk, address local content

requirements in emerging markets

and reduce gross invested capital

requirements.

Emissions calculations. We

enhanced our ability to collect

electricity, natural gas and water

usage data from our global

operating facilities, strengthening the

consistency of our reporting and

heightening employee awareness of

our intention to set goals for future

emissions reductions.

Workforce localization. By the end

of 2006, the Energy Services Group

reached 92 percent nationalization

and employed people of

121 nationalities.

Code of Business Conduct. The

Company enhanced its procedures

for approving, performing due

diligence on, managing payment to,

and monitoring our Company’s

relationships with international

commercial agents (ICAs). These

improved procedures are designed

to provide an effective program to

establish and monitor our

relationships with ICAs.

ACCOMPLISHMENTS


CHALLENGES

The challenges outlined below are

those that we believe are significant

in today’s business climate, and

addressing them will be instrumental

to our continued success. Our

sustainability strategy focuses on

how we can build business value,

mitigate risk and improve our

reputation by addressing these and

other sustainability issues. The

strategy is threefold: sustainable

relationships related to programs

for our employees and the external

communities where we work;

sustainable technologies in our

emphasis on reducing our

environmental footprint through

our products and services; and

sustainable sourcing through our

commitment to acquiring goods

and services locally.

Safety. The safety and well-being of

our employees are a major focus.

However, five Energy Services

Group employees were killed in

work-related incidents in 2006.

Four of the fatalities occurred in

the U.S.; three of them were vehicle-

related. The fifth fatality, also

vehicle- related, was in Mexico

(see page 15).

Workforce attraction and retention. Our sustainability as a company

depends on our ability to maintain

a highly skilled workforce that

reflects the diversity of the

countries where we operate and

addresses growing local content

requirements (see pages 4 and 5) .

Localized sourcing. To compete

effectively in the global energy

market, it is imperative to locally

source goods and services in the

countries where we work (see page 10).

Reducing carbon emissions. We

are evaluating the business

implications of and developing our

position on climate change. We are

also evaluating the business

potential of utilizing our

technology and expertise to address

the impact of climate change on

our customers through the

emerging carbon capture and

sequestration (CCS) market.

Reputation. Halliburton’s Dow

Jones Sustainability Index (DJSI)

score dropped 10 points in 2006,

which was largely attributed to the

DJSI media stakeholder analysis of

public perception. In response, we

will continue our practice of

providing honest and transparent

reporting to the financial community

and other stakeholders (see page 14).

One of the greatest benefits of a

commitment to sustainable

development is the ability to

strengthen relationships with our

internal and external stakeholders.

By demonstrating that our

Company is managing risks and

positioning itself to address

emerging opportunities, we build

investor confidence and enhance

our business value. And by

demonstrating that we are

operating in a socially responsible

manner, we build trust and

goodwill with our employees, our

customers, local communities,

regulators and governments.

Governance and EthicsThe definition of corporate success

has come to include fair dealing,

respect and strict adherence to

ethical and legal responsibilities in

all interactions with a company’s

constituencies: stockholders,

communities, employees and

customers. At Halliburton, the basis

for this behavior can be found in

our commitment to doing the right

thing, which is reinforced by our

Code of Business Conduct (COBC)

and our Corporate Governance

Guidelines.

We actively promote our principles

of ethical behavior and enforce our

code of conduct to guide employees

in the operating methods and

procedures of their day-to-day

activities. General COBC training is

available to all employees through

classroom and online sessions. In

2006, we modified our Energy

Services Group employees’ annual

employment evaluation process –

People, Performance, Results

(PPR) – to include a section on

ethics. This change will go into

effect in 2007.

The 2006 Energy Services Group

employee survey indicated that our

employees understand the COBC

(94 percent favorable) and know

where to go for questions or

concerns (87 percent favorable).

These two questions were among

the highest-percentage favorable

responses for the entire survey.

Halliburton’s corporate governance

guidelines provide our board of

directors with a fair and honorable

model to oversee its role as the

guardian of shareholder interest.

A report on the ethics and

compliance program is presented

to the Audit Committee of the

board of directors in December of

each year. The committee is also

informed of any fraud that may be

uncovered involving $50,000 or more.

The corporate governance guidelines

and bylaws were amended Oct. 19,

2006, to implement majority

voting. The amendment, contained

in Section 4 of the bylaws, now

provides that, at the annual

meeting, each director shall be

elected by the vote of the majority

of the votes cast. Complete

information about Halliburton’s

board of directors and our current

corporate governance guidelines

are posted on our Web site at

www.halliburton.com.

Talent Attraction and RetentionOf all our relationships, the most

important is the one we have with

our people, who are the embodiment

and outward expression of

Halliburton’s values. As a service

company, we are only as good as our

people, whose dedication and

know-how wins jobs, innovates

and delivers results.

Today’s high-demand energy

market has exposed a challenge

that has been building for years: the

“aging of the workforce” in the oil

and gas industry. Several years ago,

in anticipation of this shift, we

began developing a focused people

strategy of aggressive recruiting,

accelerated development and

vigorous retention.

SUSTAINABLE RELATIONSHIPS

20062004 2005

13.514.6

21.4

COBC Trainingin thousands of training hours completed

20062001 2003

76%81%

87%

Employee Surveypercent of favorable responses

I know where to go for COBC questions or concerns.

20062001 2003

84%

90%94%

I have a good understanding of the COBC.



In 2006, during the busiest time in

the history of the industry, the

Energy Services Group hired 13,000

new employees – about 24 percent

of our total workforce – and ended

the year with a net increase of

5,900 employees.

Recruiting. In our quest to find

the best and the brightest, we have

looked beyond our traditional

markets in North America and

Europe. In contrast to industry

trends, the average age of our total

workforce is 39. The average age of

our technical workforce is 38,

compared with 45, which is the

average age of Society of Petroleum

Engineers (SPE) membership.

As part of our very targeted

University Relations program, we

have active, ongoing relationships

with more than 200 major

universities worldwide and in every

one of our regions. In 2006, we

continued our long-standing

University Grant program,

donating Landmark software to

38 universities.

As a result of these efforts,

engineering and scientific

personnel, who are some of the

most difficult resources to recruit,

account for 17 percent of our total

workforce. Of this group, 18 percent

were hired in the past 12 months.

Around 29 percent of our new

hires were from the U.S., with the

second largest group from Asia at

16 percent.

Developing our people. In 2006,

we redesigned our expatriate policy

for implementation in 2007,

establishing criteria to ensure

knowledge transfer and local

succession planning. In addition,

we opened three new multipurpose

facilities to provide both technical

and management training to

support three of our regions. They

are located in Villahermosa,

Mexico; Cairo, Egypt; and Kuala

Lumpur, Malaysia. We are opening

another training center in Tyumen,

Russia, in 2007.

Developing a core of strong,

innovative leaders is also critical to

our future and the goal of the

President’s Leadership Excellence

Program (PLEP). An annual

yearlong leadership development

event, the program comprises a

handpicked group of high-potential

senior managers, directors and

first-time executives from our global

operations. The PLEP class of 2006

tackled four current and pressing

issues to Halliburton concerning

technology, leadership

development, business

development and the supply chain.

Employee retention. Like most

companies in our industry, we are

experiencing higher than average

attrition as a consequence of

historic activity levels. In 2006,

we expanded our employee

retention program – including

organized succession planning,

defined career paths and

performance management

initiatives – to promote proactive

goal setting and to measure progress

and competitive compensation

packages, including equity.

In 2006, the Energy Services Group

once again conducted a survey of

its employees to assess employee

attitudes and perceptions about

many aspects of the business. The

survey included 77 questions

concerning goals and direction,

leadership and ethics, work-group


12.0%

6.6%

8.4%

8.5%

3.8%

13.1%

9.1%

5.3%

12.7%

20.5%

2006 Employeespercentage of total workforce by region

Europe/Eurasia

Middle East

Africa

Asia Pacific

Canada

U.S. Northern

U.S. Southern

U.S. Gulf Coast

Latin America

Misc. Other

Europe/Eurasia

Middle East

Africa

Asia Pacific

Canada

United States

Latin America

93%

58%

75%

88%

99%

99%

95%

2006 Employeespercentage of local nationals in regional workforce

20062004 2005

1.751.97

2.18

Employee Trainingin millions of hours

issues and job satisfaction, and

career development and benefits.

An emphasis on employee

engagement will help us continue

to monitor attitudes that affect our

6

recruiting and retention. For the

first time, the survey was

administered entirely online in 16

languages. Sixty-two percent of our

employees returned completed

surveys, which was slightly higher

than our previous online and hard-

copy survey response rates. We are

proud to report that, in 2006,

Halliburton was rated as one of the

best companies to work for by the

Houston Business Journal.

Community GivingGiving back to communities has

been fundamental to our culture

from the very beginning, whether

it’s through monetary

contributions or our employees

donating their time to support

community causes close to their hearts.

Corporate giving. Halliburton

reports global charitable donations

in accordance with standards set

out by the Committee to

Encourage Corporate Philanthropy

(CECP), a U.S.-based national

forum of business CEOs and

chairpersons focused on corporate

philanthropy.

2006 was a record year for our

employee giving program, Giving

Choices. The program, currently

available in the U.S., Canada,

Australia and the United Kingdom,

enables employees to make

contributions to their choice of local

or national charities and to receive a

10 percent matching donation from

Halliburton. Total U.S. contributions

for 2006 increased by 43 percent

over 2005. Our U.S. employees are

surpassing the U.S. corporate giving

benchmark of $434 per worldwide

employee by 34 percent. In 2006 the

number of U.S. employees who

pledged a minimum of $1,000

increased by 86 percent. The number

of U.S. nonprofits benefiting from

this program grew from 626 in 2005

to 929 in 2006, a 48 percent increase.

We continue to evaluate how to

expand the Giving Choices program

to our locations around the world.

Our in-kind donations for 2004

through 2006 have been revised to

reflect the commercial value of

Landmark software that has been

donated to universities around

the world.

Employee involvement. Individual

employee volunteerism continues

to grow around the globe.

Employee volunteer projects are

typically local community outreach

programs involving a small number

of volunteers. As a whole, these

efforts add up to many thousands

of hours annually and benefit

numerous people around the globe.

We are extremely proud of our

support in 2006 for the Springboard

program in Egypt. One aspect of the

program is building one-room

schools for girls throughout the

country. The schools utilize an

innovative architectural design that is

easily reproduced, reducing

development costs, and each school

will accommodate up to 35 girls.

Halliburton is committed to build five

of these schools, two in Giza and three

in El Fayoum. Two were started in

2006, and all five will be completed in

2007. These schools, over time, will

impact the lives of thousands of

young girls in Egypt.

Highlights and stories of our

employees’ volunteer efforts can be

found in the Community section of

our Web site at www.halliburton.com.

2006 Employee Surveyorganizational satisfaction

Unfavorable FavorableMixed

3% 12%

85%

I am proud to work for Halliburton.


7%20%

72%

Considering everything, how would you rate your overall satisfactionwith Halliburton?


6%

33%

62%

How would you rate Halliburtonas a company to work for comparedto othercompanies?


6%22%

71%I would recommendHalliburton as a greatplace to work.

62%

58%

Average of Fortune 100 companiesactive in employee surveys




62%

70%


20062004 2005

$231.2

$141.5

$364.6

Total Contributionsin millions of U.S. dollars

20062004 2005

$2.23

$1.99

$2.19

Halliburton Foundation (cash)in millions of U.S. dollars

20062004 2005

$2.25

$3.10

$2.34

Direct Cashin millions of U.S. dollars

Corporate Giving

20062004 2005

$136.2

$227.0

$360.1

In-Kind Donations (noncash)in millions of U.S. dollars

Energy Services Group only

Total U.S. Patents Issuedand rank among all U.S. companies

Halliburton Rank Among 100 U.S. Companies

Data not available at press time.

Total Patents

20062004 2005

209

88

193

87

285

20062004 2005

$228$218

$254

Energy Services GroupR&D Spendingin millions of U.S. dollars

As worldwide demand

progressively outpaces production,

industry emphasis is increasingly

shifting to unconventional

hydrocarbons and increased

recoveries from existing reservoirs.

These new frontiers pose challenges

that the Energy Services Group is

addressing through a focus on

sustainable technology. One way

technological innovation will help

us to create sustainable value is by

delivering outstanding products and

services through a digital

collaborative environment that

pulls together our collective

knowledge of the reservoir,

enabling our customers to succeed

by maximizing production and

recovery, realizing reserves from

difficult environments and

improving operational efficiency.

Patents and AwardsOver the last two years, we have

instituted a new intellectual asset

management process and decision-

making framework that high-graded

the business value of our portfolio

while increasing the volume and

quality of protection. Our updated

portfolio has 4,181 patents, and our

focus on quality new patents has

resulted in another 4,054 in process.

Encouraging a culture of practical

innovation is a major priority for

us. Each year, we present our

annual Innovator of the Year award

to the inventors of new technologies

that not only are groundbreaking,

but also generate the highest revenues.

In 2006, a group of 15 integrated

solutions passed a rigorous

evaluation and were designated as

our Top Technology Solutions.

Among them are solutions for

lengthening the productive life of

an aging field, for economically

developing conventional and

unconventional gas resources, and

for delivering reliable wells in the

world’s most technically

challenging and environmentally

sensitive locations.

Industry awards. Sperry Drilling

Services’ Slimhole Reservoir

Drilling and Formation Evaluation

Solution received recognition from

the 2006 Offshore Technology

Conference’s Spotlight on New

Technologies program.

We were named an Offshore

Energy Achievement Awards III

winner in the Well Construction

category for the Hydro Troll Olje

H-2 well re-entry project performed

in Tananger, Norway, with our

ReFlexRite® completion system.

We also won four 2006 Hart’s

Meritorious Engineering Awards:

• Subsurface: Individual Tool Hostile Sequential

Formation Tester (HSFT™)

• Subsurface: Best System Chi Modeling® system

• Completion: Individual Tool Easywell’s Swellpacker™ system

• Best System StimWatch® stimulation

monitoring service.

Water ConservationThe global energy industry relies on

significant volumes of water for

accomplishing critical

hydrocarbon-production

operations such as drilling,

cementing and fracturing. In the

past, the products for these

operations were normally based on

clean, potable water. With the

expansion of the global population,

the growth of the oil field in some

remote areas of the world and, in

some cases, drought, Halliburton

has recognized the need to apply

our chemistry expertise toward

developing new products that can

perform with alternate sources of

water, such as produced salt water.

Moving to such a solution

addresses the growing scarcity of

potable water while providing a

practical application for the

produced water and eliminating

the costs operators normally incur

for disposing of it. The alternative-

water-use project has involved

developing variations of our

standard products to achieve more

salt tolerance. The project also

includes developing equipment to

mechanically and chemically

modify the typical produced salt

water to a standard, workable level.

By working on both ends of the

requirement – creating salt-tolerant

chemistry and chemically

modifying the produced water –

Halliburton is making significant

strides toward balancing the

global hydrocarbon/

potable-water equation.

SUSTAINABLE TECHNOLOGY


The globalization of our business and the reality of today’s resource-constrained market are creating new and more urgent challenges to deliver products and services to our customers on time and at the right price.

Expanding Our Supply ChainOver the next three to four years, we will work to implement the future-state manufacturing network and supply model necessary to achieve these objectives and ensure a continuity of supply.

We are expanding our

manufacturing platform to

locations that are best situated for

where our business is conducted.

By utilizing global sourcing and

logistics, we deliver greater speed to

market and faster response, and at

the same time we address

requirements for localized

sourcing. It also reduces the need to

transport materials over long

distances, which helps lessen our

overall air emissions. We have identified new manufacturing locations in Malaysia, Singapore, Mexico and Brazil. We are in the design and development stages, and we plan to have all four facilities operating by the end of 2007.

We’re developing regional supply chain organizations to source closer to the customer. Currently, we have more than $1 billion of spend procured locally that is being managed out of our country offices. Our goal is to improve our logistics capability and cost structure by creating regional supply chain centers in Europe and Eurasia,

Africa, the Middle East, Asia Pacific, Canada, the U.S. and Latin America. Managers assigned to each center are working with suppliers to measure and hone their performance in areas such as on-time delivery, quality, inventory, cost, customer satisfaction, and Health, Safety and Environment (HSE).

A third component of our strategy is to increase our utilization of lower-cost manufacturing markets to match our customers’ global operating presence. A dedicated staff is now focusing on the development of new sources of supply, implementing strategic agreements with key suppliers to augment capacity in support of our global manufacturing demands.

As we expand our manufacturing and sourcing organization, we never lose sight of maintaining our rigorous HSE standards. A new process for evaluating and approving subcontractors, adopted in 2006, requires selected suppliers to undergo an HSE evaluation as part of the pre-selection and post-award process. Our Procurement and HSE organizations work with our suppliers to continuously improve their performance and eliminate injuries or environmental incidents.

Supplier DevelopmentIn 2006, we expanded the focus of our supplier diversity strategy internationally to leverage the strengths and agility that come from diverse suppliers. Utilizing the nationally recognized Levels of Excellence standard, we have begun moving our supplier diversity initiative to a world-class model

focused on mentoring and introducing diverse suppliers to new markets across the globe. To support this new focus, we have created a three-tiered support structure.

The executive advisory board (EAB), comprising senior-level executives across all areas of the Company, serves as the chief advocate for supplier diversity, establishing supplier diversity performance metrics to ensure alignment with business strategies and serving as policy advisors.

A supplier diversity council (SDC) made up of Company management is tasked with implementing strategies to ensure success.

Supplier diversity champions are embedded within our global organization. They assist minorities, women and small businesses in understanding how to navigate our organization, and they connect them to immediate business opportunities.

In 2006, our efforts were recognized with nominations for four major awards: National Minority Supplier Development Council nominee for National Corporation of the Year; Women’s Business Enterprise Alliance (Houston chapter) nominee for Corporation of the Year; and Houston Minority Business Council nominee for Supplier of the Year and for the Innovation Award.

In addition, our supplier relations Web site was highly commended in the 2006 Oil & Gas Journal sustainability survey.

SUSTAINABLE SOURCING


Minority, Women and Small-BusinessExpenditures

Minority, Women and Small-Business Percent of Total Global Spend

Minority, Women and Small-Business Spend in Millions of U.S. Dollars

20062004 2005

$631

15.7%

$793

16.3%

$1,114

17.3%

Corporate Alliance on Malaria in Africa (CAMA)

In 2006, Halliburton collaborated with other companies to lay the groundwork for CAMA. The organization focuses on networking opportunities, information sharing and best practices, and on-the-ground cooperation in advocating malaria interventions. These corporate efforts complement work in progress by U.S. and African governments, non-governmental organizations and other malaria-control organizations that are all working toward the goal of eradicating malaria in sub-Saharan Africa.


Sustainability takes on different

meanings depending on where we do

business. The issues and imperatives

vary country by country and may

change according to economic,

political and social shifts. Angola is

a case in point. The country is

ready to develop its rich natural

resources of oil and gas lying under

the South Atlantic Ocean within its

territorial waters.

The government of Angola has

stated its determination to make

sure that the country’s citizens are

beneficiaries of the revenues from

this valuable natural resource. The

government has imposed

sustainability and local content

stipulations on foreign companies

wishing to work in Angola, requiring

a minimum 10 percent of local

content, measured on a total installed

cost basis.

Halliburton supports the Angola

government’s aim and has begun

setting out a sustainability plan to

meet the requirements. Our plan is

still in the beginning stages. We are

investigating and qualifying

contractors and exploring

opportunities where we can

implement the kind of investments

in health, education and worker

training that will make a real and

lasting difference.

We are dedicated to developing

local business in Angola to the

extent that it is both feasible and

profitable. One early success story

is the PALL Travel and Transport

agency based in Luanda. Owned

and operated by a former

Halliburton employee, who was

supported by Halliburton in starting

his business, PALL now employs

200 local workers. We are looking

for similar opportunities to seed and

support local businesses. One

opportunity would be to set up a

joint venture to manufacture and

supply coveralls to oil companies

working in Angola. By our estimates,

some 17,000 coveralls are purchased

annually by the oil and gas industry.

We are currently identifying qualified

local factories to manufacture the

coveralls using local workers.

Meeting local content requirements

is a priority. But we are also

committed to developing our

workforce and raising its technical

and professional skills. Currently,

70 percent of Halliburton’s in-

country employees are Angolan, 27

percent of whom are professional

staff, and we have launched a

global effort to recruit and train

Angolan workers. The goal of the

training is for entry-level graduates

to be associate technical

professionals within a year. We are

also sponsoring the Angolan

Leadership Development Program

at the Universidade Católica de

Angola (UCAN) in Luanda for our

high-potential Angolan workers.

We are committed to developing

Angola’s future workforce.

Landmark supplies a grant of

GeoGraphix® exploration and

production (E&P) software to

Angola’s Agostinho Neto University

to help students enter the

marketplace with qualifications to

increase their employment

opportunities. The current grant,

worth US $269,500, was awarded

May 1, 2006. We are also setting up

courses for university students in

oilfield basics and leadership

development.

Helping local communities is a vital

part of our plan. We have earmarked

US $500,000 for social programs

focusing on health and education –

the largest grant of its kind ever

made by the company. We are

looking at developing relationships

with local partners to support the

training of teachers. We will be

looking to provide scholarships, IT

classroom equipment, and health and

environmental awareness training.

While there are challenges in

Angola, we see an opportunity to

contribute to the growth, general

well-being and long-term

sustainability of the country.

Angola is the first test of our

ability to create and implement

a comprehensive sustainable

development plan, and we have

much to learn as the plan

takes shape and unfolds.

We look forward to reporting

on our progress.

ANGOLA

OPPORTUNITIES FOR SUSTAINABILITY

13

The transparency section, with the

exception of the Dow Jones

Sustainability Index discussion,

exclusively covers the Energy

Services Group activities. A

commitment to transparency is the

fourth element of our sustainability

strategy and an important value for us.

Accountability and trust relate

directly to our reputation, and no

other issue has more importance

than the value of our reputation.

BenchmarkingHalliburton continues to report to

the DJSI annual survey, one of the

sustainability benchmarks most

widely used by business. It is also

one of our main benchmarking

tools to evaluate our sustainability

performance. The 2006 survey

ranks companies on 17 items in

three categories – economic, social

and environmental. In 2006,

29 companies in the oil and gas

service sector were invited to

participate, and 15 were analyzed.

Sector leaders selected for the DJSI

had total scores that ranged from

47 to 68, with an overall average

score of 39 for all 15 companies in

the sector ranking.

Halliburton scored best in class for

social reporting and above the

industry sector average for 11 of the

17 items for a total of 12 categories

above the sector average. We

received below-sector averages

in five items related to:

• Corporate governance

• Codes of conduct

• Standards for suppliers

• Releases to the environment

• Environmental performance.

The DJSI media and stakeholder

analysis (MSA), which is based on

input from media,

nongovernmental organizations,

governments and academia,

affected scores in the first three

below-sector-average items.

Without the MSA, our Code of

Conduct rating would have been

best in class and our Corporate

Governance score would have been

15 points higher than the sector

average. The MSA resulted in an

overall deduction of seven points,

leading to a 2006 score of 46

compared with 56 in 2005.

The DJSI is a measure of objective

survey responses and perception

from the media stakeholder

analysis. The Harris Interactive Inc.

survey, conducted in 2006 on

general public perception of

companies’ reputations, ranked

Halliburton 60th out of 60 U.S.-

based companies in six categories –

financial performance, social

responsibility, workplace

environment, quality of products/

services, vision/leadership and

emotional appeal. The 2006 Oil &

Gas Journal sustainability survey,

which measures compliance with

international standards and

guidelines, reserves accounting

measures, industry standards and

national laws, rated Halliburton

second in our industry sector and

best in class for corporate

governance and transparency.

These three surveys are a partial

reflection of the range of opinions

on Halliburton’s business practices,

and we understand that different

stakeholders can have different

perspectives. However, we believe

that we have industry-leading

policies, programs and procedures

in place for governance, ethics and

sustainability. We will continue to

TRANSPARENCY

20062004

International Association of Drilling Contractors Industry Average

2005

0.31

2006

0.56

0.320.26

Lost Time Incident Ratesper 200,000 work hours

20062004

International Association of Drilling Contractors Industry Average

2005

1.02

2006

2.19

0.990.97

Total Recordable Incident Ratesper 200,000 work hours

Industry Sector Average Score

Halliburton Score

Dow Jones Sustainability IndexHalliburton compared to overall industry sector averageMaximum possible score = 100

20062004 2005

3641 43

39

5646

63 66 68

Overall Sector Leader

Total Number of DJSI Categories in Survey

Halliburton Categories Above Sector Average

Dow Jones Sustainability Index

20062004 2005

8

2218 17

13 12


work to improve these aspects of

our business and to protect our

reputation with our employees,

customers and shareholders.

Health, Safety and Environment (HSE)At Halliburton, we view HSE as

critical to our success and long-term

sustainability, and we are

committed to continuously improving

our performance. Our HSE

commitments are supported by the

Energy Services Group’s highly

effective Performance Improvement

Initiative (PII), which is championed

by executive leadership.

With our emphasis on reducing

incidents through PII, we continued

to improve our safety record with a

2 percent reduction in our Total

Recordable Incident Rate and an

18 percent reduction in the Lost

Time Incident Rate, while

increasing hours worked by

approximately 10 percent. The

increase in employees was

significant in 2006, and it is an

accomplishment to continue to

reduce our rates over previous

years. Both of these incident rates

are better than the average rates

reported by the International

Association of Drilling Contractors.

And while we achieved a reduction

of 2 percent in Vehicle Recordable

Incidents, we did have four of five

employee fatalities related to vehicle

incidents. As a result, we are

reviewing our journey management

procedures, reinforcing company

policies and instituting greater

controls to address the root causes

of these incidents. Our employees

drove more than 265 million miles

in 2006, an 11 percent increase

over 2005.

One of the focus areas for Health

and Safety for 2006 was to reduce

injuries to our employees’ hands

and fingers, as these are our most

frequent types of injuries. The

result was a decrease of 9 percent

over a similar time period from

2005, a significant accomplishment

given the tremendous growth of our

workforce and a 10 percent increase in

hours worked.

Service Quality (SQ)Our Done Right® Service Index,

which we developed and use as a

20062004 2005

7

2

0 0

5

0

Fatalities

Contractors

Energy Services Group Employees

20062004 2005

0.77

0.730.71

Recordable Vehicle Incident Ratesper million miles traveled

15

Hydrocarbon Spillsin cubic meters

20062004 2005

926

35

675

20062003

82%87%


Done RightService Quality is a core value.

20062003

76%85%


We are a customer-focused organization.


measure of our SQ standard, is also

delivering results. To qualify as a

Done Right job, the following

criteria, which comprise the Done

Right Service Index, must be met:

• Zero HSE recordable incidents

• Zero nonproductive time

• Zero cost of poor quality

• The job purpose is achieved

• The customer is completely

satisfied, as reflected in the End-

of-Job Customer Survey.

Based on a composite score of these

five key indicators, our service

performance has improved from

91.4 percent in 2004 to 92.9

percent in 2006. Our customers

have increasingly come to accept

the Done Right Service Index as the

relevant and critical measure of our

job performance at the wellsite.

The emphasis internally on SQ is

shown by the increased favorable

responses for questions in our 2006

employee survey relating to SQ as a

core value and us as a customer-

focused organization.

Idling Reduction Campaign

As part of its annual Environmental Performance Improvement Initiative, o ur Canadian operations have implemented an idling-reduction campaign where feasible throughout its operations. The campaign takes aim at reducing fuel and vehicle maintenance costs and improving the bottom line, while also helping the environment by reducing our greenhouse gas emissions. The program was initiated in the fall of 2006 with a poster campaign and education through local team HSE meetings. Statistics provided by Health Canada, the Federal department responsible for helping Canadians maintain and improve their health, indicate that if every driver of a light-duty vehicle avoided idling just five minutes a day, Canada would save more than 1.6 million liters of fuel and prevent more than 3,800 tons of CO2 from entering the atmosphere annually.

Reported Environmental Incidents

20062004 2005

530

518

686

Energy Services GroupEnvironmental Reservesin millions of U.S. dollars

20062004 2005

$28$35

$39

Greenhouse Gases*total in million metric tonnes of CO2 equivalent

20062004 2005

2.642.90

3.15

* ESG data only

Greenhouse Gases Normalized*million metric tonnes of CO2 equivalent/hours worked

20062004 2005

.0246.0248

.0244

* ESG data only

ISO and OSHAS ComplianceWe continue to utilize ISO-

compliant HSE management

systems across our operations. We

are not planning to certify to ISO

14000 or OHSAS 18000 globally;

however, based on local business

needs, our ISO-certified locations

increased in 2006 from 26 sites to

35 sites while OHSAS certifications

increased from five to 10.

Carbon EmissionsAlthough the Energy Services Group

is not a producer or refiner of

petroleum products, we continue

to pursue efficient, energy-saving

approaches to the operations,

products and services we provide to

our customers. Internally, we

maintain our commitment to

collect and report on our CO2

emissions data for the Carbon

Disclosure Project (CDP)

Greenhouse Gas Emissions

questionnaire. Our 2004 through

2006 CO2 emissions have been

recalculated for the ESG only to

comply with GHG Protocol

guidelines and are reported as CO2

equivalents that include methane

converted to CO2 equivalents. We

are reporting normalized CO2

emissions based on hours worked

for the first time.

In 2006, our environmental

Performance Improvement

Initiative (PII) teams began to

capture three basic measures for

natural resource consumption:

water, electric and natural gas

usage at approximately 250 non-

U.S. facilities around the world.

With this information, we will have

a more comprehensive

understanding of our usage

footprint and will be using our

HSE Fines/Penaltiesin thousands of U.S. dollars

20062004 2005

247

209

2006 data includes$198,000 in fines for hazardous material packing violations from the U.S. FederalAviation Administration.

HSE Notices of Violations/Citationsexcluding vehicle-related violations and citations

20062004 2005

39

5862


2007 PII process to establish

baselines and set future reduction

targets. We will report our usage

data starting next year. We plan to

implement a similar data capture

program for facility wastes starting

in 2007.

For more information or

additional copies, please contact:

Halliburton

Director, Sustainable Development

[email protected]

1401 McKinney Street, Suite 2400

Houston, Texas 77010

United States

www.halliburton.com

This document was printed using

soy inks on post-consumer recycled

material. This paper is Process

Chlorine-Free (PCF), and no

chlorine or chlorine derivatives

were used in pulping the waste

fiber or in the papermaking process.

Previous report

Connecting

published in June 2006

Current report

calendar year 2006

GRI Content Index

Strategy and Analysis

1, 2, 3

Organizational Profile

2

Report Parameters

inside front and back covers

Governance

4

Disclosure of Management

Approach

not covered

Core Indicators

2, 4, 5, 11, 15, 16

HALLIBURTON

All the photographs in our report

were shot by Jose da Silva Pinto.

Jose has been working as a

photographer in his native country

of Angola since 1980. His

portraits of life in and around

Luanda show a unique perspective

that we are proud to include

in this document.

© 2007 All Rights Reserved Printed in USA

H05290

Produced by Halliburton Communications

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