

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K
                                   (Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 (Fee required) For the fiscal year ended December 31, 1997

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 (No fee required) For the transition period from to

Commission File Number 1-3492

                               HALLIBURTON COMPANY
             (Exact name of registrant as specified in its charter)

              Delaware                                     75-2677995
    (State or other jurisdiction of                     (I.R.S. Employer
    incorporation of organization)                      Identification No.)

            3600 Lincoln Plaza, 500 N. Akard St., Dallas, Texas 75201
                    (Address of principal executive offices)
                   Telephone Number - Area code (214) 978-2600


               Securities registered pursuant to Section 12(b) of
                                    the Act:

                                                        Name of each Exchange on
        Title of each class                                 which registered
 Common Stock par value $2.50 per share                 New York Stock Exchange

        Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes X No___

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

The aggregate  market value of Common Stock held by nonaffiliates on January 30,
1998,  determined  using  the per  share  closing  price on the New  York  Stock
Exchange   Composite   tape  of   $44.94   on  that   date   was   approximately
$11,764,500,000.

As of January 30, 1998,  there were  262,492,885  shares of Halliburton  Company
Common Stock $2.50 par value per share outstanding.

Portions of the  Halliburton  Company Proxy  Statement dated March 24, 1998, are
incorporated by reference into Part III of this report.


                                       1
<PAGE>


PART I

Item  1. Business.
     General  Development of Business.  Halliburton  Company's  predecessor  was
established  in 1919,  incorporated  under the laws of the State of  Delaware in
1924  and  reorganized  under  the  laws  of the  State  of  Delaware  in  1996.
Halliburton  Company (the Company)  provides energy services and engineering and
construction  services.  Information related to acquisitions and dispositions is
set forth in Note 15 to the financial statements of this annual report.
     Financial Information About Business Segments.  The Company is comprised of
two business segments.  See consolidated statement of income on page 15 and Note
10 to the financial  statements of this annual report for financial  information
about these two business segments.
     Description  of Services and  Products.  The  following is a summary  which
briefly describes the Company's services and products for each business segment.
     The Energy  Group  business  segment  provides a wide range of services and
products to provide both discrete services and products and integrated solutions
to customers in the  exploration,  development and production of oil and natural
gas.  The  Energy  Group  operates  worldwide,   serving  major  oil  companies,
independent   operators  and  national  oil  companies.   The  segment  includes
Halliburton  Energy  Services,  which  offers  pressure  pumping  equipment  and
services,  logging and perforating  products and services,  drilling systems and
services,  specialized completion and production equipment and services and well
control  products and services;  Brown & Root Energy  Services,  which  provides
upstream  oil  and  gas  engineering,   procurement  and  construction,  project
management  and  production  services,  subsea  construction,   fabrication  and
installation  of  onshore  and  offshore  pipelines,   offshore  and  production
platforms,  marine  engineering  and other  marine  related  projects;  Landmark
Graphics  Corporation,  which  provides  integrated  exploration  and production
information   systems  and  professional   services;   and  Halliburton   Energy
Development,   which  creates  business   opportunities   for  the  development,
production and operation of oil and gas fields in conjunction with the Company's
customers.
     The Engineering and Construction Group provides: conceptual design, process
design, detailed engineering,  procurement, project and construction management;
construction of chemical and petrochemical  plants,  refineries,  pulp and paper
mills,  metal  processing  plants,  highways  and bridges,  airports,  water and
wastewater systems; technical and economic feasibility studies; site evaluation;
repair and refitting of submarines and surface ships; operations and maintenance
services,  and  engineering  and wastewater  management  services for commercial
industry,  utilities and government customers. The Company plans to exit certain
highway and paving activities over time. On December 31, 1997, the environmental
business  which  performed   environmental   remediation   related   consulting,
engineering, design and construction was sold.
     Markets  and  Competition.  The  Company  is  one of  the  world's  largest
diversified energy services and engineering and construction services companies.
The  Company's  services  and products  are sold in highly  competitive  markets
throughout  the world.  Competitive  factors  impacting  sales of the  Company's
services and products  are:  price,  service  (including  the ability to deliver
services and products on an "as needed,  where needed" basis),  product quality,
warranty  and  technical  proficiency.  A growing  number of  customers  are now
indicating a preference for integrated services and solutions.  These integrated
solutions, in the case of the Energy Group, relate to all phases of exploration,
development  and  production of oil and gas, and in the case of the  Engineering
and  Construction   Group,   relate  to  all  phases  of  design,   procurement,
construction, project management and maintenance of a facility. Demand for these
types of  integrated  solutions  is based  primarily  upon  quality of  service,
technical proficiency and value created.
     The Company conducts  business  worldwide in over 100 countries.  Since the
markets for the  Company's  services  and  products  are so large and cross many
geographic lines, a meaningful  estimate of the number of competitors  cannot be
made.  These markets are,  however,  highly  competitive  with many  substantial
companies  operating  in each  market.  Generally,  the  Company's  services and
products are marketed through its own servicing and sales organizations. A small
percentage of sales of the Energy Group's  products is made by supply stores and
third-party representatives.
     Operations  in  some  countries  may be  adversely  affected  by  unsettled
political conditions,  expropriation or other governmental actions, and exchange
control  and   currency   problems.   The  Company   believes   the   geographic
diversification  of its  business  activities  reduces the risk that loss of its
operations in any one country would be material to the conduct of its operations
taken as a whole.  Information  regarding  the  Company's  exposures  to foreign
currency  fluctuations,  risk  concentration  and financial  instruments used to
minimize risk is included in  management's  discussion and analysis of financial
condition  and  results of  operations under  the caption  "Financial Instrument
Market Risk" and in Note 12 to the financial statements of this annual report.


                                       2
<PAGE>


     Customers and Backlog. In 1997, 1996 and 1995,  respectively,  79%, 73% and
78% of the  Company's  revenues  were  derived  from  the sale of  products  and
services to,  including  construction  for, the energy  industry.  The following
schedule summarizes the backlog of projects at December 31, 1997 and 1996:
<TABLE>
<CAPTION>

Millions of dollars                                      1997           1996
--------------------------------------------------------------------------------
<S>                                                 <C>             <C>

Firm orders                                         $    6,313     $    4,555
Government orders firm but not yet funded                  445            262
Letters of intent and contracts
    awarded but not signed                                 146             23
                                                    -------------- -------------
    Total                                           $    6,904     $    4,840
--------------------------------------------------------------------------------
</TABLE>

     It is  estimated  that nearly 64% of the backlog  existing at December  31,
1997 will be completed during 1998. The Company's backlog excludes contracts for
recurring hardware and software maintenance and support services. Backlog is not
necessarily  indicative of future operating  results because backlog figures are
subject to  substantial  fluctuations.  Arrangements  included in backlog are in
many instances  extremely complex,  nonrepetitive in nature and may fluctuate in
contract  value.  Many contracts do not provide for a fixed amount of work to be
performed and are subject to modification or termination by the customer. Due to
the size of certain  contracts,  the  termination or  modification of any one or
more  contracts or the addition of other  contracts may have a  substantial  and
immediate effect on backlog.
     Raw  Materials.  Raw  materials  essential  to the  Company's  business are
normally readily available.  Where the Company is dependent on a single supplier
for any materials  essential to its business,  the Company is confident  that it
could make satisfactory alternative arrangements in the event of an interruption
in the supply of such materials.
     Research, Development and Patents. The Company maintains an active research
and development  program to assist in the  improvement of existing  products and
processes,  the development of new products and processes and the improvement of
engineering  standards  and  practices  that  serve  the  changing  needs of its
customers.  Information relating to expenditures for research and development is
included  in  Note 1 and  Note 10 to the  financial  statements  of this  annual
report.
     The Company  owns a large  number of patents and has pending a  substantial
number of patent  applications  covering  various  products and  processes.  The
Company is also licensed  under  patents  owned by others.  The Company does not
consider a particular patent or group of patents to be material to the Company's
business.
     Seasonality.  Weather  and natural  phenomena  can  temporarily  affect the
performance of the Company's services.  Winter months in the Northern Hemisphere
tend to affect operations negatively,  but the widespread geographical locations
of the  Company's  operations  serve to  mitigate  the  seasonal  nature  of the
Company's business.
     Employees.  At December 31, 1997, the Company employed approximately 70,750
people, of which about one-half were located outside the United States.
     Regulation.  The  Company  is subject  to  various  environmental  laws and
regulations.  Compliance with such requirements has not substantially  increased
capital  expenditures,  adversely affected the Company's competitive position or
materially affected the Company's earnings.  The Company does not anticipate any
material  adverse  effects  in the  foreseeable  future as a result of  existing
environmental laws and regulations.  Note 11 to the financial statements of this
annual report discusses the Company's  involvement as a potentially  responsible
party in remedial activities to clean up several "Superfund" sites.

Item 2.   Properties.
     Information  relating  to  lease  payments  is  included  in Note 11 to the
financial  statements  of this annual  report.  The  Company's  owned and leased
facilities,  as described  below,  are suitable and adequate for their  intended
use.
     Energy  Group   manufacturing   facilities   owned  by  the  Company  cover
approximately  3,100,000 square feet. Principal locations of these manufacturing
facilities are Davis and Duncan, Oklahoma; Alvarado, Amarillo,  Carrollton, Fort
Worth, Garland and Houston, Texas; Arbroath,  Scotland; and Reynosa, Mexico. The
manufacturing  facilities at Davis and Amarillo were idle at the end of 1997. An
idle  facility  in  Houston  was sold in 1997.  The  manufacturing  facility  in
Garland,  Texas,  was leased to another  company in 1997.  The Energy Group also
leases  manufacturing  facilities  covering  approximately  160,000 square feet.
Principal  locations of these  facilities  are Malvern,  Pennsylvania;  Houston,
Texas; Jurong, Singapore;  Basingstoke,  England; and Kilwinning,  Scotland. The
facility  in  Basingstoke,  England,  was  idle  at the end of  1997.  Research,
development  and  engineering  activities  are carried  out in owned  facilities
covering  approximately  375,000  square  feet  in  Duncan,  Oklahoma;  Malvern,
Pennsylvania; Houston, Austin and Carrollton, Texas; and Aberdeen, Scotland; and
in leased facilities covering approximately 150,000 square feet in Englewood and
Denver,  Colorado;  Leatherhead and Dorking,  England;  Leiderdorp,  Holland and
Singapore. Energy Group marine fabrication facilities owned by the Company cover


                                       3
<PAGE>

approximately  546 acres in Belle Chasse,  Louisiana;  Greens Bayou,  Texas; and
Nigg and Wick,  Scotland.  The Belle Chasse,  Louisiana,  facility consisting of
approximately 151 acres is idle. The facility in Nigg, Scotland,  is leased to a
joint venture of the Company.  In addition,  service centers,  sales offices and
field  warehouses  are  operated at  approximately  175  locations in the United
States,  almost  all of which are  owned,  and at  approximately  290  locations
outside the United States in both the Eastern and Western Hemispheres.
     Engineering   and   Construction   Group   fabricating   facilities   cover
approximately  441,000 square feet in Houston,  Texas, and Edmonton,  Canada, of
which 388,000 square feet in Houston is leased to another  company.  Engineering
and design,  project management and procurement  services activities are carried
out in owned  facilities  covering  approximately  3,494,000  square feet. Major
sites of these activities are in Houston,  Baytown and Hurst,  Texas;  Edmonton,
Canada;  Leatherhead,  England;  and  Bundaberg  and Emerald,  Australia.  These
activities  are also  carried out at leased  facilities  covering  approximately
1,100,000 square feet. Major sites are in Mobile, Alabama; Alhambra, California;
Surrey and London,  England;  Al Khobar,  Saudi Arabia;  and Parkside,  Victoria
Park, Milton and Melbourne,  Australia.  The Engineering and Construction  Group
operates  dockyard  facilities  owned by a 51% owned  subsidiary  of the Company
covering  approximately  191 acres in Plymouth,  England.  In addition,  project
offices,  field  camps,  service  centers  and sales  offices  are  operated  at
approximately 20 locations in the United States,  almost all of which are leased
by the Company,  and at approximately  15 foreign  locations in both the Eastern
and Western Hemispheres.
     General  Corporate  operates  from  leased  facilities  in  Dallas,  Texas,
covering approximately 25,000 square feet. The Company also leases approximately
5,500 square feet of space in  Washington,  D.C., and owns an 85,000 square foot
mainframe data processing center in Arlington, Texas, which is leased to another
company.

Item  3. Legal  Proceedings.
     Information  relating to various commitments and contingencies is described
in Note 11 to the financial statements of this annual report.

Item  4. Submission of Matters to a Vote of Security Holders.
     There were no matters  submitted to a vote of security  holders  during the
fourth quarter of 1997.

                                       4
<PAGE>


Executive Officers of the Registrant.
     The following table indicates the names and ages of the executive  officers
of the  registrant  along with a listing of all offices  held by each during the
past five years:

Name and Age                  Offices Held and Term of Office

*Richard B. Cheney            Chairman of the Board, since January 1996
  (Age 57)                    Chief Executive Officer, since October 1995
                              Director of Registrant, since October 1995
                              President, October 1995 to May 1997
                              Senior Fellow, American Enterprise Institute, 1993
                                 to October 1995
                              Secretary, U.S.  Department  of  Defense,  1989 to
                                 1993

 Jerry H. Blurton             Vice President and Treasurer, since July 1996
 (Age 53)                     Vice  President  -  Finance  &  Administration  of
                                 Halliburton  Energy  Services,  August  1995 to
                                 July 1996
                              Vice President - Finance, 1991 to August 1995

 Lester L. Coleman            Executive  Vice  President  and  General  Counsel,
 (Age 55)                        since May 1993
                              President of Energy Services Group, September 1991
                                 to May 1993

*Dale P. Jones                Director of Registrant, since December 1988
  (Age 61)                    Vice Chairman of Registrant, since October 1995
                              President, June 1989 to October 1995

*David J. Lesar               President  and Chief  Operating Officer, since May
  (Age 44)                       1997
                              President and Chief Executive Officer of Brown & 
                                 Root, Inc., since September 1996
                              Executive Vice  President and  Chief  Financial 
                                 Officer, August 1995 to May 1997
                              Executive   Vice    President   of    Finance  and
                                 Administration of Halliburton Energy  Services,
                                 November 1993 to August 1995
                              Partner,  Arthur  Andersen  LLP,  1988 to November
                                 1993

*Kenneth R. LeSuer            Vice Chairman of Registrant, since May 1997
  (Age 62)                    President  and  Chief  Executive  Officer  of  the
                                 Halliburton Energy Group, September 1996 to May
                                 1997
                              President   and    Chief   Executive   Officer  of
                                 Halliburton  Energy  Services,  March  1994  to
                                 September 1996
                              President  and  Chief   Operating  Officer  of 
                                 Halliburton  Energy Services, May 1993 to March
                                 1994
                              President   and   Chief   Executive   Officer   of
                                 Halliburton Services, December 1989 to May 1993

 Gary V. Morris               Executive Vice President  and Chief  Financial 
 (Age 45)                        Officer, since May 1997
                              Senior Vice President - Finance, February 1997 to 
                                 May 1997
                              Senior Vice  President, May  1996 to February 1997
                              Vice  President  - Finance of Brown & Root,  Inc.,
                                 June 1995 to May 1996
                              Vice  President -  Finance  of Halliburton  Energy
                                 Services, December 1993 to June 1995
                              Controller, December 1991 to December 1993

 R. Charles Muchmore, Jr.     Vice  President and  Controller, since August 1996
 (Age 44)                     Finance & Administration  Director - Europe/Africa
                                 of Halliburton  Energy Services, September 1995
                                 to August 1996
                              Regional Finance  & Administration   Manager  - 
                                 Europe/Africa  of  Halliburton Energy Services,
                                 December 1989 to September 1995

 Lewis W. Powers              Senior   Vice    President,   since    May    1996
 (Age 51)                     Vice  President  -  Europe/Africa  of  Halliburton
                                 Energy Services, April 1993 to May 1996
                              Senior  Vice   President  of  Operations  of  Otis
                                 Engineering, June 1989 to April 1993

     * Members of the Executive Committee of the registrant.
     There are no family  relationships  between the  executive  officers of the
registrant.

                                       5
<PAGE>


PART II

Item 5.  Market  for  the  Registrant's  Common  Stock  and  Related Stockholder
         Matters.
     The Company's common stock is traded on the New York Stock Exchange and the
Swiss  Exchange.  Information  relating  to market  prices  of common  stock and
quarterly  dividend  payments is included under the caption  "Quarterly Data and
Market  Price  Information"  on page 42 of this annual  report.  At December 31,
1997, there were approximately 14,400 shareholders of record. In calculating the
number of shareholders,  the Company  considers  clearing  agencies and security
position listings as one shareholder for each agency or listing.

Item  6.   Selected Financial Data.
     Information  relating  to selected  financial  data is included on pages 39
through 41 of this annual report.

Item  7.  Management's Discussion and Analysis  of  Financial  Condition  and 
          Results of Operations.
     Information  relating to management's  discussion and analysis of financial
condition  and results of  operations  is included on pages 7 through 12 of this
annual report.

Item 7(a).  Quantitative and Qualitative Disclosures About Market Risk.
     Information relating to market risk is included in management's  discussion
and analysis of financial  condition and results of operations under the caption
"Financial Instrument Market Risk" on pages 10 and 11 of this annual report.

Item  8.  Financial Statements and Supplementary Data.
<TABLE>
<CAPTION>

                                                                   Page No.
--------------------------------------------------------------------------------
<S>                                                                <C>

Responsibility for Financial Reporting........................        13
Report of Arthur Andersen LLP, Independent Public Accountants.        14
Consolidated Statements of Income for the Years Ended
     December 31, 1997, 1996 and 1995.........................        15
Consolidated Balance Sheets at December 31, 1997 and 1996.....        16
Consolidated Statements of Cash Flows for the Years Ended
     December 31, 1997, 1996 and 1995.........................        17
Consolidated Statements of Shareholders' Equity for the
     Years Ended December 31, 1997, 1996 and 1995.............        18

Notes to Financial Statements.................................      19-38

Quarterly Data and Market Price Information...................        42
</TABLE>

The related financial statement schedules are included under Part IV, Item 14 of
this annual report.

Item 9. Changes in and Disagreements   with  Accountants  on  Accounting  and 
        Financial Disclosure.
     None.

                                       6
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS  OF  FINANCIAL  CONDITION AND RESULTS OF 
OPERATIONS

BUSINESS ENVIRONMENT AND OUTLOOK

     The Company  operates in over 100  countries  around the world to provide a
variety of oilfield  services and engineering and  construction  services to the
petroleum industry and other energy,  industrial and governmental customers. The
markets  served by the  Company  are highly  competitive  with many  substantial
competitors. Operations in some countries may be adversely affected by unsettled
political  conditions,  expropriation or other  governmental  actions,  exchange
controls  and  currency   devaluation.   The  Company  believes  the  geographic
diversification  of its  business  activities  reduces the risk that loss of its
operations in any one country would be material to its  consolidated  results of
operations.  The Company has only moderate  exposure in the Asia Pacific  region
which,  including  Australia,  represents about 7% of 1997 revenues,  5% of 1997
operating income and 3% of backlog at December 31, 1997.
     Energy Group. In 1997, the oilfield services industry experienced a year of
exceptional   growth  with  customers   worldwide   expanding   their  petroleum
exploration,  development  and  production  activities.  This  increase  was  in
response to a combination of factors  including  relatively higher crude oil and
natural gas prices  early in 1997,  an  expectation  by  customers  of continued
improvement  in the  long-term  demand for  petroleum  and the  availability  of
investment  opportunities with good economic potential. The Company believes its
customers  will  continue to seek  opportunities  to lower the  overall  cost of
exploring,  developing  and  enhancing  the  recovery  of  hydrocarbons  through
increased   utilization  of  integrated   solutions,   partnering  and  alliance
arrangements  as well as the  application  of new  technology.  According to the
annual  Salomon Smith Barney  Survey and Analysis of 1998  Worldwide Oil and Gas
Exploration  and  Production  Expenditures,   spending  during  1998  by  survey
respondents is predicted to grow by 10.9%.  While this growth will represent the
second  highest growth rate in the past decade,  it is somewhat  slower than the
estimated 18.7% growth experienced  during 1997.  Included within this predicted
1998 growth is a high level of interest by survey  respondents in the deep water
Gulf of Mexico,  with some survey respondents  planning spending increases there
of up to 20%. This outlook is based on West Texas  Intermediate crude oil prices
of $19.23/bbl and United States gas prices of $2.19/mcf.  Although crude oil and
natural gas price declines  beginning late in 1997 and continuing into the first
quarter of 1998 could potentially affect the short-term outlook for the oilfield
services  industry by delaying  customer  spending,  the Company  believes  that
long-term hydrocarbon supply and demand fundamentals will tend to counterbalance
any short-term spending delays.
     The  Company  believes  the  long-term  outlook for the  oilfield  services
industry is positive due to expected  growth in world demand for energy combined
with production  declines in existing oil and gas reserves.  Although the growth
experienced  by the  oilfield  services  industry in 1997 will be  difficult  to
repeat in 1998, the Company  believes that it has good  opportunities  to expand
its revenue and profit through  greater  participation  in larger  projects that
allow it to utilize its project management and integrated services capabilities.
     Engineering and Construction Group.  Engineering and construction  industry
marketing  reports  indicate that global demand for engineering and construction
services  during  1998  may be  less  robust  than  during  1997  due in part to
uncertainty  in the Asia Pacific  region.  However,  the Company  expects to see
demand for such  services  increase over time in Latin  America,  Africa and the
Middle  East.  The  Company  believes  the keys to  increasing  its  revenue and
improving  profit  margins  in slower  growing  markets  will be its  ability to
partner  with other  service and  equipment  suppliers  and  customers on larger
projects,  acceptance of more project success risk through gain sharing or fixed
price contracts, broadening its core competencies, acquiring and fully utilizing
proprietary  technology  and  managing  costs.  The Group's  improved  operating
results in 1997 were the result of focusing on these key  factors.  During 1997,
the Engineering and  Construction  Group  reexamined its core  competencies  and
decided to exit certain  markets  that do not offer  sufficient  opportunity  to
achieve  the  Company's  profit   objectives.   This  refocusing   prompted  the
diversiture of the environmental services business unit at the end of 1997 and a
decision to exit certain highway and paving activities over time. The Group will
now  focus  on key  markets  in the  petroleum,  chemical  and  forest  products
industries in the United States and international locations. The Company sees an
expanding market for its government  services  capabilities in the United States
and the United Kingdom as  governmental  agencies,  including  local  government
units, continue to expand their use of outsourcing to improve service levels and
manage costs.

                                       7
<PAGE>

     Acquisitions  and  dispositions.  During 1997,  the Company  acquired NUMAR
Corporation,  which was accounted for as a pooling of interests, in exchange for
approximately  8.2 million  shares of the Company's  Common Stock,  acquired OGC
International  plc for  approximately  $118.3  million,  purchased  a 26% equity
interest  in  PES  (International)  Limited  for  approximately  $33.6  million,
acquired Kinhill Holdings Limited for approximately  $34 million,  and increased
its ownership of Devonport  Management  Limited from  approximately  30% to 51%.
These acquisitions are expected to expand the Company's ability to offer quality
services and products in its core  competencies  and to further  strengthen  its
technological  base. Also in 1997, the Company sold its  environmental  services
business for approximately $32 million.  See Note 15 to the financial statements
for additional information.

RESULTS OF OPERATIONS
     Revenues  for 1997 were  $8,818.6  million,  an  increase  of 19% over 1996
revenues  of  $7,385.1  million  and an  increase  of 50% over 1995  revenues of
$5,882.9 million.  Approximately 58% of the Company's consolidated revenues were
derived from international  activities in 1997 compared with 55% in 1996 and 51%
in 1995.
     Energy Group  revenues were  $5,756.4  million for 1997, an increase of 34%
over 1996 revenues of $4,286.3 million and an increase of 60% over 1995 revenues
of $3,604.0  million.  The Energy Group's increase in revenues  outpaced the 15%
increase in the worldwide average rotary rig count for 1997 compared to 1996 and
the 23% increase in the worldwide  average rotary rig count for 1997 compared to
1995.  Approximately two-thirds of the Energy Group's revenues were derived from
international activities each year in 1997, 1996 and 1995.
     Engineering and Construction Group revenues were $3,062.2 million for 1997,
a decrease of 1% from 1996  revenues of $3,098.8  million and an increase of 34%
over 1995 revenues of $2,278.9  million.  Lower levels of activity under service
contracts  with  the  U.S.  Department  of  Defense  to  provide  technical  and
logistical  support for military  peacekeeping  operations in Bosnia resulted in
revenue  reductions of approximately $294 million in 1997 compared to 1996. This
reduction  in  revenues  was mostly  offset by the  consolidation  of  Devonport
Management  Limited  revenues as a result of the Company's  increased  ownership
percentage  in that  subsidiary.  See Note 15 to the  financial  statements  for
additional information.
     Operating income was $798.1 million for 1997 compared to $417.9 million for
1996 and $400.9  million for 1995.  Excluding  special  charges of $8.6 million,
$85.8  million  and $8.4  million  during  1997,  1996 and  1995,  respectively,
operating  income  for 1997  increased  by 60% over 1996 and by 97% over 1995 as
shown in the  following  table.  See  Note 16 to the  financial  statements  for
additional information on the special charges.
<TABLE>
<CAPTION>
Millions of dollars                                                      1997          1996          1995
-------------------------------------------------------------------- ------------  ------------  -----------
<S>                                                                  <C>           <C>           <C>

Operating income before special charges                              $    806.7    $   503.7     $  409.3
Merger costs associated with NUMAR acquisition                             (8.6)
Landmark write-off of acquired in process research
  and development                                                           -          (11.3)        (3.7)
Merger costs associated with Landmark acquisition                           -          (12.4)         -
Realignment of products and service lines and support services              -          (61.2)         -
Landmark restructuring and merger costs                                     -           (0.9)        (4.7)
                                                                     ------------  ------------  -----------
Operating income                                                     $    798.1    $   417.9     $  400.9
-------------------------------------------------------------------- -----------   ------------  -----------
</TABLE>

     Approximately  53% of  the  Company's  consolidated  operating  income  was
derived from  international  activities in 1997 compared to 66% for 1996 and 65%
for 1995. Consolidated  international operating margins were 8% in 1997 and 1996
and 9% for 1995.
     Energy Group operating  income in 1997 was $706.4  million,  an increase of
46% over 1996  operating  income of $484.4  million  and an increase of 77% over
1995  operating  income of $398.2  million.  Operating  margins were 12% in 1997
compared with 11% in both 1996 and 1995.  Approximately  53%, 62% and 66% of the
Energy Group's  operating income was derived from  international  activities for
1997,  1996 and 1995,  respectively.  Operating  income in 1997 for the  group's
largest business unit, Halliburton Energy Services,  increased substantially due
primarily to increased activity levels and increased prices charged to customers
for pressure  pumping  services in North  America.  Operating  income growth for
Halliburton Energy Services in 1996 over 1995 was due primarily to substantially
increased services provided in North America and Europe and, to a lesser degree,
increases in Latin  America and the Middle East.  Energy Group  results for 1996


                                       8
<PAGE>

include  $35  million of gain  sharing  revenue on the  group's  second  largest
business  unit,  Brown & Root  Energy  Services,  portion  of the  cost  savings
realized on the BP Andrew  alliance.  The alliance  completed  the project seven
months  ahead of the  scheduled  production  of oil and  achieved a $125 million
savings  compared  with the  targeted  cost.  The effect of the gain sharing was
offset by a $20.7 million  reduction in operating  income due to lower  activity
levels in 1996 compared to 1995 by Brown & Root Energy Services' 50% owned joint
venture, European Marine Contractors, Limited.
     Engineering and Construction Group operating income for 1997 increased 149%
over 1996 and 200% over 1995 to $133.9  million.  Operating  margins were 4% for
1997 and 2% for 1996 and 1995, respectively.  Improvement in operating income in
1997 over  1996 was  realized  through  overhead  reductions,  a focus on higher
margin business lines and the consolidation of Devonport Management Limited as a
result of the Company's increased ownership  percentage in that subsidiary.  See
Note 15 to the financial statements. Increased operating income in 1996 compared
to 1995 from  petroleum  and chemical  services as well as  increased  operating
income from support  services in Bosnia were partially offset by a $17.1 million
charge for the  impairment of Brown & Root's  investment in the Dulles  Greenway
toll road extension project.
      General and administrative  expenses for 1997 were $248.1 million compared
to $236.6  million and $221.7 million for 1996 and 1995,  respectively.  General
and administrative  expenses have increased at a substantially  slower rate than
overall  growth in  consolidated  revenues,  and as a percent of revenues,  have
declined to 2.8% in 1997 from 3.2% in 1996 and 3.8% in 1995.
     Interest  expense was $42.7  million for 1997  compared to $24.1 million in
1996 and $47.1  million in 1995.  The  increase  in 1997 over 1996 is due to the
issuance  of debt under the  Company's  medium-term  note  program in 1997.  The
decrease in 1996 as compared to 1995 was due to the  redemption of the Company's
$390.7 million of zero coupon convertible  subordinated  debentures in September
1995 and the redemption of its $42 million term loan in December 1995.
     Interest  income  decreased to $11.7 million for 1997 from $14.2 million in
1996 and $32.0 million in 1995. The decrease for 1996 compared to 1995 is due to
lower amounts of invested cash resulting from debt redeemed during 1995.
     Foreign  currency gains  (losses)  netted to a loss of $0.9 million in 1997
compared to a $3.9 million loss in 1996 and a $1.4 million gain in 1995.  Losses
in 1997 are due primarily to losses in western European currencies.
     Provision  for income taxes was higher in 1997 than in 1996 and 1995 due to
improved earnings.  The effective income tax rate was 39% in 1997, compared with
26% in 1996 and 36% in 1995. The lower  effective  income tax rate and provision
for 1996 are due to credits of $43.7 million  recorded  during the third quarter
of 1996 to recognize certain net operating loss carryforwards and the settlement
of various issues with the Internal Revenue Service.  Excluding the tax benefits
recorded in 1996, the effective income tax rate for 1996 was 36%. See Note 16 to
the financial statements.
     Minority interest in net income of consolidated  subsidiaries  increased to
$11.9  million in 1997 as compared to $0.5  million in 1996 and $0.9  million in
1995.  The increase is due  primarily  to the  Company's  ownership  interest in
Devonport  Management  Limited,  which increased from  approximately  30% to 51%
during March 1997.
     Income  from  continuing  operations  for  1997,  1996 and  1995 of  $454.4
million,  $300.4 million and $249.2 million,  respectively,  resulted in diluted
income  per  share  from  continuing  operations  of  $1.75,  $1.19  and  $1.00,
respectively.
     Discontinued  operations  in  1995  consists  of  the  Company's  Insurance
Services  Group.  The  Company  declared a dividend  on  December  26,  1995 and
subsequently   distributed  its  property  and  casualty  insurance  subsidiary,
Highlands  Insurance  Group,  Inc.  (HIGI),  to its  shareholders  in a tax-free
spin-off on January 23, 1996.  The  operations of the Insurance  Services  Group
have been classified as discontinued operations. During 1995, HIGI increased its
reserves for claim losses and related  expenses and provisions for certain legal
matters  which  together  with  certain  other  provisions  associated  with the
Company's  complete exit from the insurance industry resulted in a $67.2 million
charge against net earnings. See Note 14 to the financial statements.

LIQUIDITY AND CAPITAL RESOURCES
     The Company ended 1997 with cash and equivalents of $221.3 million compared
with $213.6 million in 1996 and $239.6 million in 1995.


                                       9
<PAGE>

     Cash flows from operating  activities were $548.2 million for 1997 compared
to $452.0 million and $667.4 million for 1996 and 1995,  respectively.  In 1997,
the primary use of cash by operating  activities was to fund  increased  working
capital requirements related to increased revenues.
     Cash  flows used in  investing  activities  were  $686.7  million  for 1997
compared to $409.4  million used in 1996 and $267.3  million  used in 1995.  The
increase in cash used for investing  activities  during 1997 is due primarily to
an increase in capital  expenditures  of 46% over 1996 and 90% over 1995.  While
increased  capital  expenditures  during 1997 were due in part to investments in
capital  equipment  and  deployment  of  new  technologies,   increased  capital
expenditures  also  reflect  certain  strategic   investments  in  oil  and  gas
developments and in the Company's infrastructure.  In 1997, the Company invested
$97.8 million in oil and gas developments, with the most significant development
being its 25% share of the Sangu gas field twenty-five miles offshore Bangladesh
in the Bay of Bengal.  The Company plans similar  investments during 1998 as the
Company  identifies  opportunities  that  allow it to use its unique set of core
competencies and which provide adequate returns. The Company also invested $49.5
million  in an  enterprise-wide  information  systems  initiative.  Cash used in
investing  activities in 1997 also includes the  acquisition  of OGC and Kinhill
and an  interest  in PES  (International)  Limited  offset  by the  sale  of the
Company's  environmental  business for about $32.0 million.  In 1996,  investing
activities  included a $41.3 million  expenditure for the Company's share of the
purchase  price of a subsidiary  acquired by the Company's 36% owned  affiliate,
M-I Drilling Fluids Company, L.L.C.
     Cash flows from  financing  activities  provided  $151.6  million  for 1997
compared to use of cash of $65.8  million and $599.0  million for 1996 and 1995,
respectively. Cash was provided by proceeds from debt issued under the Company's
medium-term  note program of $300.0  million and  proceeds  from the exercise of
stock  options of $49.5  million  offset by payments on long-term  debt of $17.7
million,  net repayments on short-term  borrowings of $54.6 million and dividend
payments  of $127.3  million.  Cash used for  financing  activities  during 1996
consisted  primarily  of  dividend  payments  of  $117.5  million  offset by net
short-term  borrowings  of $38.3 million and proceeds from the exercise of stock
options  of $25.6  million.  In  1995,  the  increased  amount  of cash  used by
financing activities was due primarily to the redemption of the Company's $390.7
million zero coupon convertible  debentures and a $42.0 million term loan. Total
debt was 18%, 10% and 10% of total  capitalization  at the end of 1997, 1996 and
1995, respectively.
     The Company has the ability to borrow  additional  short-term and long-term
funds  if  necessary.  See  Note 6 to the  financial  statements  regarding  the
Company's various short-term lines of credit, notes payable and long-term debt.

FINANCIAL INSTRUMENT MARKET RISK
     The Company is  currently  exposed to market  risk from  changes in foreign
currency  exchange rates, and to a lesser extent,  to changes in interest rates.
To mitigate  market risk, the Company  selectively  hedges its foreign  currency
exposure through the use of currency  derivative  instruments.  The objective of
such hedging is to protect the Company's dollar cash flows from  fluctuations in
currency rates of foreign  denominated  sales or purchases of goods or services.
Inherent in the use of derivative  instruments are certain types of market risk:
volatility  of the  currency  rates,  tenor  (time  horizon)  of the  derivative
instruments,  market cycles and the type of  derivative  instruments  used.  The
Company does not use derivative  instruments for trading purposes. See Note 1 to
the financial statements for additional  information on the Company's accounting
policies on derivative instruments.  See Note 12 to the financial statements for
additional disclosures related to derivative instruments.
     Foreign  exchange.  While the Company  operates in over 100 countries,  the
Company  hedges  only  foreign  currencies  that are highly  liquid and  selects
derivative  instruments  or a combination of  instruments  whose  fluctuation in
value is offset by the  fluctuation in value to the underlying  exposure.  These
hedges generally have expiration  dates that do not exceed two years.  Exposures
to certain  currencies  are  generally  not hedged due  primarily to the lack of
available markets or cost considerations  (non-traded  currencies).  The Company
manages its foreign exchange hedging  activities  through a control system which
includes  daily  monitoring  of cash balances in traded  currencies,  analytical
techniques such as value at risk estimations, and other procedures.
     Interest  rates.  The Company  currently has exposure to interest rate risk
from its  long-term  debt with  interest  based on LIBOR  plus  0.75%  which was
incurred in connection  with its  acquisition of the Royal Dockyard in Plymouth,
England (the Dockyard  Loans).  This risk is partially  offset by a compensating
balance of  approximately  one-half of the  outstanding  debt amount which earns
interest at a rate equal to that of the Dockyard Loans. The compensating balance
is  restricted  as to use by the Company and is included in other  assets on the
Company's consolidated balance sheet. See Note 6 to the financial statements for
additional discussion of the Dockyard Loans.


                                       10
<PAGE>

     Value at risk. The Company uses a statistical model to assess the potential
loss  related to  derivative  instruments  used to hedge the market  risk of its
foreign exchange  exposure.  The model utilizes  historical price and volatility
patterns  to predict  the change in value of the  derivative  instruments  which
could occur from  adverse  movements in foreign  exchange  rates for a specified
time  period at a  specified  confidence  level.  The model is an  undiversified
calculation based on the variance-covariance  statistical modeling technique and
includes all foreign exchange derivative instruments outstanding at December 31,
1997. The resulting  value at risk of $0.8 million  estimates the potential loss
the Company  could incur in a one-day  period with a 95%  confidence  level from
foreign  exchange  derivative  instruments due to adverse foreign  exchange rate
changes.
     Interest rate exposures. The table below represents principal (or notional)
amounts and related  weighted average interest rates by year of maturity for the
Company's  restricted cash and long-term debt  obligations.  Other notes of $0.1
million  with  varying  interest  rates  as  shown  in  Note 6 to the  financial
statements are excluded from the table below.
<TABLE>
<CAPTION>
                                                                Expected maturity date                                     Fair
US $ Equivalent                           --------- ---------- ---------- ---------- ---------- -----------
in millions                                  1998      1999       2000       2001       2002    Thereafter   Total        Value
----------------------------------------- --------- ---------- ---------- ---------- ---------- ----------- --------- ------------
<S>                                       <C>       <C>        <C>        <C>        <C>        <C>         <C>       <C>
Assets
Restricted cash - British pound sterling      3.6      4.2        4.2        4.2         4.2        2.4       22.8        22.8
      Average variable rate                  8.45%    8.07%      7.83%      7.69%       7.58%      7.51%      8.03%
Long-term debt:
   US dollar                                   -       50.0        -          -          75.0      375.0      500.0       554.0
      Average fixed rate                       -      6.27%        -          -         6.30%      7.83%      7.77%
   British pound sterling
      (Dockyard Loans)                         7.1      8.4        8.3        8.3         8.3        5.5       45.9        45.9
      Average variable rate                  8.45%    8.07%      7.83%      7.69%       7.58%      7.51%      8.03%
----------------------------------------- --------- ---------- ---------- ---------- ---------- ----------- --------- ------------
</TABLE>

Weighted  average variable rates are based on implied forward rates in the yield
curve at December 31, 1997.  These implied forward rates should not be viewed as
predictions of actual future  interest  rates.  Restricted cash and the Dockyard
Loans earn interest at LIBOR plus 0.75%.  Instruments  that are  denominated  in
currencies  other than the US dollar  reporting  currency are subject to foreign
exchange rate risk as well as interest rate risk.

ENVIRONMENTAL MATTERS
     The  Company is  involved as a  potentially  responsible  party in remedial
activities to clean up several  "Superfund"  sites under applicable  federal law
which  imposes  joint and  several  liability,  if the harm is  indivisible,  on
certain persons without regard to fault,  the legality of the original  disposal
or  ownership  of the  site.  Although  it is very  difficult  to  quantify  the
potential impact of compliance with environmental protection laws, management of
the Company  believes  that any liability of the Company with respect to all but
one of such  sites  will not have a material  adverse  effect on the  results of
operations of the Company. See Note 11 to the financial statements.

YEAR 2000 ISSUE
     The Year 2000 issue is the risk that computer programs using two-digit date
fields  will fail to properly  recognize  the year 2000,  with the result  being
business interruptions due to computer system failures by the Company's software
and hardware or that of  government  entities,  service  providers,  vendors and
customers.  In  response  to the Year  2000  issue,  the  Company  has  formed a
cross-functional  task force  responsible  for assessing the Company's Year 2000
readiness.  The task  force has  developed  a  comprehensive  plan to assess the
Company's  Year 2000 risk and is in the process of  performing  its review.  The
Company   anticipates  that  certain   software  will  require   replacement  or
modification.  Independent  of, but  concurrent  with,  the Company's  Year 2000
review,  the  Company is  installing  an  enterprise-wide  business  information
system. This information system is scheduled to replace approximately two-thirds
of the Company's key finance,  administrative  and  marketing  software  systems
before the end of 1999 and is Year 2000 compliant. Based on the Company's review
to date, it does not expect the cost of software replacement or modification not
currently  included in the Company's  enterprise-wide  information  system to be
material to its financial position or results of operations.


                                       11
<PAGE>

ACCOUNTING PRONOUNCEMENTS
     In June 1997, the Financial  Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting  Comprehensive Income," which
requires  presentation  of total  nonowner  changes  in equity  for all  periods
displayed.  The  Company  plans  to adopt  this  statement  for the year  ending
December 31, 1998, and is evaluating alternative disclosure formats suggested by
the standard.
     In June 1997, the Financial  Accounting Standards Board issued Statement of
Financial  Accounting  Standards  No.  131,  "Disclosures  about  Segments of an
Enterprise   and  Related   Information."   This  standard   defines   reporting
requirements for operating  segments and related  information about products and
services,  geographic  areas and  reliance  on major  customers.  The Company is
evaluating the impact of this statement on its current  reporting and expects to
adopt the new  standard  for its year ending  December  31,  1998,  with interim
reporting beginning in 1999.

FORWARD LOOKING INFORMATION
       In accordance with the safe harbor  provisions of the Private  Securities
Litigation  Reform Act of 1995, the Company cautions that the statements in this
annual report and elsewhere,  which are forward  looking and which provide other
than historical information, involve risks and uncertainties that may impact the
Company's actual results of operations.  While such forward-looking  information
reflects the Company's best judgment based on current information, it involves a
number of risks and  uncertainties  and there  can be no  assurance  that  other
factors will not affect the accuracy of such forward-looking information.  While
it is not possible to identify all factors,  the Company  continues to face many
risks and  uncertainties  that could cause  actual  results to differ from those
forward  looking   statements.   Such  factors  include:   unsettled   political
conditions,  war, civil unrest,  currency  controls and governmental  actions in
over 100  countries of  operation;  trade  restrictions  and economic  embargoes
imposed by the United States and other countries;  environmental laws, including
those  that  require  emission  performance   standards  for  new  and  existing
facilities;  the magnitude of governmental  spending for military and logistical
support of the type  provided  by the  Company;  operations  in  countries  with
significant amounts of political risk,  including,  without limitation,  Algeria
and Nigeria;  technological  and structural  changes in the industries served by
the  Company;  computer  software and hardware  used by  governmental  entities,
service providers,  vendors,  customers and the Company which may be impacted by
the Year 2000  issue;  integration  of  acquired  businesses  into the  Company;
changes in the price of oil and natural  gas;  changes in the price of commodity
chemicals used by the Company;  changes in capital  spending by customers in the
hydrocarbon  industry  for  exploration,  development,  production,  processing,
refining and pipeline delivery networks; increased competition in the hiring and
retention  of  employees;  changes in capital  spending by customers in the wood
pulp and paper  industries  for plants  and  equipment;  and  changes in capital
spending by  governments  for  infrastructure.  In addition,  future  trends for
pricing,  margins, revenues and profitability remain difficult to predict in the
industries served by the Company.


                                       12
<PAGE>

RESPONSIBILITY FOR FINANCIAL REPORTING

     Halliburton Company is responsible for the preparation and integrity of its
published financial  statements.  The financial statements have been prepared in
accordance with accounting  principles  generally  accepted in the United States
and,  as  such,  include  amounts  based  on  judgments  and  estimates  made by
management.  The Company  also  prepared the other  information  included in the
annual  report and is  responsible  for its  accuracy and  consistency  with the
financial statements.
     The financial  statements have been audited by the  independent  accounting
firm, Arthur Andersen LLP, which was given unrestricted  access to all financial
records and related data, including minutes of all meetings of stockholders, the
Board of Directors and committees of the Board.
     The  Company   maintains  a  system  of  internal  control  over  financial
reporting,  which is intended to provide  reasonable  assurance to the Company's
management  and  Board of  Directors  regarding  the  preparation  of  financial
statements.  The  system  includes a  documented  organizational  structure  and
division of  responsibility,  established  policies and procedures,  including a
code of  conduct  to foster a strong  ethical  climate,  which are  communicated
throughout the Company,  and the careful selection,  training and development of
our people.  Internal  auditors  monitor the  operation of the internal  control
system and report  findings and  recommendations  to management and the Board of
Directors,  and corrective actions are taken to address control deficiencies and
other opportunities for improving the system as they are identified.  The Board,
operating  through its audit committee,  which is composed entirely of Directors
who are not current or former  officers or employees  of the  Company,  provides
oversight to the financial reporting process.
     There  are  inherent  limitations  in the  effectiveness  of any  system of
internal control, including the possibility of human error and the circumvention
or  overriding  of controls.  Accordingly,  even an effective  internal  control
system can provide only reasonable assurance with respect to financial statement
preparation.  Furthermore,  the  effectiveness of an internal control system may
change over time.
     The Company  assessed its internal  control  system in relation to criteria
for effective internal control over financial  reporting  described in "Internal
Control-Integrated   Framework"   issued   by  the   Committee   of   Sponsoring
Organizations  of the  Treadway  Commission.  Based  upon that  assessment,  the
Company  believes that, as of December 31, 1997, its system of internal  control
over financial reporting met those criteria.

HALLIBURTON COMPANY



by
         Dick Cheney                                Gary V. Morris
   Chairman of the Board and                  Executive Vice President and
    Chief Executive Officer                      Chief Financial Officer


                                       13
<PAGE>

REPORT  OF  INDEPENDENT  PUBLIC  ACCOUNTANTS
To the Shareholders and Board of Directors,
Halliburton Company:

     We have audited the accompanying consolidated balance sheets of Halliburton
Company (a Delaware  corporation)  and  subsidiary  companies as of December 31,
1997 and 1996, and the related consolidated statements of income, cash flows and
shareholders'  equity for each of the three years in the period  ended  December
31, 1997.  These  financial  statements  are the  responsibility  of Halliburton
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audits.
     We conducted  our audits in accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
     In our opinion,  the consolidated  financial  statements  referred to above
present fairly, in all material respects,  the financial position of Halliburton
Company  and  subsidiary  companies  as of December  31, 1997 and 1996,  and the
results of their  operations and their cash flows for each of the three years in
the period ended  December 31,  1997,  in  conformity  with  generally  accepted
accounting principles.






ARTHUR ANDERSEN LLP
Dallas, Texas,
  January 22, 1998


                                       14
<PAGE>

<TABLE>
<CAPTION>
Consolidated Statements of Income
Years ended December 31
Millions of dollars except per share data                                          1997            1996            1995
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>              <C>             <C>
Revenues
  Energy Group                                                               $   5,756.4      $   4,286.3     $    3,604.0
  Engineering and Construction Group                                             3,062.2          3,098.8          2,278.9
                                                                             ------------------------------------------------
      Total revenues                                                         $   8,818.6      $   7,385.1     $    5,882.9
-----------------------------------------------------------------------------------------------------------------------------

Operating income
  Energy Group                                                               $     706.4      $     484.4     $      398.2
  Engineering and Construction Group                                               133.9             53.7             44.6
  Special charges                                                                   (8.6)           (85.8)            (8.4)
  General corporate                                                                (33.6)           (34.4)           (33.5)
                                                                             ------------------------------------------------
Total operating income                                                             798.1            417.9            400.9

Interest expense                                                                   (42.7)           (24.1)           (47.1)
Interest income                                                                     11.7             14.2             32.0
Foreign currency gains (losses)                                                     (0.9)            (3.9)             1.4
Other nonoperating income, net                                                       0.1              0.1              0.6
                                                                             ------------------------------------------------
Income from continuing operations before income taxes and
 minority interest                                                                 766.3            404.2            387.8
Provision for income taxes                                                        (300.0)          (103.3)          (137.7)
Minority interest in net income of consolidated subsidiaries                       (11.9)            (0.5)            (0.9)
                                                                             ------------------------------------------------
Income from continuing operations                                                  454.4            300.4            249.2
Loss from discontinued operations                                                   -                -               (65.5)
                                                                             ------------------------------------------------
Net income                                                                   $     454.4      $     300.4     $      183.7
-----------------------------------------------------------------------------------------------------------------------------

Basic income (loss) per share
    Continuing operations                                                    $      1.78          $  1.20         $  1.00
    Discontinued operations                                                        -                 -              (0.26)
                                                                             ------------------------------------------------
    Net income                                                               $      1.78          $  1.20         $  0.74
-----------------------------------------------------------------------------------------------------------------------------
Diluted income (loss) per share
    Continuing operations                                                    $      1.75           $ 1.19   $        1.00
    Discontinued operations                                                          -                -             (0.26)
                                                                             ------------------------------------------------
    Net income                                                               $      1.75           $ 1.19   $        0.74
-----------------------------------------------------------------------------------------------------------------------------

<FN>
See notes to financial statements.
</FN>
</TABLE>


                                       15
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheets
December 31
Millions of dollars and shares except per share data                                      1997             1996
--------------------------------------------------------------------------------------------------------------------
<S>                                                                                 <C>              <C>
                                       Assets
Current assets:
  Cash and equivalents                                                              $       221.3    $       213.6
  Receivables:
    Notes and accounts receivable (less allowance for bad debts of $38.4 and $43.6)       1,815.8          1,413.4
    Unbilled work on uncompleted contracts                                                  390.0            288.9
                                                                                    --------------------------------
     Total receivables                                                                    2,205.8          1,702.3
  Inventories                                                                               326.9            292.2
  Deferred income taxes, current                                                            106.6            108.7
  Other current assets                                                                      111.0             81.2
                                                                                    --------------------------------
    Total current assets                                                                  2,971.6          2,398.0

  Property, plant and equipment:
    At cost                                                                               3,988.0          3,560.8
    Less accumulated depreciation                                                         2,325.3          2,269.2
                                                                                    --------------------------------
      Net property, plant and equipment                                                   1,662.7          1,291.6
  Equity in and advances to related companies                                               338.7            234.9
  Excess of cost over net assets acquired (net of accumulated amortization
     of $56.2 and $42.7)                                                                    323.1            233.9
  Deferred income taxes, noncurrent                                                          91.3             98.6
  Other assets                                                                              215.6            179.6
                                                                                    --------------------------------
     Total assets                                                                   $     5,603.0    $     4,436.6
--------------------------------------------------------------------------------------------------------------------

                        Liabilities and Shareholders' Equity
Current liabilities:
  Short-term notes payable                                                          $         2.7    $        46.3
  Current maturities of long-term debt                                                        7.1              0.1
  Accounts payable                                                                          586.5            452.1
  Accrued employee compensation and benefits                                                262.3            193.7
  Advance billings on uncompleted contracts                                                 303.7            336.3
  Income taxes payable                                                                      213.1            135.8
  Deferred revenues                                                                          38.4             18.9
  Other current liabilities                                                                 359.1            321.5
                                                                                    --------------------------------
    Total current liabilities                                                             1,772.9          1,504.7

Long-term debt                                                                              538.9            200.0
Employee compensation and benefits                                                          323.6            281.1
Other liabilities                                                                           363.2            290.2
Minority interest in consolidated subsidiaries                                               19.7              1.4
                                                                                    --------------------------------
    Total liabilities and minority interest                                               3,018.3          2,277.4

Shareholders' equity:
  Common stock, par value $2.50 per share - authorized 400.0 shares,
     issued 268.8 (post-split) and 129.3 (pre-split) shares                                 672.0            323.3
  Paid-in capital in excess of par value                                                     87.2            322.2
  Cumulative translation adjustment                                                         (15.0)           (12.4)
  Retained earnings                                                                       1,947.6          1,656.3
                                                                                    --------------------------------
                                                                                          2,691.8          2,289.4
  Less 6.5 (post-split) and 4.0 (pre-split) shares treasury stock, at cost                  107.1            130.2
                                                                                    --------------------------------
     Total shareholders' equity                                                           2,584.7          2,159.2
                                                                                    --------------------------------
     Total liabilities and shareholders' equity                                     $     5,603.0    $     4,436.6
--------------------------------------------------------------------------------------------------------------------
<FN>

See notes to financial statements.
</FN>
</TABLE>


                                       16
<PAGE>

<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
Years ended December 31
Millions of dollars                                                                    1997         1996           1995
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                                 <C>           <C>            <C>    
Cash flows from operating activities:
   Net income                                                                       $   454.4     $   300.4      $  183.7
   Adjustments to reconcile net income to net cash from operating activities:
      Depreciation and amortization                                                     309.5         267.9         259.8
      Provision (benefit) for deferred income taxes                                       9.4         (23.8)         46.0
      Distributions from (advances to) related companies, net of equity in
         (earnings) or losses                                                           (64.7)        (65.9)        (20.5)
      Appreciation of zero coupon bonds                                                   -             -            15.0
      Net loss from discontinued operations                                               -             -            65.5
      Other non-cash items                                                               21.8           8.9          (8.2)
      Other changes, net of non-cash items:
        Receivables                                                                    (300.9)       (218.2)        (91.6)
        Inventories                                                                     (14.1)        (46.0)         17.6
        Accounts payable                                                                (41.6)         63.7          76.5
        Other working capital, net                                                       93.7         251.5         192.1
        Other, net                                                                       80.7         (86.5)        (68.5)
                                                                                    ----------------------------------------
   Total cash flows from operating activities                                           548.2         452.0         667.4
                                                                                    ----------------------------------------
Cash flows from investing activities:
   Capital expenditures                                                                (577.1)       (395.7)       (303.3)
   Sales of property, plant and equipment                                                44.9          49.8          36.0
   Acquisitions of businesses, net of cash acquired                                    (157.9)        (31.6)        (10.3)
   Dispositions of businesses, net of cash disposed                                      37.6          21.6          25.9
   Other investing activities                                                           (34.2)        (53.5)        (15.6)
                                                                                    ----------------------------------------
   Total cash flows from investing activities                                          (686.7)       (409.4)       (267.3)
                                                                                    ----------------------------------------
Cash flows from financing activities:
   Borrowings of long-term debt                                                         301.5           0.1           -
   Payments on long-term debt                                                           (17.7)         (5.2)       (465.4)
   Net borrowings (payments) of short-term debt                                         (54.6)         38.3         (27.0)
   Payments of dividends to shareholders                                               (127.3)       (117.5)       (114.3)
   Proceeds from exercises of stock options                                              49.5          25.6           9.7
   Payments to reacquire common stock                                                    (2.2)         (7.1)         (2.2)
   Other financing activities                                                             2.4           -             0.2
                                                                                    ----------------------------------------
   Total cash flows from financing activities                                           151.6         (65.8)       (599.0)
                                                                                    ----------------------------------------
Effect of exchange rate changes on cash                                                  (5.4)         (2.8)         (2.8)
                                                                                    ----------------------------------------
Increase (decrease) in cash and equivalents                                               7.7         (26.0)       (201.7)
Cash and equivalents at beginning of year                                               213.6         239.6         441.3
                                                                                    ----------------------------------------
Cash and equivalents at end of year                                                 $   221.3     $   213.6      $  239.6
----------------------------------------------------------------------------------------------------------------------------

Supplemental  disclosure  of cash flow  information:
  Cash payments during the period for:
     Interest                                                                       $    35.2     $    24.9      $   26.2
     Income taxes                                                                       165.2          35.5          29.9

  Non-cash investing and financing activities:
     Liabilities assumed in acquisitions of businesses                              $   336.5     $    24.8      $    4.1
     Liabilities disposed of in dispositions of businesses                               11.9           9.8          14.6

<FN>
See notes to financial statements.
</FN>
</TABLE>


                                       17
<PAGE>

<TABLE>
<CAPTION>
Consolidated Statements of Shareholders' Equity
Years ended December 31
Millions of dollars and shares except per share data                      1997               1996             1995
-----------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>                   <C>              <C>  

Common stock (number of shares):
   Balance at beginning of year                                           129.3              129.1            128.8
   Shares issued (forfeited) under incentive stock plans, net               1.3                0.3              0.2
   Cancellation of treasury stock                                           -                 (0.1)             -
   Shares issued in connection with acquisition                             8.2                -                0.1
   Two-for-one common stock split                                         130.0                -                -
                                                                  -----------------------------------------------------
   Balance at end of year                                                 268.8              129.3            129.1
-----------------------------------------------------------------------------------------------------------------------

Common stock (dollars):
   Balance at beginning of year                                   $       323.3         $    322.7       $    322.1
   Shares issued (forfeited) under incentive stock plans, net               3.2                0.9              0.5
   Cancellation of treasury stock                                           -                 (0.3)             -
   Shares issued in connection with acquisition                            20.5                -                0.1
   Two-for-one common stock split                                         325.0                -                -
                                                                  -----------------------------------------------------
   Balance at end of year                                         $       672.0         $    323.3       $    322.7
-----------------------------------------------------------------------------------------------------------------------

Paid-in capital in excess of par value:
   Balance at beginning of year                                   $       322.2         $    302.9       $    298.4
   Shares issued (forfeited) under incentive stock plans, net              53.4               22.9              4.5
   Cancellation of treasury stock                                           -                 (3.6)             -
   Shares issued in connection with acquisition                            36.6                -                -
   Two-for-one common stock split                                        (325.0)               -                -
                                                                  -----------------------------------------------------
   Balance at end of year                                         $        87.2         $    322.2       $    302.9
-----------------------------------------------------------------------------------------------------------------------

Cumulative translation adjustment:
   Balance at beginning of year                                   $       (12.4)        $    (28.0)      $    (23.1)
   Changes net of tax of ($0.3) in 1997, $3.7
      in 1996 and ($0.5) in 1995                                           (2.6)              15.6             (4.9)
                                                                  -----------------------------------------------------
   Balance at end of year                                         $       (15.0)        $    (12.4)      $    (28.0)
-----------------------------------------------------------------------------------------------------------------------

Retained earnings:
   Balance at beginning of year                                   $     1,656.3         $  1,473.4       $  1,656.6
   Net income                                                             454.4              300.4            183.7
   Cash dividends paid ($0.50 per share post-split; $1.00 per
       share pre-split)                                                  (127.3)            (117.5)          (114.3)
   Spin-off of Highlands Insurance Group, Inc.                              -                  -             (268.6)
   Net change in unrealized gains (losses) on investments
      held by discontinued operation                                        -                  -               16.3
   Pooling of interests acquisition                                       (35.8)               -                -
   Shares issued in connection with acquisition                             -                  -               (0.3)
                                                                  -----------------------------------------------------
   Balance at end of year                                         $     1,947.6         $  1,656.3       $  1,473.4
-----------------------------------------------------------------------------------------------------------------------

Treasury stock (number of shares):
   Balance at beginning of year                                             4.0                4.6              5.0
   Shares issued under incentive stock plans, net                          (0.8)              (0.7)            (0.5)
   Purchase of common stock                                                 -                  0.2              0.1
   Cancellation of treasury stock                                           -                 (0.1)             -
   Two-for-one common stock split                                           3.3                -                -
                                                                  -----------------------------------------------------
   Balance at end of year                                                   6.5                4.0              4.6
-----------------------------------------------------------------------------------------------------------------------

Treasury stock (dollars):
   Balance at beginning of year                                   $       130.2         $    150.8       $    163.8
   Shares issued under incentive stock plans, net                         (25.3)             (23.8)           (15.2)
   Purchase of common stock                                                 2.2                7.1              2.2
   Cancellation of treasury stock                                           -                 (3.9)             -
                                                                  -----------------------------------------------------
   Balance at end of year                                         $       107.1         $    130.2       $    150.8
-----------------------------------------------------------------------------------------------------------------------

<FN>
</FN>
</TABLE>
See notes to financial statements.


                                       18
<PAGE>

NOTES TO FINANCIAL STATEMENTS

Note  1. Significant Accounting Policies
     The  Company  employs  accounting  policies  that  are in  accordance  with
generally accepted  accounting  principles in the United States. The preparation
of  financial  statements  in  conformity  with  generally  accepted  accounting
principles  requires  Company  management to make estimates and assumptions that
affect the reported assets and liabilities,  the disclosed contingent assets and
liabilities at the date of the financial  statements  and the reported  revenues
and expenses  during the reporting  period.  Ultimate  results could differ from
those estimates.
     Principles of Consolidation.  The consolidated financial statements include
the accounts of the Company and all  majority-owned  subsidiaries.  All material
intercompany  accounts and  transactions  are  eliminated.  Investments in other
affiliated  companies in which the Company has at least 20%  ownership  and does
not have  management  control are  accounted for on the equity  method.  Certain
prior year  amounts  have been  reclassified  to conform  with the current  year
presentation.
     Revenues  and  Income  Recognition.  The  Company  recognizes  revenues  as
services are rendered or products are shipped.  The distinction between services
and product sales is based upon the overall  business  intent of the  particular
business  operation.  Revenues from  construction  contracts are reported on the
percentage of completion  method of accounting  using  measurements  of progress
toward completion  appropriate for the work performed.  All known or anticipated
losses  on  contracts  are  provided  for   currently.   Claims  for  additional
compensation  are  recognized  during  the  period  such  claims  are  resolved.
Post-contract  customer support agreements are recorded as deferred revenues and
recognized  as revenue  ratably over the contract  periods of generally one year
duration.  Training and consulting service revenue is recognized as the services
are performed.
     Research and Development.  Research and development expenses are charged to
income as incurred.  Such charges were $164.7 million in 1997, $133.3 million in
1996 and $113.1 million in 1995.
     Software  Development  Costs.  Costs of  developing  software  for sale are
charged to expense when incurred as research and development until technological
feasibility  has  been  established  for  the  product.   Thereafter,   software
development  costs are  capitalized  until  the  software  is ready for  general
release to customers.  The Company  capitalized  costs of $14.5 million in 1997,
$12.9 million in 1996 and $8.8 million in 1995 related to software developed for
resale.  Amortization  expense  related to these costs was $15.0 million,  $12.5
million  and $10.3  million  for 1997,  1996 and  1995,  respectively.  Once the
software is ready for release,  amortization of the software  development  costs
begins.  Capitalized software development costs are amortized over periods which
do not exceed three years.
     Income Per Share.  Basic income per share amounts are based on the weighted
average number of common shares  outstanding during the year. Diluted income per
share  includes  additional  common shares that would have been  outstanding  if
potential common shares with a dilutive effect had been issued. See Note 8 for a
reconciliation of basic and diluted income per share from continuing operations.
Prior year amounts have been  adjusted  for the  two-for-one  common stock split
declared on June 9, 1997 and  effected in the form of a stock  dividend and paid
on July 21, 1997.
     Cash Equivalents.  The Company considers all highly liquid investments with
an original maturity of three months or less to be cash equivalents.
     Receivables.  The Company's  receivables are generally not  collateralized.
Notes and accounts  receivable at December 31, 1997 include $30.4 million ($24.9
million at December 31, 1996) due from customers in accordance  with  applicable
retainage  provisions of  engineering  and  construction  contracts,  which will
become  billable upon future  deliveries or completion of such  contracts.  This
amount is expected to be collected during 1998.  Additionally,  other noncurrent
assets  include  $7.3  million  ($6.7  million  at  December  31,  1996) of such
retainage  which  is  expected  to be  collected  in years  subsequent  to 1998.
Unbilled work on  uncompleted  contracts  generally  represents  work  currently
billable and such work is usually billed during normal billing  processes in the
next month.  At December  31,  1997,  notes of $9.5  million  ($14.6  million at
December  31,  1996)  with  varying  interest  rates are  included  in notes and
accounts receivable.
     Inventories.  Inventories  are stated at the lower of cost or market.  Cost
represents  invoice  or  production  cost for new items and  original  cost less
allowance for condition for used  material  returned to stock.  Production  cost
includes material,  labor and manufacturing overhead. About forty-two percent of
all sales items are valued on a last-in,  first-out (LIFO) basis. Inventories of
sales items owned by foreign  subsidiaries and inventories of operating supplies
and parts are generally valued at average cost.


                                       19
<PAGE>

     Property, Plant and Equipment. Property, plant and equipment is reported at
cost  less  accumulated  depreciation,   which  is  generally  provided  on  the
straight-line method over the estimated useful lives of the assets. Expenditures
for  maintenance  and  repairs  are  expensed;  expenditures  for  renewals  and
improvements are generally capitalized. Upon sale or retirement of an asset, the
related costs and accumulated depreciation are removed from the accounts and any
gain or loss is  recognized.  When events or changes in  circumstances  indicate
that assets may be impaired,  an evaluation is performed comparing the estimated
future undiscounted cash flows associated with the asset to the asset's carrying
amount to  determine if a write-down  to market  value or  discounted  cash flow
value is  required.  The  Company  follows  the  successful  efforts  method  of
accounting  for oil and gas  properties.  At December  31,  1997,  there were no
significant oil and gas properties in the production  stage of development.  The
Company is implementing an enterprise-wide  information system.  External direct
costs of materials and services and  payroll-related  costs of employees working
solely  on  development  of the  software  system  portion  of the  project  are
capitalized.  Capitalized costs of the project will be amortized over periods of
three to ten years  beginning  when the  system is placed in  service.  Training
costs and costs to reengineer business processes are expensed as incurred.
     Excess of cost over net assets acquired. The excess of cost over net assets
acquired is amortized  on a  straight-line  basis over periods not  exceeding 40
years.
     Income Taxes. A valuation  allowance is provided for deferred tax assets if
it is more likely than not these items will either  expire before the Company is
able to realize their  benefit,  or that future  deductibility  is prohibited or
uncertain.  Deferred tax assets and  liabilities are recognized for the expected
future tax  consequences  of events  that have been  realized  in the  financial
statements or tax returns.
     Derivative  Instruments.  The  Company  primarily  enters  into  derivative
financial  transactions  to hedge  existing or  projected  exposures to changing
foreign  exchange  rates and from time to time enters into  derivatives to hedge
exposures to interest rates or commodity prices. The Company does not enter into
derivative   transactions  for  speculative  or  trading  purposes.   Derivative
financial instruments to hedge exposure with an indeterminable maturity date are
generally carried at fair value with the resulting gains and losses reflected in
the results of operations. Gains or losses on hedges of identifiable commitments
are deferred and recognized  when the offsetting  gains or losses on the related
hedged  items are  recognized.  Deferred  gains or losses for  hedges  which are
terminated prior to the transaction date are recognized currently.  In the event
an identifiable  commitment is no longer  expected to be realized,  any deferred
gains or  losses  on  hedges  associated  with  the  commitment  are  recognized
currently.  Costs  associated with entering into such contracts are presented in
other assets,  while deferred gains or losses are included in other  liabilities
or other assets,  respectively,  on the consolidated balance sheets.  Recognized
gains or losses on derivatives  entered into to manage foreign exchange risk are
included in foreign currency gains and losses on the consolidated  statements of
income,  while  gains or losses  on  interest  rate  derivatives  and  commodity
derivatives are included in interest expense and operating income, respectively.
During the years ended  December  31, 1997,  1996 and 1995,  the Company did not
enter into any  significant  transactions  to hedge  interest rates or commodity
prices.
     Foreign Currency Translation. Foreign entities whose functional currency is
the U.S. dollar translate  monetary assets and liabilities at year-end  exchange
rates and  non-monetary  items are  translated at historical  rates.  Income and
expense  accounts are translated at the average rates in effect during the year,
except  for  depreciation  and cost of product  sales  which are  translated  at
historical rates.  Gains or losses from changes in exchange rates are recognized
in  consolidated  income  in the  year of  occurrence.  Foreign  entities  whose
functional currency is the local currency translate net assets at year-end rates
and income and expense accounts at average exchange rates. Adjustments resulting
from these translations are reflected in the shareholders' equity section of the
consolidated balance sheets titled "cumulative translation adjustment."


                                       20
<PAGE>

Note 2.  Inventories
     Inventories at December 31, 1997 and 1996 are comprised of the following:
<TABLE>
<CAPTION>
Millions of dollars                                             1997         1996
-------------------------------------------------------------------------------------
<S>                                                         <C>            <C>

Sales items                                                 $     114.9    $   104.3
Supplies and parts                                                158.1        136.3
Work in process                                                    29.3         30.4
Raw materials                                                      24.6         21.2
                                                            -------------------------
          Total                                             $     326.9    $   292.2
-------------------------------------------------------------------------------------
</TABLE>

     If the  average  cost  method had been in use for  inventories  on the LIFO
basis,  total  inventories  would have been about $3.4 million and $13.0 million
higher than reported at December 31, 1997 and 1996, respectively.

Note 3.  Property, Plant and Equipment
     Property, plant and equipment at December 31, 1997 and 1996 is comprised of
the following:
<TABLE>
<CAPTION>
Millions of dollars                                             1997         1996
-------------------------------------------------------------------------------------
<S>                                                         <C>            <C>

Land                                                        $      62.7    $    63.9
Buildings and property improvements                               624.0        568.2
Machinery and equipment                                         2,768.0      2,653.8
Other                                                             533.3        274.9
                                                            -------------------------
          Total                                             $   3,988.0    $ 3,560.8
-------------------------------------------------------------------------------------
</TABLE>

     At  December  31,  1997  and  1996,  other  property  includes  oil and gas
investments  of  approximately  $101.7  million and $5.9  million  and  software
developed for internal use of $59.5 million and $10.0 million, respectively.


                                       21
<PAGE>

Note 4.  Related Companies
     The Company conducts some of its operations  through various joint ventures
which  are in  partnership,  corporate  and  other  business  forms,  which  are
principally  accounted  for using the equity  method.  Included in the Company's
revenues  for 1997,  1996 and 1995 are equity in income of related  companies of
$124.4  million,  $105.5  million and $88.4  million,  respectively.  Summarized
financial  statements  for European  Marine  Contractors,  Limited,  a 50% owned
company  and a part  of the  Energy  Group  which  specializes  in  engineering,
procurement and construction of marine pipelines, and for the remaining combined
jointly owned operations which are not consolidated are as follows:

<TABLE>
<CAPTION>
COMBINED OPERATING RESULTS
Millions of dollars                                   1997        1996           1995
-------------------------------------------------------------------------------------------
<S>                                               <C>         <C>            <C>
                                                         European Marine Contractors
Revenues                                          $   436.1   $    246.5     $    361.8
-------------------------------------------------------------------------------------------
Operating income                                  $    75.9   $     65.5     $    106.9
-------------------------------------------------------------------------------------------
Net income                                        $    48.5   $     43.7     $     72.6
-------------------------------------------------------------------------------------------

                                                             Other Affiliates
Revenues                                          $ 2,441.4   $  2,276.4     $  1,767.2
-------------------------------------------------------------------------------------------
Operating income                                  $   247.2   $    197.7     $     92.9
-------------------------------------------------------------------------------------------
Net income                                        $   202.5   $    158.8     $     63.0
-------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
COMBINED FINANCIAL POSITION
Millions of dollars                                               1997          1996
-----------------------------------------------------------------------------------------
<S>                                                           <C>           <C>
                                                                   European Marine
                                                                     Contractors
Current assets                                                $    214.6    $     263.1
Noncurrent assets                                                   31.7           25.6
                                                              ---------------------------
   Total                                                      $    246.3    $     288.7
-----------------------------------------------------------------------------------------

Current liabilities                                           $    219.9    $     226.4
Noncurrent liabilities                                               6.2            3.8
Shareholders' equity                                                20.2           58.5
                                                              ---------------------------
   Total                                                      $    246.3    $     288.7
-----------------------------------------------------------------------------------------

                                                                   Other Affiliates
Current assets                                                $     887.2   $     871.3
Noncurrent assets                                                   670.4         615.2
                                                              ---------------------------
   Total                                                      $   1,557.6   $   1,486.5
-----------------------------------------------------------------------------------------

Current liabilities                                           $     450.6   $     572.9
Noncurrent liabilities                                              303.4         277.4
Minority interests                                                    8.1           6.6
Shareholders' equity                                                795.5         629.6
                                                              ---------------------------
   Total                                                      $   1,557.6   $   1,486.5
-----------------------------------------------------------------------------------------
</TABLE>

     In the second quarter of 1997,  Halliburton Energy Services,  which is part
of the Energy Group,  acquired a 26% ownership  interest in PES  (International)
Limited (PES) for approximately $33.6 million which includes approximately $30.0
million  excess of cost over net assets  acquired  to be  amortized  over thirty
years.  The purchase  price is included in  acquisitions  of  businesses  in the
consolidated statements of cash flows.


                                       22
<PAGE>

     In the second quarter of 1996, M-I Drilling Fluids Company,  L.L.C.,  a 36%
owned joint venture,  purchased Anchor Drilling  Fluids.  The Company's share of
the  purchase  price was $41.3  million and is included in cash flows from other
investing activities.

Note 5.  Income Taxes
     The components of the (provision) benefit for income taxes are:
<TABLE>
<CAPTION>
Millions of dollars                                             1997        1996        1995
------------------------------------------------------------------------------------------------
<S>                                                         <C>           <C>          <C>
Current income taxes
    Federal                                                 $   (104.7)   $  (21.5)    $  (6.4)
    Foreign                                                     (178.7)     (102.7)      (79.9)
    State                                                         (7.2)       (2.9)       (5.4)
                                                            ------------------------------------
         Total                                                  (290.6)     (127.1)      (91.7)
                                                            ------------------------------------
Deferred income taxes
    Federal                                                       (1.3)       58.2        (11.2)
    Foreign and state                                             (8.1)      (34.4)       (34.8)
                                                            ------------------------------------
         Total                                                    (9.4)       23.8        (46.0)
                                                            ------------------------------------
    Total                                                   $   (300.0)   $ (103.3)    $ (137.7)
------------------------------------------------------------------------------------------------
</TABLE>

     Included in income taxes are foreign tax credits of $88.4  million in 1997,
$63.7 million in 1996 and $35.2  million in 1995.  The United States and foreign
components of income from continuing operations before income taxes and minority
interests are as follows:

<TABLE>
<CAPTION>
Millions of dollars                                             1997       1996          1995
------------------------------------------------------------------------------------------------
<S>                                                         <C>         <C>           <C>
United States                                               $   461.4   $   217.2     $  234.6
Foreign                                                         304.9       187.0        153.2
                                                            ------------------------------------
    Total                                                   $   766.3   $   404.2     $  387.8
------------------------------------------------------------------------------------------------
</TABLE>


                                       23
<PAGE>

     The primary components of the Company's deferred tax assets and liabilities
and the related valuation allowances are as follows:

<TABLE>
<CAPTION>
Millions of dollars                                            1997       1996
----------------------------------------------------------------------------------
<S>                                                         <C>         <C>
Gross deferred tax assets
      Employee benefit plans                                $  120.0    $ 95.2
      Accrued liabilities                                       67.8      71.9
      Construction contract accounting methods                  50.4      38.6
      Intercompany profit                                       39.3      34.2
      Insurance accruals                                        38.4      30.0
      Net operating loss carryforwards                          35.8      62.8
      Foreign tax credits                                       21.2      29.8
      Alternative minimum tax carryforward                      15.1      19.3
      All other                                                 75.7      82.2
                                                            ----------------------
          Total                                                463.7     464.0
                                                            ----------------------
Gross deferred tax liabilities
      Depreciation and amortization                             76.1      56.7
      Unrepatriated foreign earnings                            35.6      34.1
      Safe harbor leases                                        11.0      12.0
      All other                                                 85.0      83.6
                                                            ----------------------
          Total                                                207.7     186.4
                                                            ----------------------
Valuation allowances
      Net operating loss carryforwards                          24.8      36.3
      All other                                                 33.3      34.0
                                                            ----------------------
          Total                                                 58.1      70.3
                                                            ----------------------
Net deferred income tax asset                               $  197.9    $207.3
----------------------------------------------------------------------------------
</TABLE>

     The  Company  has  provided  for  the  potential  repatriation  of  certain
undistributed  earnings of its foreign subsidiaries and considers earnings above
the amounts on which tax has been provided to be permanently  reinvested.  While
these additional earnings could become subject to additional tax if repatriated,
such a repatriation  is not  anticipated.  Any  additional  amount of tax is not
practicable to estimate.


                                       24
<PAGE>

     The Company has foreign tax credits which expire in 2000 of $21.2  million.
The Company has net operating loss carryforwards which expire as follows:  1998,
$13.1 million; 1999, $15.3 million; 2000, $9.6 million; 2001 through 2005, $16.1
million;  2006 through 2010,  $10.6 million.  The Company also has net operating
loss   carryforwards  of  $40.6  million  with  indefinite   expiration   dates.
Reconciliations  between the actual provision for income taxes and that computed
by applying the U.S. statutory rate to income from continuing  operations before
income taxes and minority interest are as follows:

<TABLE>
<CAPTION>
Millions of dollars                                             1997        1996        1995
------------------------------------------------------------------------------------------------
<S>                                                        <C>           <C>         <C>
Provision computed at statutory rate                       $   (268.2)   $ (141.5)   $  (135.7)
Reductions (increases) in taxes resulting from:
    Tax differentials on
        foreign earnings                                        (19.5)        3.7        (35.4)
    State income taxes, net of
        federal income tax benefit                               (6.6)       (2.9)        (5.1)
    Net operating losses                                          -          23.0         48.6
    Federal income tax settlement                                 -          16.1          -
    Nondeductible meals and entertainment                        (5.4)       (4.8)        (5.0)
    Other items, net                                             (0.3)        3.1         (5.1)
                                                            ------------------------------------
        Total                                              $   (300.0)   $ (103.3)   $  (137.7)
------------------------------------------------------------------------------------------------
</TABLE>

     The Company has received  statutory  notices of deficiency for the 1990 and
1991 tax years from the  Internal  Revenue  Service  (IRS) of $92.9  million and
$16.8 million,  respectively,  excluding any penalties or interest.  The Company
believes it has  meritorious  defenses  and does not expect  that any  liability
resulting  from the 1990 or 1991 tax years  will  result in a  material  adverse
effect on its results of operations or financial position.  In 1996, the Company
reached  settlements with the IRS for certain matters including the 1989 taxable
year.  As a result of the  settlement  for the 1989  taxable  year,  the Company
recognized  tax benefits and net income was  increased by $16.1  million in 1996
(see Note 16).


                                       25
<PAGE>


Note 6.  Lines of Credit, Notes Payable and Long-Term Debt
     At December 31, 1997, the Company had committed  short-term lines of credit
totaling  $200.0 million  available and unused,  and other  short-term  lines of
credit  totaling  $275.0  million with several U.S.  banks.  No borrowings  were
outstanding  under these  facilities  at December  31, 1997.  In  addition,  the
Company had $2.7 million of other  short-term  debt  outstanding at December 31,
1997,  primarily  consisting of foreign bank overdrafts with an average interest
rate of 7.31%. At December 31, 1996, the Company had committed  short-term lines
of credit totaling  $185.0 million  available and unused,  and other  short-term
lines of credit totaling $275.0 million, under which $25.0 million in borrowings
was outstanding  with several U.S. banks.  The interest rate on these borrowings
was 5.65%. In addition,  the Company had $21.3 million of other  short-term debt
outstanding at December 31, 1996,  primarily consisting of commercial paper with
an interest rate of 5.85%.
     Long-term debt at December 31, 1997 and 1996 consists of the following:
<TABLE>
<CAPTION>
Millions of dollars                                             1997        1996
------------------------------------------------------------------------------------
<S>                                                         <C>           <C>
8.75% debentures due February 15, 2021                      $    200.0    $  200.0
Medium-term notes due February 1, 2027                           125.0         -
Medium-term notes due May 12, 2017                                50.0         -
Medium-term notes due July 8, 1999                                50.0         -
Medium-term notes due August 5, 2002                              75.0         -
Term loans at LIBOR plus 0.75% payable in semi-annual
   installments through March 2004                                45.9         -
Other notes with varying interest rates                            0.1         0.1
                                                            ------------------------
                                                                 546.0       200.1
Less current portion                                               7.1         0.1
                                                            ------------------------
    Total long-term debt                                    $    538.9    $  200.0
------------------------------------------------------------------------------------
</TABLE>

      The Company's  8.75%  debentures due February 15, 2021 do not have sinking
fund  requirements  and are not redeemable  prior to maturity.  During 1997, the
Company issued notes under its medium-term note program as follows:
<TABLE>
<CAPTION>

             Amount            Issue Date              Due                Rate            Prices            Yield
        -----------------    ----------------    -----------------    -------------    --------------    ------------
<S>     <C>                      <C>                <C>                  <C>              <C>                 <C>
        $ 125 million            02/11/97           02/01/2027           6.75%            99.78%             6.78%
        $  50 million            05/12/97           05/12/2017           7.53%              Par              7.53%
        $  50 million            07/08/97           07/08/1999           6.27%              Par              6.27%
        $  75 million            08/05/97           08/05/2002           6.30%              Par              6.30%
</TABLE>

      The  medium-term  notes may not be  redeemed  at the option of the Company
prior to maturity. There is no sinking fund applicable to the notes. Each holder
of the 6.75%  medium-term  notes has the right to require  the  Company to repay
such holder's  notes, in whole or in part, on February 1, 2007. The net proceeds
from the sale of the notes were used for general corporate purposes.
     During  March 1997,  the Company  incurred  $56.3  million of term loans in
connection with the acquisition of the Royal Dockyard in Plymouth,  England (the
Dockyard  Loans).  The  Dockyard  Loans are  denominated  in  Sterling  and bear
interest at LIBOR plus 0.75% payable in semi-annual  installments  through March
2004.  Pursuant to certain terms of the Dockyard Loans, the Company was required
to provide initially a compensating balance of $28.7 million which is restricted
as to use by the Company.  The  compensating  balance amount  decreases in equal
installments  over the term of the Dockyard  Loans and earns  interest at a rate
equal to that of the Dockyard  Loans.  At December 31,  1997,  the  compensating
balance of $22.8 million is included in other assets in the consolidated balance
sheets.
     Long-term debt matures over the next five years as follows: $7.1 million in
1998;  $58.4 million in 1999;  $8.3 million in 2000;  $8.3 million in 2001;  and
$83.3 million in 2002.


                                       26
<PAGE>

Note 7.  Common Stock
     On May 20, 1997, the Company's shareholders voted to increase the Company's
number of authorized  shares from 200.0 million shares to 400.0 million  shares.
On June 9, 1997, the Company's Board of Directors  approved a two-for-one  stock
split effected in the form of a stock  dividend  distributed on July 21, 1997 to
shareholders  of record on June 26, 1997. The par value of the Company's  common
stock of $2.50 per share  remained  unchanged.  As a result of the stock  split,
$325.0 million was  transferred  from paid-in  capital in excess of par value to
common  stock.   Historical  share  and  per  share  amounts  presented  on  the
consolidated  statements of income and in the discussion  below concerning stock
options and restricted stock have been restated to reflect the stock split.
     The Company's 1993 Stock and Long-Term  Incentive Plan (1993 Plan) provides
for the grant of any or all of the following types of awards: (1) stock options,
including  incentive stock options and  non-qualified  stock options;  (2) stock
appreciation  rights,  in  tandem  with  stock  options  or  freestanding;   (3)
restricted stock; (4) performance  share awards;  and (5) stock value equivalent
awards.  Under the terms of the 1993 Plan as amended,  27 million  shares of the
Company's  Common Stock have been  reserved for  issuance to key  employees.  At
December 31, 1997,  14.8 million  shares were  available for future grants under
the 1993 Plan.
     In  connection  with the  acquisitions  of  Landmark  Graphics  Corporation
(Landmark)  and NUMAR  Corporation  (NUMAR)  (see Note  15),  outstanding  stock
options  under the stock  option  plans  maintained  by Landmark  and NUMAR were
assumed by the  Company.  Stock option  transactions  summarized  below  include
amounts for the 1993 Plan,  the Landmark  plans using the  acquisition  exchange
rate of 1.148  shares for each  Landmark  share,  and the NUMAR  plans using the
acquisition exchange rate of .9664 shares for each NUMAR share.
<TABLE>
<CAPTION>
                                                              Exercise          Weighted Average
                                           Number of          Price per          Exercise Price
                                             Shares             Share              per Share
---------------------------------------------------------------------------------------------------
<S>                                        <C>             <C>                     <C>
Outstanding at December 31, 1994            6,229,642      $   0.53 - 29.73        $  15.69
---------------------------------------------------------------------------------------------------
  Granted                                   3,966,714         15.68 - 25.32           20.53
  Exercised                                  (701,548)         0.53 - 20.91           13.81
  Forfeited                                  (265,194)         8.71 - 28.77           17.27
---------------------------------------------------------------------------------------------------
Outstanding at December 31, 1995            9,229,614          2.90 - 29.73           17.87
---------------------------------------------------------------------------------------------------
  Granted                                   3,599,340         14.48 - 29.57           27.70
  Exercised                                (1,994,574)         2.90 - 23.52           15.58
  Forfeited                                  (445,660)         8.71 - 28.09           18.81
---------------------------------------------------------------------------------------------------
Outstanding at December 31, 1996           10,388,720          3.49 - 29.73           21.67
---------------------------------------------------------------------------------------------------
  Options assumed in acquisition              854,050          3.10 - 22.12           12.22
  Granted                                   1,263,600         30.88 - 61.50           52.19
  Exercised                                (2,765,247)         3.10 - 29.56           16.82
  Forfeited                                  (325,573)         9.15 - 35.13           21.56
---------------------------------------------------------------------------------------------------
Outstanding at December 31, 1997            9,415,550      $   3.10 - 61.50        $  26.35
---------------------------------------------------------------------------------------------------
</TABLE>


                                       27
<PAGE>

     Options outstanding at December 31, 1997 are composed of the following:
<TABLE>
<CAPTION>

                                         Outstanding                                 Exercisable
                       ------------------------------------------------    --------------------------------
                                           Weighted
                          Number of         Average        Weighted           Number of        Weighted
                          Shares at        Remaining       Average            Shares at        Average
      Range of           December 31,     Contractual      Exercise         December 31,       Exercise
   Exercise Prices           1997            Life           Price               1997            Price
---------------------- ----------------- -------------- ---------------    ---------------- ---------------
<S>                        <C>               <C>          <C>                   <C>           <C>

 $  3.10 - 11.11             351,453         4.87         $   7.20                345,657     $   7.13
   11.25 - 18.13           2,309,203         6.93            16.35              1,957,596        16.28
   18.24 - 29.19           3,002,268         7.21            22.75              1,792,155        22.11
   29.56 - 61.50           3,752,626         9.22            37.18                808,284        29.56
---------------------- ----------------- -------------- ---------------    ---------------- ---------------
 $  3.10 - 61.50           9,415,550         7.85         $  26.35              4,903,692     $  19.96
---------------------- ----------------- -------------- ---------------    ---------------- ---------------
</TABLE>

     There were 4.5 million options exercisable with a weighted average exercise
price of $17.52 at December 31, 1996, and 2.6 million options exercisable with a
weighted average exercise price of $15.64 at December 31, 1995.
     All stock  options  under  the 1993  Plan,  including  options  granted  to
employees of Landmark and NUMAR since the  acquisition  of such  companies,  are
granted  at the  fair  market  value of the  Common  Stock  at the  grant  date.
Landmark,  prior to its acquisition by the Company,  had provisions in its plans
that  allowed  Landmark to set option  exercise  prices at a defined  percentage
below  fair  market  value.  The fair  value of options at the date of grant was
estimated using the  Black-Scholes  option pricing model.  The weighted  average
assumptions and resulting fair values of options granted are as follows:
<TABLE>
<CAPTION>

                                                Assumptions                                
                     -------------------------------------------------------------------    Weighted Average
                        Risk-Free          Expected          Expected        Expected        Fair Value of
                      Interest Rate     Dividend Yield   Life (in years)    Volatility      Options Granted
-------------------- ----------------- ----------------- ----------------- ------------- -----------------------
<S>                       <C>                <C>               <C>             <C>             <C>
1997                      6.0%               1.0%              5               43.3%           $   22.71
1996                      5.9%               1.6%              5               39.7%           $   10.24
1995                      6.2%               1.6%              5               38.4%           $    7.16
-------------------- ----------------- ----------------- ----------------- ------------- -----------------------
</TABLE>

Stock options generally expire ten years from the grant date. Stock options vest
over a three-year period,  with one-third of the shares becoming  exercisable on
each of the first, second and third anniversaries of the grant date.
     The  Company  accounts  for the 1993  Plan in  accordance  with  Accounting
Principles  Board  Opinion  No. 25,  under which no  compensation  cost has been
recognized for stock option awards. Had compensation cost for the 1993 Plan been
determined  consistent with Statement of Financial Accounting Standards No. 123,
"Accounting  for Stock-Based  Compensation"  (SFAS 123), the Company's pro forma
net  income  for 1997,  1996 and 1995 would  have been  $437.6  million,  $292.4
million and $181.6  million,  respectively,  resulting  in diluted  earnings per
share of $1.69,  $1.16 and $0.73,  respectively.  Because the SFAS 123 method of
accounting has not been applied to options granted prior to January 1, 1995, the
resulting pro forma  compensation  cost may not be  representative of that to be
expected in future years.
     Restricted  shares awarded under the 1993 Plan for 1997, 1996 and 1995 were
515,650;  363,800;  and  412,700,  respectively.  The shares  awarded are net of
forfeitures  of  34,900;  34,600;  and  9,800  shares  in 1997,  1996 and  1995,
respectively.  The  weighted  average fair market value per share at the date of
grant of shares  granted in 1997,  1996 and 1995 was $45.29,  $28.24 and $20.44,
respectively.
     The Company's Restricted Stock Plan for Non-Employee  Directors (Restricted
Stock Plan) allows for each non-employee  director to receive an annual award of
400  restricted  shares of Common Stock as a part of  compensation.  The Company
reserved 100,000 shares of Common Stock for issuance to non-employee  directors.
The Company issued 3,200;  3,600 and 3,200  restricted  shares in 1997, 1996 and
1995,  respectively,  under this plan. At December 31, 1997,  17,200 shares have
been issued to non-employee directors under this plan. The weighted average fair
market value per share at the date of grant of shares granted in 1997,  1996 and
1995 was $46.06, $26.57 and $20.38, respectively.


                                       28
<PAGE>

     The  Company's  Employees'   Restricted  Stock  Plan  was  established  for
employees  who are not officers,  for which 200,000  shares of Common Stock have
been reserved.  The Company awarded 3,500 restricted shares in 1995. Forfeitures
were 14,600;  8,400 and 1,800 in 1997,  1996 and 1995,  respectively.  No awards
were made in 1997 or 1996 and no further  grants are being made under this plan.
At December 31, 1997,  172,200 shares (net of 24,800 shares forfeited) have been
issued.  The  weighted  average fair market value per share at the date of grant
for shares granted in 1995 was $17.50.
     Under the terms of the Company's Career Executive  Incentive Stock Plan, 15
million  shares of the  Company's  Common  Stock were  reserved  for issuance to
officers and key employees at a purchase  price not to exceed par value of $2.50
per share.  At December 31, 1997, 11.7 million shares (net of 2.1 million shares
forfeited) have been issued under the plan. No further grants will be made under
the Career Executive Incentive Stock Plan.
     Restricted  shares  issued  under the 1993  Plan,  Restricted  Stock  Plan,
Employees'  Restricted Stock Plan and the Career Executive  Incentive Stock Plan
are  limited  as  to  sale  or  disposition  with  such   restrictions   lapsing
periodically  over an extended period of time not exceeding ten years.  The fair
market  value of the stock,  on the date of  issuance,  is being  amortized  and
charged to income  (with  similar  credits  to paid-in  capital in excess of par
value)  generally over the average period during which the  restrictions  lapse.
Compensation  costs  recognized  in  income  for  1997,  1996 and 1995 were $7.1
million, $6.9 million and $7.0 million,  respectively. At December 31, 1997, the
unamortized amount is $44.3 million.

Note 8.  Income per share
     The Company has adopted  Statement of Financial  Accounting  Standards  No.
128,  "Earnings per Share," which is effective for periods ending after December
15, 1997. The table below  reconciles  basic and diluted income from  continuing
operations. For the years presented,  diluted earnings per share were equivalent
to  primary  earnings  per share  previously  reported  pursuant  to  Accounting
Principles Board Opinion No. 15.
<TABLE>
<CAPTION>

Millions of dollars and shares except per share data                1997          1996         1995
---------------------------------------------------------------------------------------------------------
<S>                                                               <C>           <C>          <C>
Income from continuing operations                                 $ 454.4       $ 300.4      $ 249.2
---------------------------------------------------------------------------------------------------------

Basic weighted average shares                                       255.4         249.9        248.3
Effect of common stock equivalents                                    4.1           2.3          1.1
---------------------------------------------------------------------------------------------------------
Diluted weighted average shares                                     259.5         252.2        249.4
---------------------------------------------------------------------------------------------------------

Per share income from continuing operations:
  Basic                                                           $   1.78      $   1.20     $   1.00
---------------------------------------------------------------------------------------------------------
  Diluted                                                         $   1.75      $   1.19     $   1.00
---------------------------------------------------------------------------------------------------------
</TABLE>

Options to purchase  1.1 million,  2.6 million and 0.9 million  shares of common
stock were outstanding  during 1997, 1996 and 1995,  respectively,  but were not
included in the  computation  of diluted  earnings per share  because the option
exercise  price was greater than the average  market price of the common shares.
During 1995, there were 6.6 million weighted average shares and $12.5 million in
income related to the conversion of the zero coupon convertible  debentures that
were excluded from the computation because they were antidilutive.

Note 9.  Series A Junior Participating Preferred Stock
     The  Company has  previously  declared a dividend  of one  preferred  stock
purchase right (a Right) on each outstanding  share of Common Stock.  Each Right
entitles the holder thereof to buy one two-hundredth of a share of the Company's
Series A Junior Participating Preferred Stock, without par value, at an exercise
price of $75, subject to certain  antidilution  adjustments,  upon the terms and
subject to the  conditions set forth in the Rights  Agreement  entered into with
ChaseMellon Shareholder Services, L.L.C. as Rights Agent. The Rights do not have
any voting rights and are not entitled to dividends.
     The Rights become exercisable in certain limited circumstances  involving a
potential business combination.  Following certain other events after the Rights
become  exercisable,  each Right will  entitle its holder to an amount of Common


                                       29
<PAGE>


Stock of the Company, or in certain  circumstances,  securities of the acquirer,
having a then-current market value of two times the exercise price of the Right.
The Rights are redeemable at the Company's option at any time before they become
exercisable.  The Rights  expire on December 15, 2005. No event during 1997 made
the Rights exercisable.

Note 10.  Business Segment Information
     The Energy Group includes pressure pumping equipment and services,  logging
and  perforating,  drilling  systems and services,  specialized  completion  and
production equipment and services and well control.  Also included in the Energy
Group  are  upstream  oil and gas,  engineering,  construction  and  maintenance
services,   integrated   exploration  and  production  information  systems  and
professional   services  to  the  petroleum   industry.   The   Engineering  and
Construction  Group  provides  engineering,  construction,  project  management,
facilities operation and maintenance,  and environmental services for industrial
and governmental  customers.  The  environmental  services  business was sold in
December 1997.
     The Company's  equity in income or losses of related  companies is included
in  revenues  and  operating  income of each  applicable  segment.  Intersegment
revenues included in the revenues of the other business segments are immaterial.
Sales between geographic areas and export sales are also immaterial. General and
administrative  expenses were $248.1 million in 1997, $236.6 million in 1996 and
$221.7 million in 1995. General corporate assets are primarily comprised of cash
and equivalents and certain other investments.


                                       30
<PAGE>

<TABLE>
<CAPTION>
OPERATIONS BY BUSINESS SEGMENT
Years ended December 31
Millions of dollars                                              1997          1996          1995
-----------------------------------------------------------------------------------------------------
<S>                                                         <C>           <C>           <C>
Capital expenditures:
  Energy Group                                              $     466.7   $     313.8   $     248.1
  Engineering and Construction Group                               52.3          70.5          55.1
  General corporate                                                58.1          11.4           0.1
                                                            -----------------------------------------
    Total                                                   $     577.1   $     395.7   $     303.3
-----------------------------------------------------------------------------------------------------
Depreciation and amortization:
  Energy Group                                              $     267.6   $     228.4   $     220.2
  Engineering and Construction Group                               40.7          38.2          38.3
  General corporate                                                 1.2           1.3           1.3
                                                            -----------------------------------------
    Total                                                   $     309.5   $     267.9   $     259.8
-----------------------------------------------------------------------------------------------------
Identifiable assets:
  Energy Group                                              $   3,985.6   $   2,899.8   $   2,445.1
  Engineering and Construction Group                            1,080.8         986.3         873.6
  General corporate                                               536.6         550.5         543.3
                                                            -----------------------------------------
    Total                                                   $   5,603.0   $   4,436.6   $   3,862.0
-----------------------------------------------------------------------------------------------------
Research and development:
  Energy Group                                              $     163.6   $     130.7   $     111.6
  Engineering and Construction Group                                1.1           2.6           1.5
                                                            -----------------------------------------
    Total                                                   $     164.7   $     133.3   $     113.1
-----------------------------------------------------------------------------------------------------

OPERATIONS BY GEOGRAPHIC AREA
Years ended December 31
Millions of dollars                                              1997          1996          1995
------------------------------------------------------------------------------------------------------
Revenues:
  United States                                             $   4,238.7   $   3,953.2   $   3,255.6
  Europe                                                        2,443.2       1,711.1       1,117.7
  Latin America                                                   677.0         557.4         529.9
  Other areas                                                   1,459.7       1,163.4         979.7
                                                            ------------------------------------------
    Total                                                   $   8,818.6   $   7,385.1   $   5,882.9
------------------------------------------------------------------------------------------------------
Operating income (loss):
  United States                                             $     617.1   $     397.5   $     231.4
  Europe                                                          101.2          62.3           3.3
  Latin America                                                    37.1          24.7          64.9
  Other areas                                                      84.9          53.6         134.8
  General corporate and special charges                           (42.2)       (120.2)        (33.5)
                                                            ------------------------------------------
    Total                                                   $     798.1   $     417.9   $     400.9
------------------------------------------------------------------------------------------------------
Identifiable assets:
  United States                                             $   2,238.5   $   1,994.7   $   1,872.0
  Europe                                                        1,282.4         695.0         528.0
  Latin America                                                   456.8         347.3         279.7
  Other areas                                                   1,088.7         849.1         639.0
  General corporate                                               536.6         550.5         543.3
                                                            ------------------------------------------
    Total                                                   $   5,603.0   $   4,436.6   $   3,862.0
------------------------------------------------------------------------------------------------------
</TABLE>


                                       31
<PAGE>

Note 11. Commitments and Contingencies
     Leases. At December 31, 1997, the Company was obligated under noncancelable
operating leases,  expiring on various dates to 2020, principally for the use of
land,  offices,  equipment and field  facilities.  Aggregate  rentals charged to
operations for such leases totaled $78.5 million in 1997,  $70.8 million in 1996
and $73.7 million in 1995. Future aggregate  rentals on noncancelable  operating
leases are as follows:  1998, $42.7 million;  1999,  $25.3 million;  2000, $16.2
million; 2001, $11.0 million; 2002, $9.2 million; and thereafter, $54.0 million.
     Environmental.  The Company is involved as a potentially  responsible party
(PRP) in  remedial  activities  to  clean up  several  "Superfund"  sites  under
applicable federal law which imposes joint and several liability, if the harm is
indivisible,  on certain  persons  without regard to fault,  the legality of the
original  disposal,  or ownership of the site.  Although it is very difficult to
quantify the potential impact of compliance with environmental  protection laws,
management  of the Company  believes  that any  liability  of the  Company  with
respect to all but one of such sites will not have a material  adverse effect on
the  results of  operations  of the  Company.  With  respect to a site in Jasper
County,  Missouri (Jasper County Superfund Site), sufficient information has not
been developed to permit  management to make such a determination and management
believes the process of determining the nature and extent of remediation at this
site and the total costs thereof will be lengthy.  Brown & Root,  Inc.  (Brown &
Root), a subsidiary of the Company,  has been named as a PRP with respect to the
Jasper County Superfund Site by the  Environmental  Protection Agency (EPA). The
Jasper County  Superfund  Site includes  areas of mining  activity that occurred
from the 1800s  through the mid 1950s in the  southwestern  portion of Missouri.
The site  contains lead and zinc mine  tailings  produced from mining  activity.
Brown & Root is one of nine  participating  PRPs which have  agreed to perform a
Remedial  Investigation/Feasibility Study (RI/FS), which, due to various delays,
is not expected to be completed  until the fourth quarter of 1998.  Although the
entire Jasper County  Superfund Site comprises 237 square miles as listed on the
National  Priorities  List,  in the  RI/FS  scope  of  work,  the EPA  has  only
identified  seven areas,  or subsites,  within this area that need to be studied
and then possibly remediated by the PRPs. Additionally, the Administrative Order
on Consent for the RI/FS only requires Brown & Root to perform RI/FS work at one
of the subsites  within the site,  the Neck/Alba  subsite,  which only comprises
3.95  square  miles.  Brown &  Root's  share  of the cost of such a study is not
expected  to be  material.  In addition to the  superfund  issues,  the State of
Missouri has indicated that it may pursue natural resource damage claims against
the PRPs.  At the present time Brown & Root cannot  determine  the extent of its
liability,  if any, for  remediation  costs or natural  resource  damages on any
reasonably practicable basis.
     Other.  The Company and its subsidiaries are parties to various other legal
proceedings.  Although the ultimate  dispositions  of such  proceedings  are not
presently  determinable,  in the opinion of the Company any  liability  that may
ensue will not be material in relation to the  consolidated  financial  position
and results of operations of the Company.

Note 12.  Financial Instruments and Risk Management
     Foreign  Exchange  Risk.  Techniques  in  managing  foreign  exchange  risk
include,  but are not limited to, foreign  currency  borrowing and investing and
the use of  currency  derivative  instruments.  The Company  selectively  hedges
significant  exposures to potential foreign exchange losses considering  current
market  conditions,  future  operating  activities  and the cost of hedging  the
exposure in relation to the perceived risk of loss. The purpose of the Company's
foreign currency hedging activities is to protect the Company from the risk that
the eventual  dollar cash flows resulting from the sale and purchase of products
in foreign  currencies will be adversely  affected by changes in exchange rates.
The Company does not hold or issue derivative financial  instruments for trading
or speculative purposes.
     The  Company  hedges its  currency  exposure  through  the use of  currency
derivative instruments.  Such contracts generally have an expiration date of two
years  or  less.  Forward  exchange  contracts  (commitments  to buy  or  sell a
specified  amount  of a  foreign  currency  at a  specified  price and time) are
generally used to hedge  identifiable  foreign currency  commitments.  Losses of
$2.6 million for  identifiable  foreign  currency  commitments  were deferred at
December  31, 1997.  Forward  exchange  contracts  and foreign  exchange  option
contracts  (which  convey the right,  but not the  obligation,  to sell or buy a
specified amount of foreign currency at a specified price) are generally used to
hedge foreign currency commitments with an indeterminable maturity date. None of
the forward or option contracts are exchange traded.


                                       32
<PAGE>

     While  hedging  instruments  are  subject to  fluctuations  in value,  such
fluctuations are generally offset by the value of the underlying exposures being
hedged.  The use of some  contracts may limit the  Company's  ability to benefit
from favorable  fluctuations in foreign  exchange rates. The notional amounts of
open forward  contracts  and options were $331.8  million and $161.1  million at
December 31, 1997 and 1996, respectively.  The notional amounts of the Company's
foreign exchange  contracts do not generally  represent amounts exchanged by the
parties,  and thus,  are not a measure of the  exposure of the Company or of the
cash  requirements  relating  to these  contracts.  The  amounts  exchanged  are
calculated  by  reference  to the  notional  amounts  and by other  terms of the
derivatives,  such as exchange rates. The Company actively  monitors its foreign
currency exposure and adjusts the amounts hedged as appropriate.
     Exposures to certain  currencies  are generally not hedged due primarily to
the lack of available markets or cost  considerations  (non-traded  currencies).
The Company  attempts to manage its working capital position to minimize foreign
currency  commitments in non-traded  currencies and recognizes  that pricing for
the  services and products  offered in such  countries  should cover the cost of
exchange rate devaluations.  The Company has historically  incurred  transaction
losses in non-traded currencies.
     Credit Risk. Financial instruments which potentially subject the Company to
concentrations  of credit risk are primarily cash  equivalents,  investments and
trade  receivables.  It is the Company's  practice to place its cash equivalents
and investments in high quality securities with various investment institutions.
The Company  derives the  majority of its  revenues  from sales and services to,
including  engineering and  construction  for, the energy  industry.  Within the
energy industry,  trade receivables are generated from a broad and diverse group
of customers.  There are  concentrations of receivables in the United States and
the United Kingdom. The Company maintains an allowance for losses based upon the
expected collectibility of all trade accounts receivable.
     There are no significant  concentrations of credit risk with any individual
counterparty  or groups of  counterparties  related to the Company's  derivative
contracts. Counterparties are selected by the Company based on creditworthiness,
which the Company continually  monitors,  and on the counterparties'  ability to
perform their obligations under the terms of the transactions.  The Company does
not expect any  counterparties  to fail to meet their  obligations  under  these
contracts  given their high credit  ratings and, as such,  considers  the credit
risk associated with its derivative contracts to be minimal.
     Fair Value of Financial Instruments.  The estimated fair value of long-term
debt at  December  31,  1997 and 1996 was $600.0  million  and  $229.6  million,
respectively,  as compared to the carrying  amount of $546.0 million at December
31, 1997 and $200.1  million at December 31, 1996.  The fair value of fixed rate
long-term   debt  is  based  on  quoted  market  prices  for  those  or  similar
instruments.  The carrying amount of variable rate long-term debt and restricted
cash (see Note 6)  approximates  fair value  because  such  instruments  reflect
market changes to interest rates.  The carrying  amount of short-term  financial
instruments  (cash and  equivalents,  receivables,  short-term notes payable and
accounts payable) as reflected in the consolidated  balance sheets  approximates
fair value due to the short maturities of these  instruments.  The fair value of
currency  derivative  instruments,  which  generally  approximates  the carrying
amount,  was $6.4 million and $27.3  million  payable and $8.2 million and $28.7
million receivable at December 31, 1997 and 1996, respectively, based upon third
party quotes.

Note 13.  Retirement Plans
     Retirement  Plans.  The Company has various  retirement plans which cover a
significant  number of its  employees.  The major  retirement  plans are defined
contribution  plans,  which  provide  retirement  contributions  in  return  for
services  rendered,  provide an individual account for each participant and have
terms that  specify how  contributions  to the  participant's  account are to be
determined  rather than the amount of pension  benefits  the  participant  is to
receive.  Contributions  to these  plans  are  based on  pre-tax  income  and/or
discretionary  amounts  determined on an annual basis. The Company's expense for
the defined contribution plans totaled $166.7 million,  $114.2 million and $95.1
million in 1997, 1996 and 1995,  respectively.  Other  retirement  plans include
defined benefit plans, which define an amount of pension benefit to be provided,
usually as a function of one or more  factors  such as age,  years of service or
compensation.  As a result of sizable  reductions  in the number of employees in
1995,  curtailment  gains of $1.3 million are reflected in the net  amortization
and deferral  component of net periodic  pension cost for 1995.  These plans are
funded to operate on an  actuarially  sound  basis.  Plan  assets are  primarily
invested in equity and fixed  income  securities  of entities  domiciled  in the
country  of the  plan's  operation.  Assumed  long-term  rates of return on plan


                                       33
<PAGE>

assets,   discount  rates  for  estimating  benefit  obligations  and  rates  of
compensation  increases  vary for the  different  plans  according  to the local
economic conditions. The rates used are as follows:

<TABLE>
<CAPTION>
Percentages                                                         1997               1996               1995
----------------------------------------------------------------------------------------------------------------------
<S>                                                              <C>                  <C>                <C>
Return on plan assets:                                                                                          
   United States plans                                                  8.5%           8% to 8.5%               8.5%
   International plans                                                    7%                   9%         6.5% to 9%
Discount rate:
   United States plans                                                 7.25%          7% to 7.75%        7% to 7.25%
   International plans                                            7% to 7.5%          7%  to 8.5%         4% to 8.5%
Compensation increase:
   United States plans                                                  4.5%                 4.5%                 4%
   International plans                                           4.25% to 5%           4.3% to 6%           1% to 6%
----------------------------------------------------------------------------------------------------------------------
</TABLE>

     The net periodic  pension cost  (benefit)  for defined  benefit plans is as
follows:

<TABLE>
<CAPTION>
Millions of dollars                                             1997        1996         1995
------------------------------------------------------------------------------------------------
<S>                                                         <C>         <C>          <C>
Service cost - benefits earned during period                $     35.3  $     15.8   $      9.6
Interest cost on projected benefit obligation                     85.1        29.9         27.5
Actual return on plan assets                                    (207.3)      (61.0)       (46.8)
Net amortization and deferral                                     92.4        13.7         12.7
                                                            ------------------------------------
  Net periodic pension cost (benefit)                       $      5.5  $     (1.6)  $      3.0
------------------------------------------------------------------------------------------------
</TABLE>

     The  reconciliation  of the funded  status for defined  benefit plans where
assets exceed accumulated benefits is as follows:

<TABLE>
<CAPTION>
Millions of dollars                                              1997         1996
--------------------------------------------------------------------------------------
<S>                                                         <C>          <C>
Actuarial present value of benefit obligations:
    Vested                                                  $ (1,216.5)  $   (351.9)
--------------------------------------------------------------------------------------
    Accumulated benefit obligation                          $ (1,224.1)  $   (358.4)
--------------------------------------------------------------------------------------
    Projected benefit obligation                            $ (1,331.1)  $   (388.6)
Plan assets at fair value                                      1,481.6        522.0
                                                            --------------------------
    Funded status                                                150.5        133.4

Unrecognized prior service cost                                    2.3          2.7
Unrecognized net gain                                           (148.6)      (133.2)
Unrecognized net transition (asset) obligation                    (2.4)        (3.9)
                                                            --------------------------
  Net prepaid (accrued) pension cost                        $      1.8   $     (1.0)
--------------------------------------------------------------------------------------
</TABLE>

     Included  in the 1997  reconciliation  of the  funded  status  for  defined
benefit  plans  where  assets  exceed  accumulated   benefits  are  the  benefit
obligations and plan assets associated with Devonport  Management  Limited,  the
Company's 51% owned subsidiary. See Note 15.


                                       34
<PAGE>

     The  reconciliation  of the funded  status for defined  benefit plans where
accumulated benefits exceed assets is as follows:

<TABLE>
<CAPTION>
Millions of dollars                                             1997        1996
------------------------------------------------------------------------------------
<S>                                                         <C>          <C>
Actuarial present value of benefit obligations:
    Vested                                                  $   (4.3)    $  (2.5)
------------------------------------------------------------------------------------
    Accumulated benefit obligation                          $   (7.1)    $  (6.3)
------------------------------------------------------------------------------------
    Projected benefit obligation                            $   (7.8)    $  (6.9)
                                                            ------------------------
    Funded status                                               (7.8)       (6.9)

Unrecognized net gain                                           (5.5)       (6.0)
                                                            ------------------------
  Net accrued pension cost                                  $  (13.3)    $ (12.9)
------------------------------------------------------------------------------------
</TABLE>

     Postretirement  Medical Plan. The Company offers a  postretirement  medical
plan to certain  employees that qualify for  retirement  and, on the last day of
active employment, are enrolled as participants in the Company's active employee
medical plan. The Company's  liability is limited to a fixed contribution amount
for each participant or dependent.  The plan  participants  share the total cost
for all benefits provided above the fixed Company contribution and participants'
contributions  are adjusted as required to cover benefit  payments.  The Company
has made no commitment to adjust the amount of its contributions; therefore, the
computed accumulated postretirement benefit obligation amount is not affected by
the expected  future  healthcare  cost  inflation  rate.  The  weighted  average
discount  rate  used  in  determining  the  accumulated  postretirement  benefit
obligation was 7.25% in 1997, 7.75% in 1996 and 7% in 1995.

     Net periodic postretirement benefit cost is as follows:

<TABLE>
<CAPTION>
Millions of dollars                                                1997       1996      1995
-------------------------------------------------------------------------------------------------
<S>                                                              <C>        <C>       <C>
Service cost - benefits attributed to service during the period  $   0.5    $  0.5    $   0.5
Interest cost on accumulated postretirement benefit obligation       1.5       1.6        2.1
Net amortization and deferral                                       (1.3)     (1.2)      (1.0)
                                                                 --------------------------------
Net periodic postretirement cost                                 $   0.7    $  0.9    $   1.6
-------------------------------------------------------------------------------------------------
</TABLE>

     Postretirement  medical  benefits are funded by the Company when  incurred.
The Company's  postretirement  medical plan's funded status  reconciled with the
amounts  included in the Company's  consolidated  balance sheets at December 31,
1997 and 1996 is as follows:

<TABLE>
<CAPTION>
Millions of dollars                                                  1997         1996
-----------------------------------------------------------------------------------------
<S>                                                              <C>          <C>
Accumulated postretirement benefit obligation:
   Retirees and related beneficiaries                            $     12.3   $    12.7
   Fully eligible active plan participants                              2.6         2.4
   Other active plan participants not fully eligible                    7.5         6.4
                                                                 ------------------------
Accumulated postretirement benefit obligation                          22.4        21.5
Unrecognized prior service cost                                         6.3         7.4
Unrecognized gain                                                       7.4         9.1
                                                                 ------------------------
Net postretirement liability                                     $     36.1   $    38.0
-----------------------------------------------------------------------------------------
</TABLE>


                                       35
<PAGE>

Note 14. Discontinued Operations
     On January 23,  1996,  the  Company  spun-off  its  property  and  casualty
insurance  subsidiary,  Highlands  Insurance Group,  Inc. (HIGI),  in a tax-free
distribution  to  holders of  Halliburton  Company  Common  Stock.  Each  common
shareholder of the Company  received one share of common stock of HIGI for every
ten (pre-split) shares of Halliburton  Company Common Stock.  Approximately 11.4
million common shares of HIGI were issued in conjunction with the spin-off.
     The following  summarizes  the results of  operations  of the  discontinued
operations:

<TABLE>
<CAPTION>
Millions of dollars                                              1995
---------------------------------------------------------------------------
<S>                                                         <C>
Revenues                                                    $      252.6
---------------------------------------------------------------------------
Loss before income taxes                                    $     (126.3)
Benefit for income taxes                                            67.5
Loss on disposition                                                 (7.6)
Benefit for income taxes                                             0.9
                                                            ---------------
  Loss from discontinued operations                         $      (65.5)
---------------------------------------------------------------------------
</TABLE>

     In the third  quarter of 1995,  HIGI  conducted an extensive  review of its
loss and loss adjustment expense reserves to assess HIGI's reserve position. The
review  process  consisted  of gathering  new  information  and  refining  prior
estimates and primarily focused on assumed reinsurance and overall environmental
and asbestos exposure.  As a result of such review,  HIGI increased its reserves
for loss and loss adjustment  expenses and certain legal matters and the Company
also recognized the estimated  expenses related to the spin-off  transaction and
additional compensation costs and other regulatory and legal provisions directly
associated  with  discontinuing  the  insurance  services  business  segment  as
follows:

<TABLE>
<CAPTION>
                                                             Income (Loss)
                                                             before Income     Net Income
Millions of dollars                                              Taxes           (Loss)
--------------------------------------------------------------------------------------------
<S>                                                         <C>               <C>
Additional claim loss reserves for environmental
   and asbestos exposure and other exposures                $    (117.0)      $     (76.4)
Realization of deferred income tax valuation allowance              -                25.9
Provisions for legal matters                                       (8.0)             (5.2)
Expenses related to the spin-off transaction                       (7.6)             (6.7)
Other insurance services expenses                                  (7.4)             (4.8)
                                                            ---------------------------------
   Total charges                                            $    (140.0)      $     (67.2)
---------------------------------------------------------------------------------------------
</TABLE>

     In the third  quarter of 1995,  the review of the  insurance  policies  and
reinsurance  agreements was based upon an actuarial study and HIGI  management's
best estimates using facts and trends currently known, taking into consideration
the current  legislative and legal environment.  Developed case law and adequate
claim  history do not exist for such  claims.  Estimates of the  liability  were
reviewed and updated continually.  Due to the significant  uncertainties related
to these types of claims,  past claim  experience may not be  representative  of
future claim experience.
     The Company  also  realized a valuation  allowance  for deferred tax assets
primarily  related to HIGI's  insurance  claim loss  reserves.  The  Company had
provided a valuation  allowance  for all temporary  differences  related to HIGI
based upon its intent announced in 1992 that it was pursuing the sale of HIGI. A
taxable  transaction  would have made it more  likely  than not that the related
benefit or future deductibility would not be realized.  The spin-off transaction
was  tax-free  and  allowed  HIGI to  retain  its tax basis and the value of its
deferred tax asset.

Note 15.  Acquisitions and Dispositions
     See Note 14 regarding the disposition of the Company's insurance segment.
     During  March  1997,  the  Devonport   management   consortium,   Devonport
Management  Limited  (DML),  which is 51% owned by the  Company,  completed  the
acquisition  of  Devonport  Royal  Dockyard  plc,  which owns and  operates  the
Government of the United  Kingdom's  Royal  Dockyard in Plymouth,  England,  for
approximately  $64.9  million.  Concurrent  with the  acquisition  of the  Royal


                                       36
<PAGE>

Dockyard,  the Company's  ownership  interest in DML increased from about 30% to
51% and DML borrowed  $56.3 million under term loans.  The dockyard  principally
provides  repair and  refitting  services for the British  Royal Navy's fleet of
submarines and surface ships.
     During April 1997, the Company completed its acquisition of the outstanding
common stock of OGC International  plc (OGC) for  approximately  $118.3 million.
OGC is engaged in providing a variety of engineering, operations and maintenance
services, primarily to the North Sea oil and gas production industry.
     During July 1997, the Company acquired all of the outstanding  common stock
and  convertible   debentures  of  Kinhill   Holdings   Limited   (Kinhill)  for
approximately  $34  million.  Kinhill,   headquartered  in  Australia,  provides
engineering in mining and minerals  processing,  petroleum and chemicals,  water
and wastewater, transportation and commercial and civil infrastructure.  Kinhill
markets its services  primarily in Australia,  Indonesia,  Thailand,  Singapore,
India and the Philippines.
     In 1997, the Company  recorded  approximately  $99.1 million excess of cost
over net assets acquired  primarily related to the purchase  acquisitions of OGC
and Kinhill.
     On September  30, 1997,  the Company  completed  its  acquisition  of NUMAR
through  the merger of a  subsidiary  of the Company  with and into  NUMAR,  the
conversion  of  the  outstanding   NUMAR  common  stock  into  an  aggregate  of
approximately  8.2  million  shares  of  common  stock  of the  Company  and the
assumption  by the  Company of the  outstanding  NUMAR  stock  options  (for the
exercise of which the Company has  reserved an aggregate  of  approximately  0.9
million  shares of common stock of the Company).  The merger qualified as a tax-
free  exchange and was  accounted  for using the pooling of interests  method of
accounting for business combinations. The Company has not restated its financial
statements to include NUMAR's historical operating results because they were not
material to the Company.  NUMAR's  assets and  liabilities on September 30, 1997
were  included  in the  Company's  accounts  of the same date,  resulting  in an
increase in net assets of $21.3 million. Headquartered in Malvern, Pennsylvania,
NUMAR designs,  manufactures and markets the Magnetic  Resonance Imaging Logging
(MRIL(R)) tool which utilizes magnetic  resonance imaging technology to evaluate
subsurface rock formations in newly drilled oil and gas wells.
     In October 1997, the Company  announced it had reached an agreement to sell
its  environmental  services  business to Tetra Tech, Inc. for approximately $32
million.  The  transaction  was  completed on December  31,  1997.  The sale was
prompted  by the  Company's  desire to  divest  non-core  businesses  and had no
significant effect on net income for the year.
     In October 1996, the Company  completed its acquisition of Landmark through
the merger of Landmark with and into a subsidiary of the Company, the conversion
of the outstanding Landmark common stock into an aggregate of approximately 20.4
million  shares of  common  stock of the  Company  (after  giving  effect to the
Company's  two-for-one  stock  split) and the  assumption  by the Company of the
outstanding  Landmark stock options. The merger qualified as a tax-free exchange
and was  accounted for using the pooling of interests  method of accounting  for
business combinations.  The Company's financial statements have been restated to
include the results of Landmark for all periods  presented  prior to the date of
acquisition.
     Prior to the merger,  Landmark had a fiscal year-end of June 30. Landmark's
results  have been  restated  to conform  with  Halliburton  Company's  calendar
year-end.  Combined and  separate  results of  Halliburton  and Landmark for the
periods preceding the merger were as follows:

<TABLE>
<CAPTION>
                                                  Nine Months Ended       Twelve Months Ended
Millions of dollars                               September 30, 1996       December 31, 1995
--------------------------------------------------------------------------------------------------
<S>                                                 <C>                       <C>
Revenues:
   Halliburton                                      $    5,251.5              $     5,698.7
   Landmark                                                143.9                      184.2
                                                    -------------------------------------------
      Combined                                      $    5,395.4              $     5,882.9
-----------------------------------------------------------------------------------------------
Net Income:
   Halliburton                                      $      201.2              $       168.3
   Landmark                                                 (8.4)                      15.4
                                                    -------------------------------------------
      Combined                                      $      192.8              $       183.7
-----------------------------------------------------------------------------------------------
</TABLE>


                                       37
<PAGE>

Note 16.  Special Charges
     In September  1997, the Company  recorded  special  charges of $8.6 million
(also $8.6 million after tax) for transaction  costs incurred by the Company and
NUMAR to complete the merger of a subsidiary of the Company with and into NUMAR.
The Company  settled these  obligations  during the fourth  quarter of 1997 with
funds provided by operations.
     During  September  1996,  the  Company  recorded  special  charges of $65.3
million ($42.7 million after tax), which included provisions of $41.0 million to
terminate approximately one thousand employees related to reorganization efforts
by  the  Engineering  and  Construction  Group  and  plans  to  combine  various
administrative  support functions into combined shared services for the Company;
$20.2  million  to  restructure   certain  Engineering  and  Construction  Group
businesses,  provide for excess  lease space and other  items;  and $4.1 million
($3.5 million after tax) for costs related to the  acquisition of Landmark.  The
Company has substantially  completed its  reorganization  plans initiated during
the third  quarter of 1996.  Approximately  $57.6  million  has been  charged or
allocated  to this  reserve  with the  remaining  amount to be charged  over the
remaining term of excess leases through August 2003.
     In September 1996,  Landmark recorded special charges of $8.3 million ($7.6
million after tax) for costs incurred for merging with the Company. During March
1996,  Landmark  recorded  special  charges of $12.2 million ($8.7 million after
tax)  for the  write-off  of  in-process  research  and  development  activities
acquired in connection  with the purchase by Landmark of certain  assets and the
assumption of certain liabilities of Western Atlas International, Inc.
and the write-off of related redundant assets and activities.
     The special  charges to net income in the third quarter of 1996 were offset
by tax credits  during the same quarter of $43.7 million due to the  recognition
of net operating loss  carryforwards  and the  settlement  during the quarter of
various  issues with the Internal  Revenue  Service (IRS).  The Company  reached
agreement with the IRS and recognized net operating loss  carryforwards of $62.5
million  ($22.5  million  in tax  benefits)  from  the 1989  tax  year.  The net
operating  loss  carryforwards  were utilized in the 1996 tax year. In addition,
the  Company  also  reached   agreement  with  the  IRS  on  issues  related  to
intercompany  pricing of goods and  services for the tax years 1989 through 1992
and entered into an advanced  pricing  agreement  for the tax years 1993 through
1998. As a result of these  agreements with the IRS, the Company  recognized tax
benefits of $16.1  million.  The Company  also  recognized  net  operating  loss
carryforwards of $14.0 million ($5.1 million in tax benefits) in certain foreign
areas due to improving profitability and restructuring of foreign operations.
     In 1995,  Landmark recorded special charges of $8.4 million,  primarily for
the  write-off of research and  development  activities  of acquired  companies,
merger costs and restructuring charges.


                                       38
<PAGE>

<TABLE>

                               Halliburton Company
                             Selected Financial Data
        Millions of dollars and shares except per share and employee data
<CAPTION>

                                                                    Years ended December 31
                                                  -------------------------------------------------------------
                                                       1997         1996            1995            1994
---------------------------------------------------------------------------------------------------------------
<S>                                               <C>             <C>              <C>             <C>
Operating results
Net revenues
    Energy Group                                  $  5,756.4      $  4,286.3       $ 3,604.0       $ 3,364.0
    Engineering and Construction Group               3,062.2         3,098.8         2,278.9         2,297.1
------------------------------------------------------------------------------------------------------------------
        Total revenues                            $  8,818.6      $  7,385.1       $ 5,882.9       $ 5,661.1
------------------------------------------------------------------------------------------------------------------
Operating income (loss)
    Energy Group                                  $    706.4      $    484.4       $   398.2       $   264.1
    Engineering and Construction Group                 133.9            53.7            44.6            15.2
    Special charges (a)                                 (8.6)          (85.8)           (8.4)          (16.6)
    General corporate                                  (33.6)          (34.4)          (33.5)          (22.9)
------------------------------------------------------------------------------------------------------------------
        Total operating income (loss) (a)              798.1           417.9           400.9           239.8
Nonoperating income (expense), net                     (31.8)          (13.7)          (13.1)           58.0
------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations
    before income taxes and minority interest          766.3           404.2           387.8           297.8
Benefit (provision) for income taxes (b)              (300.0)         (103.3)         (137.7)         (122.2)
Minority interest in net (income) loss of
    consolidated subsidiaries                          (11.9)           (0.5)           (0.9)           (0.2)
------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations          $    454.4      $    300.4       $   249.2       $   175.4
------------------------------------------------------------------------------------------------------------------
Basic income (loss) per share
   Continuing operations                          $     1.78      $     1.20       $    1.00       $    0.71
   Net income (loss)                                    1.78            1.20            0.74            0.73
Diluted income (loss) per share
   Continuing operations                                1.75            1.19            1.00            0.71
   Net income (loss)                                    1.75            1.19            0.74            0.73
Cash dividends per share (c)                            0.50            0.50            0.50            0.50
Return on average shareholders' equity                  19.2%           14.7%            9.2%            8.8%
------------------------------------------------------------------------------------------------------------------
Financial position
Net working capital                               $  1,198.7      $    893.3       $   987.9       $ 1,366.5
Total assets                                         5,603.0         4,436.6         3,862.0         4,197.4
Property, plant and equipment                        1,662.7         1,291.6         1,157.9         1,117.4
Long-term debt (including current maturities)          546.0           200.1           205.2           655.7
Shareholders' equity                                 2,584.7         2,159.2         1,920.2         2,090.2
Total capitalization                                 3,133.4         2,405.6         2,130.2         2,776.6
Shareholders' equity per share (c)                      9.85            8.62            7.71            8.44
Average common shares outstanding (basic) (c)          255.4           249.9           248.3           247.8
Average common shares outstanding (diluted) (c)        259.5           252.2           249.4           248.4
------------------------------------------------------------------------------------------------------------------
Other financial data
Cash flows from operating activities              $    548.2      $    452.0       $   667.4       $   439.0
Capital expenditures                                   577.1           395.7           303.3           245.0
Long-term borrowings (repayments), net                 283.8            (5.1)         (465.4)          (74.4)
Depreciation and amortization expense                  309.5           267.9           259.8           271.3
Payroll and employee benefits                        3,785.7         3,112.7         2,775.0         2,878.8
Number of employees (d)                               70,750          60,000          58,400          57,300

</TABLE>


                                       39
<PAGE>

<TABLE>
                               Halliburton Company
                             Selected Financial Data
        Millions of dollars and shares except per share and employee data
<CAPTION>
                                                                     Years ended December 31
                                                  --------------------------------------------------------------
                                                        1993          1992            1991           1990
----------------------------------------------------------------------------------------------------------------
<S>                                               <C>              <C>              <C>           <C>
Operating results
Net revenues
    Energy Group                                  $  3,765.1       $  3,536.9       $ 3,652.4     $  3,551.0
    Engineering and Construction Group               2,459.6          2,848.1         3,124.6        3,105.4
-----------------------------------------------------------------------------------------------------------------
        Total revenues                            $  6,224.7       $  6,385.0       $ 6,777.0     $  6,656.4
-----------------------------------------------------------------------------------------------------------------
Operating income (loss)
    Energy Group                                  $    253.1       $    205.1       $   233.9     $    327.6
    Engineering and Construction Group                  13.3            (19.3)            9.7           33.8
    Special charges (a)                               (321.8)          (272.9)         (118.5)           -
    General corporate                                  (22.0)           (21.0)          (21.8)         (19.9)
-----------------------------------------------------------------------------------------------------------------
        Total operating income (loss) (a)              (77.4)          (108.1)          103.3          341.5
Nonoperating income (expense), net                     (55.0)           (37.2)           (0.7)          17.1
-----------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations
    before income taxes and minority interest         (132.4)          (145.3)          102.6          358.6
Benefit (provision) for income taxes                     3.0              1.1           (76.5)        (167.0)
Minority interest in net (income) loss of
    consolidated subsidiaries                            1.5              1.7            (2.6)          (2.6)
-----------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations          $   (127.9)      $   (142.5)      $    23.5     $    189.0
-----------------------------------------------------------------------------------------------------------------
Basic income (loss) per share
   Continuing operations                          $    (0.53)      $    (0.62)      $    0.10     $     0.83
   Net income (loss)                                   (0.61)           (0.63)           0.17           0.89
Diluted income (loss) per share
   Continuing operations                               (0.53)           (0.62)           0.10           0.83
   Net income (loss)                                   (0.61)           (0.63)           0.17           0.89
Cash dividends per share (c)                            0.50             0.50            0.50           0.50
Return on average shareholders' equity                  (7.4)%           (6.9)%           1.7%           9.1%
-----------------------------------------------------------------------------------------------------------------
Financial position 
Net working capital                               $  1,217.7       $   1,150.0      $ 1,304.6     $  1,154.0
Total assets                                         4,318.6           4,185.3        4,480.6        3,971.7
Property, plant and equipment                        1,189.3           1,214.6        1,204.6        1,028.2
Long-term debt (including current maturities)          637.4             657.8          654.9          192.0
Shareholders' equity                                 2,023.5           1,982.8        2,248.6        2,316.7
Total capitalization                                 2,752.9           2,641.3        2,914.3        2,514.6
Shareholders' equity per share (c)                      8.19              8.62           9.80          10.12
Average common shares outstanding (basic) (c)          241.5             230.0          229.2          228.6
Average common shares outstanding (diluted) (c)        241.5             230.0          229.2          228.6
-----------------------------------------------------------------------------------------------------------------
Other financial data
Cash flows from operating activities              $    293.0       $     449.9      $   294.7     $    127.0
Capital expenditures                                   270.5             322.8          430.1          342.9
Long-term borrowings (repayments), net                 (44.7)            (16.3)         440.6           (9.0)
Depreciation and amortization expense                  459.8             366.9          300.2          254.4
Payroll and employee benefits                        3,141.9           3,373.3        3,286.8        3,043.4
Number of employees (d)                               64,600            69,000         72,700         76,600

</TABLE>


                                       40
<PAGE>

 (a) Operating income (loss) includes the following  special  charges:  in 1997,
     $8.6 million related to acquisition  costs; in 1996 and 1995, $85.8 million
     and $8.4 million, respectively,  related to merger and restructuring costs,
     including  severance  costs,  and  the  write-off  of  acquired  in-process
     research and  development  activities;  in 1994,  $16.6 million  related to
     merger and restructuring  costs; in 1993, $321.8 million related to loss on
     sale of geophysical  business and employee severance costs; in 1992, $272.9
     million related to restructuring/reorganization  costs and consolidation of
     certain support functions; in 1991, $118.5 million related to restructuring
     costs.

(b)  Benefit (provision) for income taxes in 1996 includes tax benefits of $43.7
     million due to the recognition of net operating loss  carryforwards and the
     settlement of various issues with the Internal Revenue Service.

 (c) Weighted  average shares,  cash dividends paid per share and  shareholders'
     equity per share have been restated to reflect the two-for-one common stock
     split  declared  on June  9,  1997,  and  effected  in the  form of a stock
     dividend and paid on July 21, 1997.

(d)  Does not include employees of 50% or less owned affiliated companies.


                                       41
<PAGE>

<TABLE>

Quarterly Data and Market Price Information
<CAPTION>

                                                                         Quarter
Millions of dollars except per share data         -----------------------------------------------------
(unaudited)                                           First       Second          Third       Fourth           Year
-----------------------------------------------------------------------------------------------------------------------
<S>                                               <C>           <C>           <C>           <C>           <C>
1997
Revenues                                          $  1,897.5    $   2,231.1   $   2,304.7   $  2,385.3    $  8,818.6
Operating income                                       138.7          182.0         217.0        260.4         798.1
Net income                                              83.0          101.9         121.1        148.4         454.4
Earnings per share: (1), (2)
   Basic net income per share                           0.33           0.40          0.48         0.57          1.78
   Diluted net income per share                         0.32           0.40          0.47         0.56          1.75
Cash dividends paid per share (2)                      0.125          0.125         0.125        0.125          0.50
Common stock prices (2), (3)
    High                                               36.69          41.00         52.88        62.69         62.69
    Low                                                30.00          32.06         42.00        47.25         30.00

1996
Revenues                                          $  1,704.7    $   1,830.8   $   1,859.9   $  1,989.7    $  7,385.1
Operating income                                        71.6          115.7          57.3        173.3         417.9
Net income                                              45.5           71.8          75.5        107.6         300.4
Earnings per share: (1), (2)
   Basic net income per share                           0.18           0.29          0.30         0.43          1.20
   Diluted net income per share                         0.18           0.29          0.30         0.43          1.19
Cash dividends paid per share (2)                      0.125          0.125         0.125        0.125          0.50
Common stock prices (2), (3)
    High                                               29.19          29.38         28.63        31.44         31.44
    Low                                                22.88          25.00         25.38        25.94         22.88

<FN>
 (1)  Presented in accordance with Statement of Financial Accounting Standards No. 128.

 (2) Amounts  presented  reflect the two-for-one  common stock split declared on
     June 9, 1997, and effected in the form of a stock dividend and paid on July
     21, 1997.

 (3)  New York Stock Exchange - composite transactions high and low closing stock prices.
</FN>
</TABLE>



                                       42
<PAGE>

PART III

Item 10. Directors and Executive Officers of Registrant.
     The   information   required  for  the  directors  of  the   registrant  is
incorporated by reference to the Halliburton Company Proxy Statement dated March
24, 1998,  under the caption  "Election of Directors." The information  required
for the executive officers of the registrant is included under Part I, under the
caption "Executive Officers of the Registrant" on page 5 of this annual report.

Item 11.  Executive Compensation.
     This  information is incorporated  by reference to the Halliburton  Company
Proxy Statement dated March 24, 1998, under the captions "Compensation Committee
Report on Executive  Compensation,"  "Comparison of Five-Year  Cumulative  Total
Return,"  "Summary  Compensation  Table,"  "Option  Grants in Last Fiscal Year,"
"Aggregated  Option  Exercises  in Last Fiscal Year and Fiscal  Year-End  Option
Values," "Retirement Plan," "Employment  Contracts and Termination of Employment
and  Change-in-Control  Arrangements" and "Directors'  Compensation,  Restricted
Stock Plan and Retirement Plan."

Item 12.  Security Ownership of Certain Beneficial Owners and Management.
     This  information is incorporated  by reference to the Halliburton  Company
Proxy  Statement  dated March 24, 1998,  under the caption  "Stock  Ownership of
Certain Beneficial Owners and Management."

Item 13.   Certain Relationships and Related Transactions.
     Not applicable.


                                       43
<PAGE>

PART IV

Item  14.  Exhibits, Financial  Statement Schedules and Reports on Form 8-K.
(a)  1.Financial Statements:
       The report of Arthur Andersen LLP,  independent public  accountants,  and
       the  financial  statements of the Company as required by Part II, Item 8,
       are included on pages 14 through 38 of this annual  report.  See index on
       page 6.

     2.Financial Statement Schedules:                                  Page No.

       Report on supplemental schedule of Arthur Andersen LLP.............49

       Schedule II - Valuation and qualifying accounts for the
       three years ended December 31, 1997................................50

        Note:  All schedules not filed herein for which  provision is made under
        rules of  Regulation  S-X have been  omitted  as not  applicable  or not
        required or the  information  required  therein has been included in the
        notes to financial statements.

     3. Exhibits:

     Exhibit
     Number                                    Exhibits

         2        Agreement and Plan of Reorganization  dated as of December 11,
                  1996  among  Halliburton  Company,  now  known as  Halliburton
                  Energy Services,  Inc. (the  "Predecessor"),  Halliburton Hold
                  Co., now known as  Halliburton  Company (the  "Company"),  and
                  Halliburton  Merge Co.  (incorporated  by reference to Exhibit
                  1.1 of the Company's  Registration Statement on Form 8-B dated
                  December 12, 1996, File No. 1-03492).

         3(a)     Restated   Certificate   of   Incorporation   of  the  Company
                  (incorporated  by  reference  to  the  Company's  Registration
                  Statement  on Form  S-3  File  No.  333-32731  filed  with the
                  Securities and Exchange Commission on August 1, 1997).

         3(b)     By-laws of  the Company, as amended (incorporated by reference
                  to the  Company's  Registration Statement on Form S-3 File No.
                  333-32731 filed with the Securities and Exchange Commission on
                  August 1, 1997).

         4(a)     Subordinated  Indenture  dated as of January  2, 1991  between
                  Halliburton Company, now known as Halliburton Energy Services,
                  Inc.  (the  Predecessor)  and  Texas  Commerce  Bank  National
                  Association,  as Trustee (incorporated by reference to Exhibit
                  4(c) to the Predecessor's  Registration  Statement on Form S-3
                  (File No.  33-38394)  originally filed with the Securities and
                  Exchange Commission on December 21, 1990), as supplemented and
                  amended  by  the  First  Supplemental  Indenture  dated  as of
                  December 12, 1996 among the  Predecessor,  the Company and the
                  Trustee  (incorporated  by  reference  to  Exhibit  4.3 of the
                  Company's  Registration  Statement on Form 8-B dated  December
                  12, 1996, File No. 1-03492).

         4(b)     Form of debt  security of 8.75%  Debentures  due  February 12,
                  2021  (incorporated  by  reference  to  Exhibit  4(a)  to  the
                  Predecessor's Form 8-K dated as of February 20, 1991).

         4(c)     Senior  Indenture  dated as of  January  2, 1991  between  the
                  Predecessor and Texas Commerce Bank National  Association,  as
                  Trustee  (incorporated  by  reference  to Exhibit  4(b) to the
                  Predecessor's  Registration  Statement  on Form S-3  (File No.
                  33-38394)  originally  filed with the  Securities and Exchange
                  Commission on December 21, 1990), as supplemented  and amended
                  by the First  Supplemental  Indenture dated as of December 12,
                  1996  among  the  Predecessor,  the  Company  and the  Trustee
                  (incorporated  by  reference  to Exhibit 4.1 of the  Company's
                  Registration  Statement  on Form 8-B dated  December 12, 1996,
                  File No. 1-03492).


                                       44
<PAGE>

         3. Exhibits:  (continued)

     Exhibit
     Number                                    Exhibits


         4(d)     Resolutions of the Predecessor's Board of Directors adopted at
                  a meeting held on February 11, 1991 and of the special pricing
                  committee of the Board of Directors of the Predecessor adopted
                  at a meeting held on February 11, 1991 and the special pricing
                  committee's consent in lieu of meeting dated February 12, 1991
                  (incorporated   by   reference   to   Exhibit   4(c)   to  the
                  Predecessor's Form 8-K dated as of February 20, 1991).

         4(e)     Form of debt  security  of 6.75%  Notes due  February  1, 2027
                  (incorporated  by  reference  to Exhibit 4.1 to the  Company's
                  Form 8-K dated as of February 11, 1997).

         4(f)     Second Senior  Indenture  dated as of December 1, 1996 between
                  the Predecessor and Texas Commerce Bank National  Association,
                  as  Trustee,   as  supplemented   and  amended  by  the  First
                  Supplemental  Indenture  dated as of December 5, 1996  between
                  the  Predecessor  and the Trustee and the Second  Supplemental
                  Indenture dated as of December 12, 1996 among the Predecessor,
                  the Company  and the Trustee  (incorporated  by  reference  to
                  Exhibit 4.2 of the  Company's  Registration  Statement on Form
                  8-B dated December 12, 1996, File No. 1-03492).

         4(g)     Resolutions  of  the  Company's Board  of Directors adopted by
                  unanimous consent dated December 5, 1996.

         4(h)     Restated Rights Agreement dated as of December 1, 1996 between
                  the  Company  and  ChaseMellon  Shareholder  Services,  L.L.C.
                  (incorporated by reference to Exhibit  4.4  of  the  Company's
                  Registration  Statement  on Form 8-B  dated December 12, 1996,
                  File No. 1-03492).

         4(i)     Copies of  instruments  which  define the rights of holders of
                  miscellaneous  long-term  notes  of  the  Registrant  and  its
                  subsidiaries,  totaling  $46.0  million  in the  aggregate  at
                  December  31, 1997,  have not been filed with the  Commission.
                  The  registrant  agrees  herewith  to  furnish  copies of such
                  instruments upon request.

         4(j)     Form  of debt  security  of  7.53%  Notes  due  May  12,  2017
                  (incorporated  by  reference  to Exhibit 4.4 to the  Company's
                  Form 10-Q for the quarterly period ended March 31, 1997).

         4(k)     Form  of  debt  security  of  6.27%  Notes  due  July  8, 1999
                  (incorporated  by  reference  to  Exhibit 4.1 to the Company's
                  Form 8-K dated as of July 8, 1997).

         4(l)     Form of debt  security  of 6.30%  Notes  due  August  5,  2002
                  (incorporated  by  reference  to Exhibit 4.1 to the  Company's
                  Form 8-K dated as of August 5, 1997).

         10(a)    Halliburton  Company Career Executive  Incentive Stock Plan as
                  amended  November  15,  1990  (incorporated  by  reference  to
                  Exhibit 10(a) to the Predecessor's  Annual Report on Form 10-K
                  for the year ended December 31, 1992).

         10(b)    Retirement  Plan  for the  Directors  of  Halliburton  Company
                  adopted  and  effective  January  1,  1990   (incorporated  by
                  reference to Exhibit 10(c) to the Predecessor's  Annual Report
                  on Form 10-K for the year ended December 31, 1992).

         10(c)    Halliburton Company Directors'  Deferred  Compensation Plan as
                  amended and restated  effective May 1, 1994  (incorporated  by
                  reference to Exhibit 10(c) to the  Company's  Annual Report on
                  Form 10-K for the year ended December 31, 1996).


                                       45
<PAGE>


         3. Exhibits:  (continued)

     Exhibit
     Number                                    Exhibits

         10(d)    Summary Plan  Description of the Executive  Split-Dollar  Life
                  Insurance Plan  (incorporated by reference to Exhibit 10(g) to
                  the  Predecessor's  Annual  Report  on Form  10-K for the year
                  ended December 31, 1992).

         10(e)*   Halliburton  Company 1993 Stock  and Long-Term Incentive Plan,
                  as amended and restated July 22, 1997.

         10(f)    Agreement  and  Plan  of  Merger   between  the   Predecessor,
                  Halliburton  Acq. Company and Landmark  Graphics  Corporation,
                  dated  as of June  30,  1996  (incorporated  by  reference  to
                  Appendix A of the Predecessor's Registration Statement on Form
                  S-4, filed on August 30, 1996).

         10(g)    Halliburton  Company  Restricted  Stock Plan for  Non-Employee
                  Directors  (incorporated  by  reference  to  Appendix B of the
                  Predecessor's proxy statement dated March 23, 1993).

         10(h)    Halliburton  Elective  Deferral  Plan, as amended and restated
                  effective  January  1,  1997  (incorporated  by  reference  to
                  Exhibit 10(h) to the Company's  Annual Report on Form 10-K for
                  the year ended December 31, 1996).

         10(i)    Employment agreement (incorporated  by reference to Exhibit 10
                  to  the Predecessor's Form 10-Q for the quarterly period ended
                  September 30, 1995).

         10(j)    Halliburton Company Senior Executives'  Deferred  Compensation
                  Plan,  as  amended  and  restated  effective  January  1, 1996
                  (incorporated  by reference to Exhibit  10(j) to the Company's
                  Annual  Report on Form 10-K for the year  ended  December  31,
                  1996).

         10(k)    Halliburton  Company Annual  Performance  Plan, as amended and
                  restated  effective January 1, 1997 (incorporated by reference
                  to Exhibit 10(k) to the  Company's  Annual Report on Form 10-K
                  for the year ended December 31, 1996).

         10(l)    Employment  agreement  (incorporated  by  reference to Exhibit
                  10(n) to  the  Predecessor's  Form  10-K  for  the  year ended
                  December 31, 1995).

         10(m)    Early  retirement  agreement  (incorporated  by  reference  to
                  Exhibit 10(m) to the  Company's Annual Report on Form 10-K for
                  the year ended December 31, 1996).

         10(n)*   Halliburton  Company  1993 Stock and Long-Term Incentive Plan,
                  as amended and restated February 19, 1998.

         11*      Computation of earnings per share.

         21*      Subsidiaries of the registrant.

         23*      Consent of Arthur Andersen LLP.


                                       46
<PAGE>


         3. Exhibits:  (continued)

     Exhibit
     Number                                    Exhibits

         24(a)    Powers  of  attorney  for the  following  directors  signed in
                  February,  1997  (incorporated  by reference to the  Company's
                  Annual  Report on Form 10-K for the year  ended  December  31,
                  1996):

                  Anne L. Armstrong
                  Richard B. Cheney
                  Lord Clitheroe
                  Robert L. Crandall
                  W. R.  Howell
                  Dale P. Jones
                  Delano E. Lewis
                  C. J. Silas
                  Roger T. Staubach
                  Richard J. Stegemeier

         24(b)*   Power of attorney signed  in  December  1997 for Charles J. 
                  DiBona.

         27*      Financial   data   schedules   for   the   registrant   (filed
                  electronically).


                           *  Filed with this annual report


                                       47
<PAGE>


     (b)  Reports on Form 8-K:

      During the fourth quarter of 1997:

      A Current Report on Form 8-K dated October 20, 1997,  was filed  reporting
      on Item 5. Other Events, regarding a press release dated October 20, 1997,
      announcing the agreement to sell the environmental services business.

      A Current Report on Form 8-K dated October 22, 1997,  was filed  reporting
      on Item 5. Other Events, regarding a press release dated October 22, 1997,
      announcing third quarter earnings.

      A Current Report on Form 8-K dated October 30, 1997,  was filed  reporting
      on Item 5. Other Events, regarding a press release dated October 30, 1997,
      announcing fourth quarter dividend.

      A Current Report on Form 8-K dated October 30, 1997,  was filed  reporting
      on Item 5. Other Events, regarding a press release dated October 30, 1997,
      announcing award of a pipeline construction contract to a joint venture of
      the Company's Brown & Root Energy Services unit.

      A Current Report on Form 8-K dated November 19, 1997, was filed  reporting
      on Item 5. Other  Events,  regarding a press  release  dated  November 19,
      1997,  announcing  officer  appointment at its Halliburton Energy Services
      business unit.

      A Current Report on Form 8-K dated  December 8, 1997, was filed  reporting
      on Item 5. Other Events,  regarding a press release dated December 8, 1997
      announcing the election of a member to its Board of Directors.

      A Current Report on Form 8-K dated December 31, 1997, was filed  reporting
      on Item 5. Other  Events,  regarding a press  release  dated  December 31,
      1997, announcing the completion of the sale of its environmental  services
      unit.

      During the first quarter of 1998 to the date hereof:

      A Current Report on Form 8-K dated January 22, 1998,  was filed  reporting
      on Item 5. Other Events, regarding a press release dated January 22, 1998,
      announcing fourth quarter earnings.

      A Current Report on Form 8-K dated February 17, 1998, was filed  reporting
      on Item 5. Other Events,  regarding two press  releases dated February 17,
      1998,  announcing  it will provide a wide range of services as part of the
      Terra Nova Alliance for Petro-Canada and the Terra Nova development and an
      alliance  agreement at Elk Hills  between two of its  business  units with
      Occidental.

      A Current Report on Form 8-K dated February 19, 1998, was filed  reporting
      on Item 5. Other  Events,  regarding a press  release  dated  February 19,
      1998,  announcing first quarter 1998 dividend declaration and shareholders
      annual meeting.


                                       48
<PAGE>


                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON
                              SUPPLEMENTAL SCHEDULE



To Halliburton Company:

     We have audited in accordance with generally  accepted auditing  standards,
the  consolidated  financial  statements  included  in this Form 10-K,  and have
issued our report  thereon dated January 22, 1998.  Our audits were made for the
purpose of forming an  opinion on the basic  consolidated  financial  statements
taken as a whole. The supplemental  schedule (Schedule II) is the responsibility
of Halliburton  Company's  management and is presented for purposes of complying
with the Securities and Exchange Commission's rules and is not part of the basic
financial  statements.   This  schedule  has  been  subjected  to  the  auditing
procedures  applied in our audits of the basic financial  statements and, in our
opinion,  fairly states in all material  respects the financial data required to
be set forth therein in relation to the basic  financial  statements  taken as a
whole.







ARTHUR ANDERSEN LLP
Dallas, Texas,
   January 22, 1998


                                       49
<PAGE>

<TABLE>

                               HALLIBURTON COMPANY
                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                              (MILLIONS OF DOLLARS)
<CAPTION>

                                                                     Additions
                                                           -------------------------------
                                            Balance at        Charged to     Charged to                         Balance at
                                             Beginning        Costs and         Other                             End of
              Descriptions                   of Period         Expenses       Accounts     Deductions (A)         Period
----------------------------------------- ---------------- ----------------- ------------ ------------------ -----------------
<S>                                            <C>               <C>             <C>          <C>                  <C>
Year ended December 31, 1997:
   Allowance for bad debts                     $ 43.6            $   8.7         $ -          $ 13.9               $ 38.4
----------------------------------------- ---------------- ----------------- ------------ ------------------ -----------------
Year ended December 31, 1996:
   Allowance for bad debts                     $ 38.1            $  12.6         $ -          $  7.1               $ 43.6
----------------------------------------- ---------------- ----------------- ------------ ------------------ -----------------
Year ended December 31, 1995:
   Allowance for bad debts                     $ 36.4            $   7.9         $ -          $  6.2               $ 38.1
----------------------------------------- ---------------- ----------------- ------------ ------------------ -----------------
<FN>
(A) Receivable write-offs and reclassifications, net of recoveries.
</FN>
</TABLE>


                                       50
<PAGE>


SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf  by the  undersigned,  thereunto  duly  authorized,  on this  23rd day of
February, 1998.


                                        HALLIBURTON COMPANY



                                        By  /s/ RICHARD B. CHENEY
                                          ---------------------------
                                                Richard B. Cheney
                                            Chairman of the Board and
                                             Chief Executive Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons in the  capacities  indicated on
this 23rd day of February, 1998.


Signature                                 Title

  /s/ RICHARD B. CHENEY                   Chairman of the Board and
-----------------------------             Chief Executive Officer and Director
      Richard B. Cheney


 /s/  GARY V. MORRIS                      Executive Vice President and
-----------------------------             Chief Financial Officer
      Gary V. Morris


 /s/  R. CHARLES MUCHMORE, JR.            Vice President and Controller and
-----------------------------             Principal Accounting Officer
      R. Charles Muchmore, Jr.


                                       51
<PAGE>


Signature                                    Title



 /s/ *ANNE  L.  ARMSTRONG                    Director
-----------------------------
      Anne L. Armstrong

 /s/ *LORD CLITHEROE                         Director
-----------------------------
      Lord Clitheroe

 /s/ *ROBERT L. CRANDALL                     Director
-----------------------------
      Robert L. Crandall

 /s/ *CHARLES J. DIBONA                      Director
-----------------------------
      Charles J. DiBona

 /s/ *W. R. HOWELL                           Director
-----------------------------
      W. R. Howell

 /s/ *DALE P. JONES                          Vice Chairman and Director
-----------------------------
      Dale P. Jones

 /s/ *DELANO E. LEWIS                        Director
-----------------------------
      Delano E. Lewis

 /s/ *C. J. SILAS                            Director
-----------------------------
      C. J. Silas

 /s/ *ROGER T. STAUBACH                      Director
-----------------------------
      Roger T. Staubach

 /s/ *RICHARD J. STEGEMEIER                  Director
-----------------------------
      Richard J. Stegemeier






 /s/*  SUSAN S. KEITH
-----------------------------
Susan S. Keith, Attorney-in-fact


                                       52
<PAGE>

Index to Exhibits filed with this annual report.

Exhibit
Number                   Exhibits
--------                 --------

  10(e)             Halliburton Company 1993 Stock and Long-Term Incentive Plan,
                    as amended and restated July 22, 1997.

  10(n)             Halliburton Company 1993 Stock and Long-Term Incentive Plan,
                    as amended and restated February 19, 1998.

     11             Computation of earnings per share.

     21             Subsidiaries of the registrant.

     23             Consent of Arthur Andersen LLP.

  24(b)             Power  of  attorney  signed  in December 1997 for Charles J.
                    DiBona.

     27             Financial data schedule.



                                       53

