HOUSTON, Jan. 30 /PRNewswire/ -- Baker Hughes Incorporated (NYSE:
BHI; EBS) today announced that net income for the fourth quarter
2007 was $400.5 million or $1.26 per diluted share compared to
$326.2 million or $1.02 per diluted share for the fourth quarter
2006 and $389.1 million or $1.22 per diluted share for the third
quarter 2007. Net income for the year 2007 was $1,513.9 million or
$4.73 per diluted share, compared to $2,419.0 million or $7.27 per
diluted share for the year 2006. Operating profit, which is a
non-GAAP measure comprised of income from continuing operations
excluding the impact of certain identified items, was $1,513.9
million for the year 2007 compared to $1,363.4 million for the year
2006. Operating profit per diluted share increased 15% to $4.73 per
diluted share for the year 2007 from $4.10 per diluted share for
the year 2006. There were no identified items in 2007. The only
identified item in 2006 relates to the pre-tax gain of $1,743.5
million ($1,035.2 million after-tax) from the sale of our 30%
interest in WesternGeco, our seismic joint venture with
Schlumberger Limited, to Schlumberger on April 28, 2006 for $2.4
billion in cash. Income from continuing operations is reconciled to
operating profit in the section titled "Reconciliation of GAAP and
Operating Profit" in this news release. Revenue for the fourth
quarter 2007 was $2,740.3 million, up 12% compared to $2,452.7
million for the fourth quarter 2006 and up 2% compared to $2,677.6
million for the third quarter 2007. Revenue for the year 2007 was
$10,428.2 million, up 16% compared to $9,027.4 million for the year
2006. Revenue from North America increased 9% and revenue from
outside North America increased 21% for the year 2007 compared to
the year 2006. Chad C. Deaton, Baker Hughes chairman and chief
executive officer said, "Our Completion and Production segment
reported good results with strong incremental margins in the fourth
quarter. Baker Petrolite and Centrilift benefited from their
greater exposure to production-oriented expenditures, despite a
softer than expected North American market and Baker Oil Tools had
a strong quarter, particularly in the Eastern Hemisphere. Our
Drilling and Evaluation segment reported decreased profits as lower
than expected activity in the Gulf of Mexico, a more competitive
market in North America, and a labor disruption in Algeria affected
results. "The global fundamentals of our long-term outlook have not
changed. For the foreseeable future, the world will need more
hydrocarbons to satisfy its growing energy demand and oil and gas
companies will work to fill that need by increasing their spending
on exploration, development and production. "In North America we
expect no more than moderate increases in spending in 2008 because
strong drilling activity has brought natural gas production growth
roughly into balance with demand growth. In this environment, we
expect our Completion and Production segment to benefit, as
customers seek to optimize production. "Outside of North America,
we expect growth to continue in 2008, but at a somewhat slower pace
than in recent years. In this environment, we have not changed our
strategy and will continue to invest in infrastructure, technology
and people to service the demand we see continuing well past the
end of the decade." During the fourth quarter of 2007, debt
increased $9.9 million to $1,084.8 million, and cash and short-term
investments increased $146.4 million to $1,054.4 million compared
to the third quarter of 2007. In the fourth quarter 2007, the
company's capital expenditures were $315.9 million, depreciation
and amortization expense was $140.9 million and dividend payments
were $41.7 million. For the year 2007, capital expenditures were
$1,127.0 million and depreciation and amortization expense was
$521.2 million compared to $922.2 million and $433.7 million in
2006, respectively. During the fourth quarter 2007, the company
repurchased 3.0 million shares of common stock at an average price
of $81.75 per share for a total of $241.5 million. During 2007, the
company repurchased 6.4 million shares of common stock at an
average price of $81.25 per share for a total of $521.5 million. At
the end of 2007, the company had authorization remaining to
repurchase approximately $824.0 million in common stock. Financial
Information Consolidated Statements of Operations (In millions,
except per share amounts) Three Months Ended
------------------------------------- December 31, September 30,
---------------------- -------------- UNAUDITED 2007 2006 2007
---------- ---------- ----------- Revenues: Sales $1,351.3 $1,247.2
$1,359.5 Services and rentals 1,389.0 1,205.5 1,318.1 ----------
---------- ---------- Total revenues 2,740.3 2,452.7 2,677.6
---------- ---------- ---------- Costs and Expenses: Cost of
sales(1) 917.3 849.1 906.7 Cost of services and rentals(1) 890.8
727.2 859.1 Research and engineering 93.5 90.7 94.2 Marketing,
general and administrative(1) 240.8 292.5 235.0 ----------
---------- ---------- Total costs and expenses 2,142.4 1,959.5
2,095.0 ---------- ---------- ---------- Operating income 597.9
493.2 582.6 Equity in income of affiliates 0.8 0.3 - Interest
expense (16.4) (17.3) (16.7) Interest and dividend income 11.1 13.4
10.5 ---------- ---------- ---------- Income from continuing
operations before income taxes 593.4 489.6 576.4 Income taxes
(192.9) (163.4) (187.3) ---------- ---------- ---------- Income
from continuing operations 400.5 326.2 389.1 Income from
discontinued operations, net of tax - - - ---------- ----------
---------- Net income $400.5 $326.2 $389.1 ========== ==========
========== Basic earnings per share: Income from continuing
operations $1.27 $1.02 $1.23 Income from discontinued operations -
- - ---------- ---------- ---------- Net income $1.27 $1.02 $1.23
========== ========== ========== Diluted earnings per share: Income
from continuing operations $1.26 $1.02 $1.22 Income from
discontinued operations - - - ---------- ---------- ---------- Net
income $1.26 $1.02 $1.22 ========== ========== ========== Weighted
average shares outstanding, basic 316.3 319.2 317.6 Weighted
average shares outstanding, diluted 318.3 321.0 319.8 Depreciation
and amortization expense $140.9 $118.0 $134.4 Capital expenditures
$315.9 $320.6 $272.7 (1) Effective in the fourth quarter of 2007
the company began classifying certain expenses as cost of sales or
cost of services and rentals that were previously classified in
Selling, General and Administrative (now Marketing, General and
Administrative). The reclassified expenses generally relate to
sales and field service costs which are closely related to
operating activities. The impact of these reclassifications is to
decrease Marketing, General and Administrative expense by $131.4
million and add $96.1 million to cost of sales and $35.3 million to
cost of services and rentals in Quarter 4 2007; to decrease
Marketing, General and Administrative expense by $115.0 million and
add $84.9 million to cost of sales and add $30.1 million to cost of
services and rentals in Quarter 4 2006; and decrease Marketing,
General and Administrative expense by $125.4 million and add $92.8
million to cost of sales and $32.6 million to cost of services and
rentals in Quarter 3 2007. All prior periods have been reclassified
to conform to this new presentation. Information on historic
periods not referenced in this news release for 2005 through 2007
by quarter can be found on our website at
http://www.bakerhughes.com/investorin the "Financial Information"
section. Financial Information Consolidated Statements of
Operations Twelve Months Ended ---------------------------- (In
millions, except per share amounts) December 31,
---------------------------- UNAUDITED 2007 2006 -----------
----------- Revenues: Sales $5,170.7 $4,566.1 Services and rentals
5,257.5 4,461.3 ----------- ----------- Total revenues 10,428.2
9,027.4 ----------- ----------- Costs and Expenses: Cost of
sales(1) 3,517.3 3,033.0 Cost of services and rentals(1) 3,328.3
2,843.4 Research and engineering 372.0 338.9 Marketing, general and
administrative(1) 932.8 877.8 ----------- ----------- Total costs
and expenses 8,150.4 7,093.1 ----------- ----------- Operating
income 2,277.8 1,934.3 Equity in income of affiliates 1.2 60.4 Gain
on sale of interest in affiliate - 1,743.5 Interest expense (66.1)
(68.9) Interest and dividend income 43.8 67.5 -----------
----------- Income from continuing operations before income taxes
2,256.7 3,736.8 Income taxes (742.8) (1,338.2) -----------
----------- Income from continuing operations 1,513.9 2,398.6
Income from discontinued operations, net of tax - 20.4 -----------
----------- Net income $1,513.9 $2,419.0 =========== ===========
Basic earnings per share: Income from continuing operations $4.76
$7.26 Income from discontinued operations - 0.06 -----------
----------- Net income $4.76 $7.32 =========== =========== Diluted
earnings per share: Income from continuing operations $4.73 $7.21
Income from discontinued operations - 0.06 ----------- -----------
Net income $4.73 $7.27 =========== =========== Weighted average
shares outstanding, basic 318.0 330.6 Weighted average shares
outstanding, diluted 320.1 332.6 Depreciation and amortization
expense $521.2 $433.7 Capital expenditures $1,127.0 $922.2 (1)
Effective in the fourth quarter of 2007 the company began
classifying certain expenses as cost of sales or cost of services
and rentals that were previously classified in Selling, General and
Administrative (now Marketing, General and Administrative). The
reclassified expenses generally relate to sales and field service
costs which are closely related to operating activities. The impact
of these reclassifications is to decrease Marketing, General and
Administrative expense by $490.0 million and add $366.1 million to
cost of sales and $123.9 million to cost of services and rentals in
2007; and decrease Marketing, General and Administrative expense by
$432.9 million and add $318.6 million to cost of sales and add
$114.3 million to cost of services and rentals in 2006. All prior
periods have been reclassified to conform to this new presentation.
Information on historic periods not referenced in this news release
for 2005 through 2007 by quarter can be found on our website at
http://www.bakerhughes.com/investor in the "Financial Information"
section. Reconciliation of GAAP and Operating Profit The following
table reconciles GAAP (Generally Accepted Accounting Principles)
and operating profits for the twelve months ended December 31, 2006
referenced in this news release. Reconciliation of GAAP and
Operating Profit(1) (for the twelve months ended December 31, 2006)
Diluted UNAUDITED Profit Profit Earnings (In millions except
earnings Before After Per per share) Tax Tax Tax Share
--------------------------------------------------------------------------
Income from continuing operations (GAAP) $3,736.8 $(1,338.2)
$2,398.6 $7.21 Items: Less: Gain on sale of interest in WesternGeco
(1,743.5) 708.3 (1,035.2) (3.11)
--------------------------------------------------------------------------
Operating results, excluding the impact of identified items
$1,993.3 $(629.9) $1,363.4 $4.10
==========================================================================
(1) Operating profit before tax and operating profit after tax are
non-GAAP measures comprised of income from continuing operations
excluding the impact of certain identified items. The item in the
second quarter of 2006 related to the pre-tax gain of $1,743.5
million ($1,035.2 million after tax) from the sale of our 30%
interest in WesternGeco, our seismic joint venture with
Schlumberger Limited, to Schlumberger on April 28, 2006 for $2.4
billion in cash. The company believes that operating profit is
useful to investors because it is a consistent measure of the
underlying results of the company's business. Furthermore,
management uses operating profit internally as a measure of the
performance of the company's operations. Income from continuing
operations is reconciled to operating profit in this section of
this news release. Reconciliation of GAAP and operating profits for
historical periods can be found on the company's website at
http://www.bakerhughes.com/investor. Calculation of EBIT and EBITDA
(non-GAAP measures)(1) Three Months Ended
--------------------------------- UNAUDITED December 31, September
30, -------------------- -------------- (In millions) 2007 2006
2007 --------- -------- ----------- Income from continuing
operations before income taxes $593.4 $489.6 $576.4 Interest
expense 16.4 17.3 16.7 --------- -------- ----------- Earnings
before interest expense and taxes (EBIT) 609.8 506.9 593.1
Depreciation and amortization expense 140.9 118.0 134.4 ---------
-------- ----------- Earnings before interest expense, taxes,
depreciation and amortization (EBITDA) $750.7 $624.9 $727.5
========= ======== =========== UNAUDITED Twelve Months Ended (In
millions) December 31, ---------------------- 2007 2006
---------------------- Income from continuing operations before
income taxes $2,256.7 $3,736.8 Less: Gain on sale of interest in
affiliate - (1,743.5) ---------- ---------- Operating income
(Income from continuing operations before income taxes excluding
gain on sale of interest in WesternGeco) 2,256.7 1,993.3 Interest
expense 66.1 68.9 ---------- ---------- Earnings before interest
expense and taxes (EBIT) 2,322.8 2,062.2 Depreciation and
amortization expense 521.2 433.7 ---------- ---------- Earnings
before interest expense, taxes, depreciation and amortization
(EBITDA) $2,844.0 $2,495.9 ========== ========== (1) EBIT and
EBITDA (as defined in the calculations above) are non-GAAP
measurements. Management uses EBIT and EBITDA because it believes
that such measurements are widely accepted financial indicators
used by investors and analysts to analyze and compare companies on
the basis of operating performance and that these measurements may
be used by investors to make informed investment decisions.
Consolidated Balance Sheets UNAUDITED AUDITED December 31, December
31, 2007 2006 (In millions)
========================================================================
ASSETS Current Assets: Cash and cash equivalents $1,054.4 $750.0
Short-term investments - 353.7 Accounts receivable, net 2,382.9
2,055.1 Inventories 1,714.4 1,528.8 Deferred income taxes 181.5
167.8 Other current assets 122.4 112.4
------------------------------------------------------------------------
Total current assets 5,455.6 4,967.8
------------------------------------------------------------------------
Property, plant and equipment 2,344.6 1,800.5 Goodwill 1,354.2
1,347.0 Intangible assets, net 176.6 190.4 Other assets 525.6 400.0
------------------------------------------------------------------------
Total assets $9,856.6 $8,705.7
========================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts
payable $704.2 $648.8 Short-term borrowings 15.4 1.3 Accrued
employee compensation 456.8 484.2 Income taxes payable 190.9 150.0
Other accrued liabilities 250.6 337.6
-----------------------------------------------------------------------
Total current liabilities 1,617.9 1,621.9
=======================================================================
Long-term debt 1,069.4 1,073.8 Deferred income taxes and other tax
liabilities 415.6 300.2 Liabilities for pensions and other
postretirement benefits 332.1 339.3 Other liabilities 116.0 127.6
Stockholders' Equity: Common stock 315.4 319.9 Capital in excess of
par value 1,216.1 1,600.6 Retained earnings 4,818.3 3,509.6
Accumulated other comprehensive loss (44.2) (187.2)
-----------------------------------------------------------------------
Total stockholders' equity 6,305.6 5,242.9
-----------------------------------------------------------------------
Total liabilities and stockholders' equity $9,856.6 $8,705.7
=======================================================================
Segment Highlights We report our results under two segments:
Drilling and Evaluation and Completion and Production. Historical
results include a third segment, WesternGeco, which consisted of
our 30% interest in the WesternGeco seismic joint venture with
Schlumberger Limited that was sold to Schlumberger on April 28,
2006. Historical information on these segments from the first
quarter of 2005 through the fourth quarter of 2007 can be found on
our website at http://www.bakerhughes.com/investor in the "investor
relations/financial information" section. Operational highlights
for the three months ended December 31, 2007, December 31, 2006 and
September 30, 2007, and the twelve months ended December 31, 2007
and December 31, 2006, are detailed below. All results are
unaudited and shown in millions. Comparison of Quarters -- Year
over Year (For the Three Months Ended December 31, 2007 and 2006)
--------------------------------------------------------------------------
Operating Profit Before Revenue Tax(1) Q4 2007 Q4 2006 Q4 2007 Q4
2006
--------------------------------------------------------------------------
Drilling and Evaluation $1,370.0 $1,253.7 $347.4(2) $355.8(2,3)
Completion and Production 1,370.3 1,199.0 314.8 249.7
--------------------------------------------------------------------------
Oilfield Operations 2,740.3 2,452.7 662.2 605.5 WesternGeco - - - -
--------------------------------------------------------------------------
Total Oilfield 2,740.3 2,452.7 662.2 605.5
--------------------------------------------------------------------------
Interest expense - - (16.4) (17.3) Interest and dividend income - -
11.1 13.4 Charge for investigation resolution(4) - - - (46.1)
Corporate and other(5) - - (63.5) (65.9)
--------------------------------------------------------------------------
Corporate, net interest and other - - (68.8) (115.9)
--------------------------------------------------------------------------
Total $2,740.3 $2,452.7 $593.4 $489.6
==========================================================================
Comparison of Quarters -- Sequential (For the Three Months Ended
December 31, 2007 and September 30, 2007)
--------------------------------------------------------------------------
Operating Profit Before Revenue Tax(1) Q4 2007 Q3 2007 Q4 2007 Q3
2007
--------------------------------------------------------------------------
Drilling and Evaluation $1,370.0 $1,356.0 $347.4 $357.1 Completion
and Production 1,370.3 1,321.8 314.8 287.2
--------------------------------------------------------------------------
Oilfield Operations 2,740.3 2,677.8 662.2 644.3 WesternGeco - - - -
--------------------------------------------------------------------------
Total Oilfield 2,740.3 2,677.8 662.2 644.3
--------------------------------------------------------------------------
Interest expense - - (16.4) (16.7) Interest and dividend income - -
11.1 10.5 Charge for investigation resolution(4) - - - - Corporate
and other(5) - (0.2) (63.5) (61.7)
--------------------------------------------------------------------------
Corporate, net interest and other - (0.2) (68.8) (67.9)
--------------------------------------------------------------------------
Total $2,740.3 $2,677.6 $593.4 $576.4
==========================================================================
Comparison of Years (For the Twelve Months Ended December 31, 2007
and 2006)
--------------------------------------------------------------------------
Operating Profit Before Revenue Tax(1) 2007 2006 2007 2006
--------------------------------------------------------------------------
Drilling and Evaluation $5,293.2 $4,660.8 $1,396.2(2) $1,241.8(2,3)
Completion and Production 5,135.0 4,366.6 1,112.2 941.9
--------------------------------------------------------------------------
Oilfield Operations 10,428.2 9,027.4 2,508.4 2,183.7 WesternGeco -
- - 58.7
--------------------------------------------------------------------------
Total Oilfield 10,428.2 9,027.4 2,508.4 2,242.4
--------------------------------------------------------------------------
Interest expense - - (66.1) (68.9) Interest and dividend income - -
43.8 67.5 Charge for investigation resolution(4) - - - (46.1)
Corporate and other(5) - - (229.4) (201.6)
--------------------------------------------------------------------------
Corporate, net interest and other - - (251.7) (249.1)
--------------------------------------------------------------------------
Total $10,428.2 $9,027.4 $2,256.7 $1,993.3
==========================================================================
(1) Operating profit before tax and operating profit after tax are
non-GAAP measures comprised of income from continuing operations
excluding the impact of certain identified items. The item in the
second quarter of 2006 related to the pre-tax gain of $1,743.5
million ($1,035.2 million after tax) from the sale of our 30%
interest in WesternGeco, our seismic joint venture with
Schlumberger Limited, to Schlumberger on April 28, 2006 for $2.4
billion in cash. The company believes that operating profit is
useful to investors because it is a consistent measure of the
underlying results of the company's business. Furthermore,
management uses operating profit internally as a measure of the
performance of the company's operations. Income from continuing
operations is reconciled to operating profit in the section of this
news release titled "Reconciliation of GAAP and Operating Profit".
Reconciliation of GAAP and operating profits for historical periods
can be found on the company's website at
http://www.bakerhughes.com/investor. (2) Commencing in the first
quarter of 2007, Baker Atlas increased the depreciable lives of
certain assets. The pretax impact of this change is a reduction to
cost of services and rentals of approximately $6.0 million per
quarter. (3) Fourth quarter 2006 results were favorably impacted by
a change in accounting procedures related to certain inventory of
our Baker Atlas division recorded as a $21.2 million pre-tax
reduction in cost of services and rentals. (4) Fourth quarter 2006
and full year results include a $46 million before tax ($38.5
million after tax or approximately $0.12 per diluted share)
financial charge, recorded in Marketing, General and Administrative
expense, associated with our April 2007 settlement with the
Securities and Exchange Commission and the Department of Justice
regarding our activities in Angola, Kazakhstan and Nigeria. (5)
Effective in the fourth quarter of 2007 the company began
allocating certain expenses previously reported in Corporate and
Other, to the Drilling and Evaluation and Completion and Production
segments. These expenses consist of administrative operations
support costs and totaled approximately $4.8 million, $1.9 million
and $4.2 million in the fourth quarter of 2007 and 2006, and the
third quarter of 2007, respectively, and $15.4 million and $12.2
million for the years ended December 31, 2007 and 2006,
respectively. All prior periods have been reclassified to conform
to this new presentation. Information on historic periods not
referenced in this news release for 2005 through 2007 by quarter
can be found on our website at http://www.bakerhughes.com/investor
in the "Financial Information" section. Oilfield Operations
Oilfield Operations revenue was up 12% in the fourth quarter 2007
compared to the fourth quarter 2006, and up 2% sequentially
compared to the third quarter 2007. Operating profit before tax was
up 9% compared to the fourth quarter of 2006 and was up 3%
sequentially compared to the third quarter of 2007. The quarterly
year-over-year incremental pre-tax margin (a non-GAAP measure of
the change in operating profit before tax divided by the change in
revenue) was 20% (27% excluding the $21.2 million favorable impact
of the fourth quarter 2006 change in accounting procedures related
to certain inventory at Baker Atlas). The pre-tax operating margin
in the fourth quarter 2007 was 24% compared to 25% in the fourth
quarter 2006 and 24% in the third quarter 2007. For the year 2007
compared to the year 2006, revenue increased 16%; operating profit
before tax increased 15%; and the year-over-year incremental
pre-tax margin was 23% (25% excluding the $21.2 million favorable
impact of the fourth quarter 2006 change in accounting procedures
related to certain inventory at Baker Atlas). The pre-tax operating
margin for both 2007 and 2006 was 24%. The following table details
the percentage change in revenue in the fourth quarter 2007
compared to the fourth quarter 2006 and third quarter 2007.
Comparison of Revenue (For the Three Months Ended December 31, 2007
Compared to the Three Months Ended December 31, 2006 and September
30, 2007) UNAUDITED December 31, 2006 September 30, 2007
--------------------------------------------------------------------------
Baker Atlas 2% 0% Baker Hughes Drilling Fluids 10% (2)% Hughes
Christensen 9% 2% INTEQ 15% 3%
--------------------------------------------------------------------------
Drilling & Evaluation Segment 9% 1% Baker Oil Tools 10% 3%
Baker Petrolite 18% 3% Centrilift 23% 9%
--------------------------------------------------------------------------
Completion & Production Segment(1) 14% 4% Oilfield Operations
12% 2%
--------------------------------------------------------------------------
(1) Includes the ProductionQuest business unit. Drilling and
Evaluation Drilling and Evaluation revenue was up 9% in the fourth
quarter 2007 compared to the fourth quarter 2006, and up 1%
sequentially compared to the third quarter of 2007. Operating
profit before tax in the fourth quarter 2007 was down 2% compared
to the fourth quarter of 2006 and down 3% compared to the third
quarter 2007. Excluding the $21.2 million favorable impact of the
fourth quarter 2006 change in accounting procedures related to
certain inventory at Baker Atlas, profit increased $12.8 million
and the quarterly year-over-year incremental pre-tax margin was
11%. The pre-tax operating margin in the fourth quarter 2007 was
25% compared to 28% in the fourth quarter 2006 and 26% in the third
quarter 2007. For the year 2007 compared to the year 2006, revenue
increased 14%; operating profit before tax increased 12%; and the
year-over-year incremental pre-tax margin was 24% (28% excluding
the $21.2 million favorable impact of the fourth quarter 2006
change in accounting procedures related to certain inventory at
Baker Atlas). The pre-tax operating margin for 2007 was 26%
compared to 27% in 2006. Completion and Production Completion and
Production revenue was up 14% in the fourth quarter 2007 compared
to the fourth quarter 2006 and up 4% sequentially compared to the
third quarter 2007. Operating profit before tax in the fourth
quarter 2007 was up 26% compared to the fourth quarter 2006 and up
10% compared to the third quarter 2007. The quarterly
year-over-year incremental pre-tax margin was 38%. The pre-tax
operating margin in the fourth quarter 2007 was 23% compared to 21%
in the fourth quarter 2006 and 22% in the third quarter 2007. For
the year 2007 compared to the year 2006, revenue increased 18%;
operating profit before tax increased 18%; and the year-over-year
incremental pre-tax margin was 22%. The pre-tax operating margin
for both 2007 and 2006 was 22%. Corporate and Other Corporate and
other expense was down $2.4 million in the fourth quarter of 2007
compared to the fourth quarter of 2006 and up $1.8 million from the
third quarter 2007. Effective in the fourth quarter of 2007 the
company began allocating certain administrative expenses that
support operations, previously reported in Corporate and Other, to
the Drilling and Evaluation and Completion and Production segments.
All prior periods have been reclassified to conform to this new
presentation. Information on historic periods not referenced in
this news release for 2005 through 2007 by quarter can be found on
our website at http://www.bakerhughes.com/investor in the
"Financial Information" section Geographic Highlights Outside of
North America revenue increased 16% in the fourth quarter 2007
compared to the fourth quarter 2006 and increased 4% sequentially
compared to the third quarter 2007. North America revenue increased
7% in the fourth quarter 2007 compared to the fourth quarter 2006
and was flat sequentially compared to the third quarter 2007.
Revenue by geographic area for the three months ended December 31,
2007, September 30, 2007 and December 31, 2006, are detailed below.
All results are unaudited and shown in millions. Additional
information for prior periods beginning with the three months ended
March 31, 2001 can be found on our website at
http://www.bakerhughes.com/investor in the "investor
relations/financial information" section. Revenue by Geography
Europe, Middle Three Months North Latin Africa, East, Asia Oilfield
Ended America(1) America(2) Russia, Pacific(4) Operations
Caspian(3)
==========================================================================
December 31, 2007 $1,115.5 $257.7 $804.1 $563.0 $2,740.3 December
31, 2006 1,045.7 233.7 677.6 495.7 2,452.7
--------------------------------------------------------------------------
$ Increase $69.8 $24.0 $126.5 $67.3 $287.6 % Increase 7% 10% 19%
14% 12%
--------------------------------------------------------------------------
Europe, Middle Three Months North Latin Africa, East, Asia Oilfield
Ended America(1) America(2) Russia, Pacific(4) Operations
Caspian(3)
--------------------------------------------------------------------------
December 31, 2007 $1,115.5 $257.7 $804.1 $563.0 $2,740.3 September
30, 2007 1,120.1 261.9 792.7 503.1 2,677.8
--------------------------------------------------------------------------
$ Increase (decrease) $(4.6) $(4.2) $11.4 $59.9 $62.5 % Increase
(decrease) - % (2)% 1% 12% 2%
--------------------------------------------------------------------------
Europe, Middle Twelve Months North Latin Africa, East, Asia
Oilfield Ended America(1) America(2) Russia, Pacific(4) Operations
Caspian(3)
--------------------------------------------------------------------------
December 31, 2007 $4,358.0 $990.1 $3,065.6 $2,014.5 $10,428.2
December 31, 2006 3,999.6 826.7 2,472.6 1,728.5 9,027.4
--------------------------------------------------------------------------
$ Increase (decrease) $358.4 $163.4 $593.0 $286.0 $1,400.8 %
Increase (decrease) 9% 20% 24% 17% 16%
--------------------------------------------------------------------------
(1) United States and Canada. (2) Mexico, Central America and South
America. (3) Europe, Africa, Russia and the Caspian area, excluding
Egypt. (4) Middle East and Asia Pacific, including Egypt. In North
America, comparing the fourth quarter 2007 to the fourth quarter
2006, revenue from our U.S. land operations increased 12% compared
to a rig count which increased 6%; U.S. offshore revenue increased
2% compared to a rig count which decreased 33%. These increases in
U.S. revenue more than offset a 10% drop in Canada revenue where
the rig count declined 19%. Latin America revenue increased 10% in
the fourth quarter of 2007 compared to the fourth quarter of 2006
and decreased 2% compared to the third quarter of 2007 driven by
market share gains in Brazil and activity increases in Colombia.
Europe, Africa, Russia, and Caspian revenue increased 19% in the
fourth quarter 2007 compared to the fourth quarter 2006, and
increased 1% sequentially compared to the third quarter 2007 with
particularly strong results from Russia and the Caspian which was
up 63% and Europe which was up 21% both in the fourth quarter 2007
compared to the fourth quarter 2006. Middle East, Asia Pacific
revenue increased 14% in the fourth quarter 2007 compared to the
fourth quarter 2006 and increased 12% sequentially compared to the
third quarter 2007. Improved revenue in Saudi Arabia, Australia,
Qatar and Egypt were the primary drivers of the improved
performance in the Middle East, Asia Pacific market in the fourth
quarter of 2007 compared to the fourth quarter of 2006. Outlook The
following statements are based on current expectations. These
statements are forward-looking, and actual results may differ
materially. Factors affecting these forward-looking statements are
detailed below under the section titled "Forward-Looking
Statements" in this news release. These statements do not include
the potential impact of any stock repurchases, acquisition,
disposition, merger, joint venture or other transaction or event
that could occur in the future. -- Outside North America revenue
for the year 2008 is expected to increase in a percentage range
from the low to mid-teens compared to the year 2007. -- Corporate
and other expenses, excluding interest expense and interest and
dividend income are expected to be approximately $245 million. --
Capital expenditures are expected to be approximately $1.3 billion
for the year 2008. -- Depreciation and amortization expense is
expected to be between $635 million and $645 million for the year
2008. -- The tax rate on operating results for the year 2008 is
expected to be between 32% and 33%. -- We expect a sequential
decline in the first quarter of 2008 of approximately $100 million
in export shipments from our Completion and Production segment.
Conference Call The company has scheduled a conference call to
discuss the results of today's earnings announcement. The call will
begin at 8:30 a.m. Eastern time, 7:30 a.m. Central time, on
Wednesday, January 30, 2008. To access the call, which is open to
the public, please contact the conference call operator at (800)
374-2469, or (706) 634-7270 for international callers, 20 minutes
prior to the scheduled start time, and ask for the "Baker Hughes
Conference Call." A replay will be available through Wednesday,
February 13, 2008. The number for the replay is (800) 642-1687, or
(706) 645-9291 for international callers, and the access code is
25959373. The call and replay will also be web cast on
http://www.bakerhughes.com/investor. Forward-Looking Statements
This news release (and oral statements made regarding the subjects
of this release, including on the conference call announced herein)
contain forward- looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended, (each a
"Forward-Looking Statement"). The words "anticipate," "believe,"
"ensure," "expect," "if," "intend," "estimate," "project,"
"forecasts," "predict," "outlook," "aim," "will," "could,"
"should," "would," "may," "probable," "likely," and similar
expressions, and the negative thereof, are intended to identify
forward-looking statements. There are many risks and uncertainties
that could cause actual results to differ materially from our
forward-looking statements. These forward-looking-statements are
also affected by the risk factors described in the company's Annual
Report on Form 10-K for the year ended December 31, 2006; the
company's subsequent quarterly reports on Form 10-Q; and those set
forth from time to time in our other filings with the Securities
and Exchange Commission ("SEC"). The documents are available
through the company's website at
http://www.bakerhughes.com/investor or through the SEC's Electronic
Data Gathering and Analysis Retrieval System (EDGAR) at
http://www.sec.gov/. We undertake no obligation to publicly update
or revise any forward-looking statement. Our expectations regarding
our business outlook, including changes in revenue, pricing,
expenses, capital spending, backlogs, profitability, tax rates,
strategies for our operations, oil and natural gas market
conditions, market share and contract terms, costs and availability
of resources, economic and regulatory conditions, legal and
regulatory matters, and environmental matters are only our
forecasts regarding these matters. These forecasts may be
substantially different from actual results, which are affected by
the following risk factors and the timing of any of those risk
factors: Oil and gas market conditions -- the level of petroleum
industry exploration and production expenditures; drilling rig and
oil and natural gas industry manpower and equipment availability;
the price of, and the demand for, crude oil and natural gas;
drilling activity; excess productive capacity; LNG imports;
seasonal and other adverse weather conditions that affect the
demand for energy; severe weather conditions, such as hurricanes,
that affect exploration and production activities; Organization of
Petroleum Exporting Countries ("OPEC") policy and the adherence by
OPEC nations to their OPEC production quotas. Terrorism and
geopolitical risks -- war, military action, terrorist activities or
extended period of international conflict, particularly involving
the U.S., Middle East or other major petroleum-producing or
consuming regions; labor disruptions, civil unrest or security
conditions where we operate; expropriation of assets by
governmental action. Pricing, market share and contract terms --
our ability to implement and affect price increases for our
products and services; the effect of the level and sources of our
profitability on our tax rate; the ability of our competitors to
capture market share; our ability to retain or increase our market
share; changes in our strategic direction; the effect of industry
capacity relative to demand for the markets in which we
participate; our ability to negotiate acceptable terms and
conditions with our customers, especially national oil companies;
our ability to manage warranty claims and improve performance and
quality; our ability to effectively manage our commercial agents.
Costs and availability of resources -- our ability to manage the
rising costs and availability of sufficient raw materials and
components (especially steel alloys, copper, carbide, lead, nickel,
and chemicals); our ability to manage compliance related costs; our
ability to recruit, train and retain the skilled and diverse
workforce necessary to meet our business needs; manufacturing
capacity and subcontracting capacity at forecasted costs to meet
our revenue goals; the availability of essential electronic
components used in our products; the effect of competition,
particularly our ability to introduce new technology on a
forecasted schedule and at forecasted costs; potential impairment
of long-lived assets; the accuracy of our estimates regarding our
capital spending requirements; unanticipated changes in the levels
of our capital expenditures; the need to replace any unanticipated
losses in capital assets; the development of technology by us or
our competitors that lowers overall finding and development costs;
labor-related actions, including strikes, slowdowns and facility
occupations. Litigation and changes in laws or regulatory
conditions -- the outcome of pending litigation as well as the
potential for unexpected litigation or proceedings; the
legislative, regulatory and business environment in the U.S. and
other countries in which we operate; costs and changes in processes
and operations related to or resulting from the activities of the
compliance monitor appointed to assess our Foreign Corrupt
Practices Act policies and procedures in connection with previously
reported settlements with the SEC and Department of Justice
("DOJ"); outcome of government and legal proceedings as well as
costs arising from compliance and ongoing or additional
investigations in any of the countries where the company does
business; new laws, regulations and policies that could have a
significant impact on the future operations and conduct of all
businesses; changes in export control laws or exchange control
laws; restrictions on doing business in countries subject to
sanctions; customs clearance procedures; changes in laws in
countries identified by management for immediate focus; changes in
accounting standards; changes in tax laws or tax rates in the
jurisdictions in which we operate; resolution of tax assessments or
audits by various tax authorities; additional taxes incurred as a
result of any resolution with the SEC and DOJ; ability to fully
utilize our tax loss carryforwards and tax credits. Economic
conditions -- worldwide economic growth; the effect that high
energy prices may have on worldwide economic growth and demand for
hydrocarbons; foreign currency exchange fluctuations and changes in
the capital markets in international locations where we operate;
the condition of the capital and equity markets in general; our
ability to estimate the size of and changes in the worldwide oil
and natural gas industry. Changes in the price of our stock may
affect the results and timing of our stock repurchase program.
Environmental matters -- unexpected, adverse outcomes or material
increases in liability with respect to environmental remediation
sites where we have been named as a potentially responsible party;
the discovery of new environmental remediation sites; changes in
environmental regulations; the discharge of hazardous materials or
hydrocarbons into the environment. Baker Hughes is a leading
provider of drilling, formation evaluation, completion and
production products and services to the worldwide oil and gas
industry. Contact: Gary R. Flaharty (713) 439-8039 H. Gene Shiels
(713) 439-8822 DATASOURCE: Baker Hughes Incorporated CONTACT: Gary
R. Flaharty, +1-713-439-8039, or H. Gene Shiels, +1-713-439-8822,
both of Baker Hughes Incorporated Web site:
http://www.bakerhughes.com/
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