HOUSTON, Aug. 5 /PRNewswire-FirstCall/ -- Baker Hughes Incorporated
(NYSE: BHI) today announced that net income for the second quarter
2009 was $87 million or $0.28 per diluted share compared to $379
million or $1.23 per diluted share for the second quarter 2008 and
$195 million or $0.63 per diluted share for the first quarter 2009.
Net income for the second quarter 2009 includes expenses of $54
million before tax ($0.13 per share) comprised of $16 million
($0.04 per share) associated with employee severance and
reorganization costs and $38 million ($0.09 per share) associated
with increasing our allowance for doubtful accounts. As previously
reported, net income for the first quarter 2009 included expenses
of $83 million before tax ($0.19 per share) comprised of $54
million ($0.12 per share) associated with employee severance and
$29 million ($0.07 per share) associated with increasing our
allowance for doubtful accounts. Net income for the second quarter
2008 included a net charge of $62 million ($40 million after-tax or
$0.13 per share), related to the settlement of litigation. Revenue
for the second quarter 2009 was $2.34 billion, down 22% compared to
$3.00 billion for the second quarter 2008 and down 12% compared to
$2.67 billion for the first quarter 2009. Chad C. Deaton, Baker
Hughes chairman, president and chief executive officer, said, "Our
second quarter results reflect trends in the North America and
International markets. For North America, the decline in activity
has been severe; however, in recent weeks the market has been
stabilizing. We believe the decline in the US rig count is now
behind us and we expect a gradual increase in drilling activity
beginning in 2010. Pricing deterioration has slowed and with our
cost cutting efforts we expect the second quarter 2009 to have
marked the bottom for North America profitability.
"Internationally, the decline in activity has been less severe and
isolated to specific geographic areas. The recent strengthening of
oil prices provides support for customer activity in the second
half of 2009 and sets the stage for incremental growth in spending
in 2010; however, price concessions negotiated in the first half of
2009 will drive international profitability lower in the second
half of the year. "Geographically, activity in the Russia and
Caspian geomarkets has bottomed and is benefitting from the recent
increase in oil prices. Activity in the Middle East Asia Pacific
and Latin America regions will increase modestly. We were awarded
new work or renewed international contracts in the second quarter
for more than $1.5 billion including contracts for artificial lift
in the Andean (Colombia / Ecuador / Peru) geomarket; intelligent
completions in Brazil; directional drilling, drilling fluids, drill
bits, wireline and oilfield chemicals offshore Nigeria; wireline in
the North Africa and Caspian geomarkets, and wireline and
completions in the Australasia and Southeast Asia geomarkets. "Our
new geographic organization is now in place. It has been well
received by our customers and employees and is focused on new
market opportunities. Our investments in infrastructure,
organization and technology are positioning the company to grow
share and profitability as the next cycle unfolds." During the
second quarter 2009, debt increased $16 million to $1.83 billion
and cash and short-term investments increased $183 million to $1.36
billion as compared to the first quarter 2009. Capital expenditures
were $291 million, depreciation and amortization expense was $182
million and dividend payments were $46 million in the second
quarter 2009. Financial Information Consolidated Statements of
Operations UNAUDITED (In millions, except per share amounts) Three
Months Ended ------------------------------- June 30, March 31,
---------------- --------- 2009 2008 2009 ---- ---- ---- Revenues:
Sales $1,156 $1,466 $1,311 Services and rentals 1,180 1,532 1,357
----- ----- ----- Total revenues 2,336 2,998 2,668 ----- -----
----- Costs and Expenses: Cost of sales 926 1,055 1,027 Cost of
services and rentals 871 942 933 Research and engineering 102 106
109 Marketing, general and administrative 284 270 281 Litigation
settlement - 62 - ----- ----- ----- Total costs and expenses 2,183
2,435 2,350 ----- ----- ----- Operating income 153 563 318 Equity
in income of affiliates - 1 - Interest expense (34) (17) (35)
Interest and dividend income 3 4 1 ----- ----- ----- Income before
income taxes 122 551 284 Income taxes (35) (172) (89) ----- -----
----- Net income $87 $379 $195 ===== ===== ===== Basic earnings per
share $0.28 $1.24 $0.63 Diluted earnings per share $0.28 $1.23
$0.63 Weighted average shares outstanding, basic 310 307 310
Weighted average shares outstanding, diluted 310 308 310
Depreciation and amortization expense $182 $155 $173 Capital
expenditures $291 $312 $281 Financial Information Consolidated
Statements of Operations (In millions, except per share amounts)
Six Months Ended June 30, ------------------------- UNAUDITED 2009
2008 ---- ---- Revenues: Sales $2,467 $2,719 Services and rentals
2,537 2,949 ----- ----- Total revenues 5,004 5,668 ----- -----
Costs and Expenses: Cost of sales 1,953 1,920 Cost of services and
rentals 1,804 1,846 Research and engineering 211 209 Marketing,
general and administrative 565 520 Litigation settlement - 62 ---
--- Total costs and expenses 4,533 4,557 ----- ----- Operating
income 471 1,111 Equity in income of affiliates - 1 Gain on sale of
product line - 28 Interest expense (69) (32) Interest and dividend
income 4 12 --- --- Income before income taxes 406 1,120 Income
taxes (124) (346) ---- ---- Net income $282 $774 ==== ==== Basic
earnings per share $0.91 $2.51 Diluted earnings per share $0.91
$2.50 Weighted average shares outstanding, basic 310 308 Weighted
average shares outstanding, diluted 310 310 Depreciation and
amortization expense $355 $302 Capital expenditures $572 $539
Calculation of EBIT and EBITDA (non-GAAP measures)(1) UNAUDITED
Three Months Ended --------------------------- June 30, March 31,
-------- --------- 2009 2008 2009 ---- ---- ---- $122 $551 $284
Income before income taxes Litigation settlement(2) - 62 - Interest
expense 34 17 35 --- --- --- Earnings before interest expense and
taxes (EBIT) 156 630 319 Depreciation and amortization expense 182
155 173 --- --- --- Earnings before interest expense, taxes,
depreciation and amortization (EBITDA) $338 $785 $492 ==== ====
==== (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. (2) Net charge of $62 million ($40 million after-tax or
$0.13 per diluted share) relating to the settlement of litigation
with ReedHycalog announced May 22, 2008. Consolidated Balance
Sheets (In millions) UNAUDITED AUDITED ============ June 30,
December 31, 2009 2008 ==== ==== ASSETS Current Assets: Cash and
cash equivalents $1,362 $1,955 Accounts receivable, net 2,313 2,759
Inventories, net 2,024 2,021 Deferred income taxes 236 231 Other
current assets 195 179 -------------------- --- --- Total current
assets 6,130 7,145 -------------------- ----- ----- Property, plant
and equipment, net 3,017 2,833 Goodwill 1,407 1,389 Intangible
assets, net 193 198 Other assets 352 296 ------------ --- --- Total
assets $11,099 $11,861 ============ ======= ======= LIABILITIES AND
STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $737
$888 Short-term borrowings and current portion of long-term debt 52
558 Accrued employee compensation 407 530 Income taxes payable 78
272 Other accrued liabilities 192 263 ------------------------- ---
--- Total current liabilities 1,466 2,511 -------------------------
----- ----- Long-term debt 1,777 1,775 Deferred income taxes and
other tax liabilities 321 384 Liabilities for pensions and other
postretirement benefits 355 317 Other liabilities 67 67
Stockholders' Equity: Common stock 309 309 Capital in excess of par
value 786 745 Retained earnings 6,465 6,276 Accumulated other
comprehensive loss (447) (523) ------------------------------------
---- ---- Total stockholders' equity 7,113 6,807
-------------------------- ----- ----- Total liabilities and
stockholders' equity $11,099 $11,861
=================================== ======= ======= Revenue, Profit
Before Tax, and Profit Before Tax Operating Margin Three Months
Ended ------------------ 6/30/2009 6/30/2008 3/31/2009
------------- ------------- ------------ Segment Revenue Drilling
and Evaluation $1,116 $1,528 $1,304 Completion and Production 1,220
1,470 1,364 ------------------------- ----- ----- ----- Oilfield
Operations 2,336 2,998 2,668 =================== ===== ===== =====
Geographic Revenue North America 794 1,278 1,083 Latin America 276
266 288 Europe Africa Russia Caspian 743 906 776 Middle East Asia
Pacific 523 548 521 ------------------------ --- --- --- Oilfield
Operations 2,336 2,998 2,668 =================== ===== ===== =====
Segment Profit Before Tax(1) Drilling and Evaluation $73 $367 $150
Completion and Production 166 322 230 ------------------------- ---
--- --- Oilfield Operations 239 689 380 =================== === ===
=== Geographic Profit Before Tax(1) North America 3 326 131 Latin
America 34 44 25 Europe Africa Russia Caspian 130 212 151 Middle
East Asia Pacific 72 107 73 ------------------------ --- --- ---
Oilfield Operations 239 689 380 ------------------- --- --- ---
Corporate and Other Profit Before Tax Interest expense (34) - (35)
Interest and dividend income 3 4 1 Litigation settlement(2) - (62)
- Corporate and other (86) (63) (62) ------------------- --- ---
--- Corporate, net interest and other (117) (138) (96)
----------------------- ---- ---- --- Total Profit Before Tax $122
$551 $284 ======================= ==== ==== ==== Profit Before Tax
Operating Margin(3) Drilling and Evaluation 7% 24% 12% Completion
and Production 14% 22% 17% Oilfield Operations 10% 23% 14% Profit
Before Tax Operating Margin(3) North America 0% 26% 12% Latin
America 12% 16% 9% Europe Africa Russia Caspian 17% 24% 19% Middle
East Asia Pacific 14% 20% 14% Oilfield Operations 10% 23% 14% (1)
Segment profit before tax and geographic profit before tax include
the impact of charges associated with employee severance and
reorganization costs (approximately $16 million in Q2 2009); the
impact of charges associated with employee severance (approximately
$54 million in Q1 2009); and charges associated with increasing our
allowance for doubtful accounts (approximately $38 million in Q2
2009 and approximately $29 million in Q1 2009). (2) Net charge of
$62 million ($40 million after-tax or $0.13 per diluted share)
relating to the settlement of litigation. (3) Profit before tax
operating margin is a non-GAAP measure defined as profit before tax
("income before income taxes") divided by revenue. Management uses
the profit before tax operating margin because it believes it is a
widely accepted financial indicator used by investors and analysts
to analyze and compare companies on the basis of operating
performance and that this measurement may be used by investors to
make informed investment decisions. Comparison of Revenue to Prior
Periods Percent Increase (Decrease) for the Three Months Ended June
30, 2009 Compared to the ---------------------------------------
Three Months Ended Three Months Ended June 30, 2008 March 31, 2009
------------- -------------- Segment Drilling and Evaluation (27%)
(14%) Completion and Production (17%) (11%) Oilfield Operations
(22%) (12%) Geographic North America (38%) (27%) Latin America 4%
(4%) Europe Africa Russia Caspian (18%) (4%) Middle East Asia
Pacific (5%) --% Oilfield Operations (22%) (12%) Operational
Highlights North America In North America our customers continued
to adapt to a market characterized by low natural gas prices,
strong production, decreased demand and ample natural gas in
storage by trimming their spending in the second quarter 2009. This
was reflected in the North America rig count which averaged 1,024
in the second quarter 2009, down 50% compared to the second quarter
2008 and down 39% sequentially from the first quarter 2009. North
America profit before tax and profit before tax operating margin
were impacted by reduced activity, a more severe than normal spring
break up in Canada, further price deterioration and severance
costs, which were partially offset by our cost reduction and
productivity improvement programs. In the second quarter we were
awarded a contract for directional drilling,
logging-while-drilling, wireline logging, and drilling and
completion fluids by Petrobras. Revision of services on this
significant five-year deepwater Gulf of Mexico contract is expected
to begin in the third quarter 2009. Latin America The
year-over-year growth in Latin America revenue was led by our
Mexico / Central America geomarket, where operations on the Alma
Marine Integrated Operations project for PEMEX increased from two
to four offshore rigs. The Andean geomarket, led by increased
revenue for directional drilling and completions and the Brazil
geomarket also contributed to year-over-year growth. Sequentially,
revenue declined as decreases in Venezuela and Southern Cone
(Argentina /Bolivia/Chile) geomarket revenue was offset partially
by an increase in Mexico / Central America geomarket revenue. In
the second quarter 2009 Baker Hughes was awarded a five-year
contract for artificial lift in Colombia valued in excess of $100
million. Europe Africa Russia Caspian The year-over-year revenue
decline in the Europe Africa Russia Caspian region was led by the
overall decline in spending in the Russia and Caspian geomarkets,
where customer activity decreased by approximately 30%. Also
contributing to the year-on-year decline were project delays and
completions of existing projects in the Norway, Sub Sahara Africa,
Nigeria and North Africa geomarkets. Sequential revenue decreases
in the Norway, Nigeria, Libya and Caspian geomarkets were partially
offset by increases in the UK, North Africa and Russia geomarkets.
We were awarded over $1 billion in contracts in the second quarter
2009 including key contracts in Norway, Central Europe, deepwater
projects off West Africa and projects throughout Russia. Middle
East Asia Pacific Compared to the second quarter 2008, revenue for
the second quarter 2009 was down as revenue increases in the
Southeast Asia and Gulf geomarkets were offset by lower revenue
throughout the region. Sequentially, reduced activity in the
Indonesia, Egypt and India/Southwest Asia geomarkets was offset by
increases in wireline and completions revenue in the Southeast Asia
geomarket, directional drilling in the Gulf geomarket, and
increased completions revenue in the Australasia geomarket. The
activity decrease in the Indonesia geomarket in the second quarter
2009 reflected completion of a major project for an international
oil company. We are continuing to invest throughout the region with
major facilities scheduled to open in the second half of 2009 and
2010 in India, China, Saudi Arabia and Qatar. We were awarded over
$400 million in the second quarter 2009, including significant wins
for wireline in the Australasia and Southeast Asia geomarkets.
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, August 5, 2009. 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,
August 19, 2009. The number for the replay is (800) 642-1687, or
(706) 645-9291 for international callers, and the access code is
15689055. 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, 2008; 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 and business plans; the business plans of our
customers; oil and natural gas market conditions; cost and
availability of resources; economic, legal and regulatory
conditions and other matters are only our forecasts regarding these
matters. These forecasts may be substantially different from actual
results, which are affected by many risks including the following
risk factors and the timing of any of those risk factors: Economic
conditions - the impact of deteriorating worldwide economic
conditions; the effect that declines in credit availability may
have on worldwide economic growth and demand for hydrocarbons; the
ability of our customers to finance their exploration and
development plans; foreign currency exchange fluctuations and
changes in the capital markets in locations where we operate; the
condition of financial institutions and the debt, capital and
equity markets in general, any impact on our ability to borrow to
fund short-term cash requirements and retire long-term debt upon
maturity as well as any impact on our customers' spending and
ability to pay amounts owed to us; our ability to estimate the size
of and changes in the worldwide oil and natural gas industry.
Changes in the price of our stock and other factors may affect the
amount and timing of any potential stock repurchases. Oil and gas
market conditions - the level of petroleum industry exploration,
development and production expenditures; the price of, volatility
in pricing of, and the demand for, crude oil and natural gas;
drilling activity; excess productive capacity; crude and product
inventories; 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 any major
petroleum-producing or consuming regions; labor disruptions, civil
unrest or security conditions where we operate; expropriation of
assets by governmental action. Price, market share, contract terms,
and customer payments - our ability to obtain market prices 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 integration of
newly-acquired businesses; 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, successfully execute these
contracts, and receive payment in accordance with the terms of our
contracts with our customers; 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 costs and availability of sufficient raw
materials and components (especially steel alloys, chromium,
copper, carbide, lead, nickel, titanium, beryllium, barite,
synthetic and natural diamonds, chemicals, and electronic
components); our ability to manage energy-related costs; our
ability to manage compliancerelated costs; our ability to recruit,
train and retain the skilled and diverse workforce necessary to
meet our business needs and manage the associated costs;
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 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 as well as compliance with the terms of the
settlements; 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; and the ability to fully utilize
our tax loss carry forwards and tax credits. 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 provides reservoir consulting,
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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