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Baker Hughes Improves Pressure Pumping Sector in Q2
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Baker Hughes Incorporated reported net income on a GAAP basis for the second quarter of 2013 of $240 million or $0.54 per diluted share.
This includes after-tax charges of $20 million ($0.05 per diluted share) for bad debt provisions in Latin America and $7 million ($0.02 per diluted share) for an inventory charge related to certain proppants used in pressure pumping in North America. These results compare to net income of $0.60 per diluted share for the first quarter of 2013, and $1.00 per diluted share for the second quarter of 2012.
Revenue for the second quarter of 2013 was $5.49 billion, up 5% compared to $5.23 billion for the first quarter of 2013 and up 3% compared to $5.33 billion for the second quarter of 2012.
Martin Craighead, Baker Hughes' Chairman and Chief Executive Officer, commented: "Our second quarter results reflect mixed performance across our international operating segments. Activity levels continued to rise across the Eastern Hemisphere based on strong demand in deepwater markets, particularly in Europe and Africa, as well as seasonal improvements in Russia. However, our gains in the East were more than offset by a sharp decline in Latin America resulting from reduced activity and demobilization costs in Brazil and Mexico. In response to these conditions, during the second quarter we began taking actions to reduce costs in our Latin America operations. This process should be substantially complete in the third quarter leading to increased profitability in the second half of the year."
Craighead added, "Our U.S. Pressure Pumping business continues to improve as recent share gains and operational improvements are increasing fleet utilization and profitability. Combined with record performance from our Gulf of Mexico operations, revenue in North America grew 3% sequentially, despite Canadian seasonality reaching its lowest level in four years. Now that Canada is returning to normal activity levels, we foresee a strong rebound in operating margins in the third quarter for North America."
Cash increased $22 million to $1.12 billion as of June 30, 2013, compared to $1.10 billion at March 31, 2013. Debt decreased by $183 million to $4.91 billion compared to the first quarter of 2013.
Capital expenditures were $551 million, depreciation and amortization expense was $424 million and dividend payments were $66 million in the second quarter of 2013.
EBITDA in the second quarter of 2013 was $860 million, a decrease of $10 million compared to the first quarter of 2013.
Baker Hughes Operational Highlights
The Baker Hughes FASTrak™ logging while drilling (LWD) fluid analysis and sampling system launched in the second quarter 2013. Since its introduction, Baker Hughes has successfully deployed FASTrak on wells for a customer in Australia. The fluid sampling and formation pressure testing capabilities of the LWD assembly allowed the customer to acquire 25 formation fluid samples and a range of pressure tests in challenging, near horizontal wellbores. Obtaining this high number and quality of formation fluid samples allowed the customer to make strategic field development decisions, saved millions of dollars in necessary retrofit costs, and substantially reduced the number of rig days.
The Baker Hughes AutoTrak X-treme™ rotary steerable system has delivered excellent results across multiple regions including Latin America, Africa and U.S. Land. The growing Marine region of Mexico experienced a drilling rate of penetration (ROP) of 200 ft/hr using the AutoTrak X-treme system as well as the Baker Hughes Quantec Force™ bit, which surpassed the previous ROP record for offset wells in this field by more than 45%. The Quantec Force bit has seen successes this quarter in Brazil and Ghana, both of which showed substantial increases in penetration rate, allowing customers to reach their targets more quickly and efficiently.
Baker Hughes continues its success with the Drill Bits product line, particularly with the Kymera™ hybrid bit. The rolling torque management with dual action cutting structures has allowed customers in Latin America, Asia Pacific, Africa, Middle East and Gulf of Mexico to experience increases in ROP and superior directional control. The Kymera bit was deployed for the first time in China this quarter, and also had exceptional success onshore in Mauritania, allowing a 12¼-in. section to be drilled in one run, eliminating the expected extra day of rig time to run multiple bits. In addition, we deployed a 26-in. Kymera bit was deployed for the first time in the Gulf of Mexico during the quarter and displayed excellent ROP and rig time savings.
Baker Hughes is gaining share in the Gulf of Mexico through the introduction of new technologies. During the quarter, Baker Hughes successfully completed wireline logging operations on an ultradeepwater, high-temperature appraisal project at a total depth of 26,340 ft in the Gulf of Mexico. The Baker Hughes RCX™ Sentinel obtained fluid samples for safer, cleaner, and faster sampling.
In the Gulf of Mexico, Baker Hughes performed six individual fracpacks on a well with a single vessel, in a single trip. The Blue Dolphin™ stimulation vessel remained on location for the duration of the project without having to travel back to the dock to resupply. Traditionally, a project of this size would have been required two vessels. However, the capability of the Blue Dolphin allowed for the largest volume of proppant ever to be pumped into a single well in the Gulf of Mexico.
The demand for Rhino™ Bifuel continues to grow. Baker Hughes stimulated multiple wells in Canada and the U.S. this quarter with Rhino Bifuel. Replacing up to 70% of diesel with natural gas not only reduces emissions of the pumping units, but the potential for using field gas negates the requirement for large quantities of fuel to be transported. This transport savings can dramatically reduce an operator's environmental footprint. Baker Hughes Rhino Bifuel pumping fleets have completed more than 400 stages to date. With increasing demand for Rhino Bifuel, Baker Hughes plans to double its Rhino Bifuel capacity by converting additional fleets this year.