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Baker Hughes announces third quarter results

01 Nov 2011

Baker Hughes Incorporated (NYSE: BHI) today announced adjusted net income (a non-GAAP measure) for the third quarter 2011 of $518 million, or $1.18 per diluted share. This excludes a $214 million tax benefit associated with the reorganization of certain foreign subsidiaries and a $26 million after-tax loss related to the early extinguishment of debt. This compares to $255 million, or $0.59 per diluted share, for the third quarter 2010, and adjusted net income of $408 million, or $0.93 per diluted share, for the second quarter 2011.

Net income attributable to Baker Hughes, a GAAP measure, for the third quarter 2011 was $706 million or $1.61 per diluted share, compared to $255 million, or $0.59 per diluted share, for the third quarter 2010, and $338 million, or $0.77 per diluted share, for the second quarter 2011. Please see Table 1 for a reconciliation of GAAP to non-GAAP Financial Measures.

Revenue for the third quarter 2011 was $5.18 billion, up 27% compared to $4.08 billion for the third quarter 2010 and up 9% compared to $4.74 billion for the second quarter 2011.

Chad C. Deaton, Baker Hughes Chairman and Chief Executive Officer, said, "The third quarter was a record revenue quarter for Baker Hughes.

"In Canada, the rig count grew substantially throughout the quarter and our operational results reflected this growth. Strong growth continues across U.S. Land, and capacity across most of the market remains tight. The Gulf of Mexico improved marginally during the quarter as the pace of permitting modestly improved. We continue to position our organization to respond to gradual growth in the Gulf of Mexico over the medium term.

"Internationally, we delivered strong revenue growth, but margins declined approximately 125 basis points primarily as a result of a change in geographic and product mix. The strategy we set in place last year to enhance our international operating margins has delivered approximately 700 basis points year-on-year improvement. We expect to deliver 15% international margins in the fourth quarter.

"The commodity, capital, and foreign exchange markets have experienced tremendous volatility throughout the third quarter; however, we have seen no material change in customer behavior. A substantial majority of our customers' projects are justified at prices far lower than the current commodity price levels and sufficient liquidity appears to be available to continue to develop these projects. We are very encouraged by the long-term prospects for the North American and International markets. Oil demand is at record levels and growth for hydrocarbons will remain strong in the years to come, supported by the continued industrialization of developing economies. Production from declining conventional resources will be replaced by increases in production from the service-intensive unconventional hydrocarbon resources in the U.S. and over time, internationally. We continue to position Baker Hughes to take advantage of long-term opportunities while maintaining the flexibility to address short-term changes to our business," Deaton said.

Debt increased by $292 million to $3.90 billion compared to the second quarter 2011, reflecting the issuance of $750 million 3.2% 10-year notes and the redemption of $500 million 6.5% notes. Cash and short-term investments decreased by $134 million to $803 million compared to the second quarter 2011. Capital expenditures were $628 million, depreciation and amortization expense was $332 million, and dividend payments were $65 million in the third quarter 2011.