Baker Hughes Inc BHI
Q2 2013 Earnings Call Transcript

Transcript Call Date 07/19/2013

Operator: Hello, my name is Lorraine, and I'll be your conference facilitator. At this time, I would like to welcome everyone to the Baker Hughes Second Quarter 2013 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period.

I will now turn the conference over to Mr. Trey Clark, Vice President of Investor Relations. Sir, you may proceed.

Trey Clark - IR: Thank you, Lorraine, and good morning, everyone. Welcome to the Baker Hughes' second quarter 2013 earnings conference call. Here with me today is our Chairman and CEO, Martin Craighead; and Peter Ragauss, Senior Vice President and Chief Financial Officer. Today's presentation and the earnings release that was issued earlier today can be found on our website at

During the course of this conference call, we will provide predictions, forecasts, and other forward-looking statements. Although they reflect our current expectations, these statements are not guarantees of future performance, but involve a number of risks and assumptions. We urge you to review Baker Hughes' SEC filings for a discussion on some of the factors that could cause actual results to differ materially.

Lastly, reconciliation of operating profit and other non-GAAP measures to GAAP results can be found on our earnings release and on our website at under the Investor Relations section.

With that, I'll turn the call over to Martin Craighead. Martin?

Martin Craighead - President and CEO: Thanks Trey, and good morning, everyone. Let me start off with a few comments about our results. First, Baker Hughes performed well in North America and across the Eastern Hemisphere this quarter. In fact, the Eastern Hemisphere posted record revenues on strong growth in both Europe/Africa/Russia Caspian and Middle East/Asia Pacific business segments; while North American revenue increased 3% sequentially despite Canadian activity reaching its lowest level in four years. Unfortunately, that performance was more than offset by profit erosion in our Latin American business segment. So I want to begin my remarks today by addressing these issues right out of the gate.

First, the most meaningful issue we faced in the quarter was timing associated with the ramp down of our drilling contract in Brazil. As we transitioned to the new contract structure in the second quarter, we made a conscious decision to work with our customer and ensure there were no operational disruptions. This customer-centric approach in Brazil has served us well over the years and that coupled with stellar drilling performance secured us a contract extension last year, which resulted in very high activity levels being reached in the first quarter of this year. As we progressed through the second quarter, we were anticipating a further extension. Unfortunately, that did not occur and as a result we forfeited an opportunity for a more orderly demobilization. This left us with stranded costs associated with elevated staffing and underutilized assets.

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