Baker Hughes Incorporated announced that net income for the second quarter 2008 was $379.3 million or $1.23 per diluted share compared to $349.6 million or $1.09 per diluted share for the second quarter 2007 and $395.0 million or $1.27 per diluted share for the first quarter 2008.
Net income for the second quarter of 2008 includes a net charge of $62.0 million ($40.3 million after-tax or $0.13 per diluted share), relating to the settlement of litigation with ReedHycalog announced May 22, 2008. Net income for the first quarter 2008 includes a gain of $28.2 million ($18.4 million after-tax or $0.06 per diluted share) from the sale of the Completion and Production segment's Surface Safety Systems ("SSS") product line.
Revenue for the second quarter 2008 was $2,997.5 million, up 18% compared to $2,537.5 million for the second quarter 2007 and up 12% compared to $2,670.4 million for the first quarter 2008. North America revenue for the second quarter 2008 was up 20% compared to the second quarter 2007 and up 9% compared to the first quarter 2008. Outside of North America, revenue for the second quarter 2008 was up 17% compared to the second quarter 2007 and up 15% compared to the first quarter 2008.
Chad C. Deaton, Baker Hughes chairman, president, and chief executive officer said, "Activity levels improved in the United States in the quarter, particularly horizontal drilling on land, more than offsetting the seasonal sequential decline in Canada drilling activity. While the primary driver of increased rig activity in the U.S. compared to a year ago has been oil-directed drilling, we expect that our customers will increase the pace of their natural gas-directed activity in the second half of 2008, resulting in additional opportunities for Baker Hughes.
"Price, utilization and productivity improvements offset significant inflation in labor and materials costs resulting in oilfield operating margins remaining unchanged at 23%. As expected, Completion and Production segment margins improved sequentially and Drilling and Evaluation segment margins decreased modestly primarily as a result of the seasonal slowdown in Canada.
"Looking forward, we continue to see many opportunities for Baker Hughes. While higher oil prices are having an impact on global demand, we expect global production declines and growing demand for oil in China, India and the Middle East to support increased spending for exploration, development and production. In the second quarter we were awarded more than $1.6 billion in project awards and extensions in Brazil and Mexico, which will drive growth in 2009 and beyond. We will incur incremental start up costs in the next two quarters as we invest to support these Latin American projects. This year, in support of future growth, we expect to spend $1.3 billion in capital; build more infrastructure than we have added over the last 6 years combined; and invest more than $430 million in technology development. In the second half of this year we will increase our global workforce by over 3,000 employees."
During the second quarter of 2008, debt increased $74.8 million to $1,621.2 million, and cash and short-term investments increased $41.3 million to $1,071.7 million compared to the first quarter of 2008. In the second quarter 2008, the company's capital expenditures were $312.4 million, depreciation and amortization expense was $155.7 million and dividend payments were $39.9 million.
During the second quarter of 2008, the company repurchased 51,000 shares of common stock at an average price of $87.08 per share for a total of $4.4 million. At the end of the second quarter of 2008, the company had authorization remaining to repurchase approximately $251.7 million in common stock.
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