Baker Hughes announced that net income for the first quarter 2009 was $195 million or $0.63 per diluted share compared to $395 million or $1.27 per diluted share for the first quarter 2008 and $432 million or $1.41 per diluted share for the fourth quarter 2008.
Net income for the first quarter 2009 includes expenses of approximately $83 million before tax (or approximately $0.19 per share) comprised of $54 million (or approximately $0.12 per share) associated with employee severance and approximately $29 million (or approximately $0.07 per share) associated with increasing our allowance for doubtful accounts. Net income for the first quarter 2008 included a pre-tax gain of $28 million (approximately $18 million after-tax or $0.06 per diluted share) from the sale of a product line and net income for the fourth quarter 2008 included an impairment of auction rate securities of $25 million after-tax ($0.08 per diluted share).
Revenue for the first quarter 2009 was $2.67 billion, equal to the $2.67 billion for the first quarter 2008 and down 16% compared to $3.19 billion for the fourth quarter 2008. North America revenue for the first quarter 2009 was $1.08 billion, down 8% compared to $1.18 billion for the first quarter 2008 and down 23% compared to $1.41 billion for the fourth quarter 2008. Revenue outside of North America for the first quarter 2009 was $1.59 billion, up 6% compared to $1.49 billion for the first quarter 2008 and down 11% compared to $1.78 billion for the fourth quarter 2008.
Chad C. Deaton, Baker Hughes chairman, president and chief executive officer, said, "Our first quarter results for North America reflect the severe contraction in customer spending and activity. Profit from North America operations was impacted by significantly lower activity levels, severance charges and price deterioration. Results from operations outside North America reflected the relative strength of international markets as contraction in the Saudi Arabia, Russia, Caspian and UK markets was partially offset by strength in the Latin America, Norway, and Africa markets. Profitability was also impacted negatively by changes in foreign exchange rates and charges related to severance and allowances for doubtful accounts.
"Looking forward, the fundamentals that drive our outlook are essentially unchanged. We expect customer activity in North America to continue to decline, and see little chance of a recovery before the end of the year. Internationally, oil prices and the strength of the global economy remain the most critical factors for determining international spending and activity.
"We have taken actions in North America to reduce our operating costs through workforce reductions, facility consolidations, and other cost control measures. Our financial strength allows us to continue our program of expanding our international infrastructure. Baker Hughes will exit this cycle as a stronger competitor, so we are continuing our investment in infrastructure, research and development, and training."
During the first quarter 2009, debt decreased $520 million to $1.81 billion and cash and short-term investments decreased $776 million to $1.18 billion as compared to the fourth quarter 2008. In the first quarter 2009, the company repaid approximately $525 million of maturing long-term debt. The next maturities of long-term debt amounting to $500 million are due in November 2013. In March 2009 we successfully renewed a $500 million 364-day revolving credit facility. Capital expenditures were $281 million, depreciation and amortization expense was $173 million and dividend payments were $46 million in the first quarter 2009.
Customer spending and drilling activity contracted in North America as customers adapted to a market characterized by lower natural gas and oil prices, scarce commercial credit, ample natural gas supplies and reduced natural gas demand. The pace of activity contraction, as measured by the rig count, has been faster than any other cyclical contraction post-1986. Completion and Production segment revenue was less affected than our Drilling and Evaluation segment revenue. Comparing Quarter 1 2009 to Quarter 1 2008, Completion and Production segment revenue increased 8% while Drilling and Evaluation product line segment revenue decreased 24%, as the North America rig count decreased 27%. Comparing Quarter 1 2009 to Quarter 4 2008, Completion and Production segment revenue decreased 15% while Drilling and Evaluation segment revenue decreased 33%, as the North America rig count decreased 28%.
The decrease in North America profit before tax operating margin was primarily due to reduced activity levels, price deterioration, severance costs recognized in Quarter 1 2009, and the weakness of the Canadian dollar.
The year-over-year growth in Latin America revenue was led by directional drilling systems, logging-while-drilling, and drilling fluids in Brazil and completion systems in Mexico. Sequentially, revenue decreased primarily due to the expected seasonal drop in large export orders from Quarter 4 2008 to Quarter 1 2009.
Building on our successes in Brazil, Baker Hughes was awarded a four year, $170 million contract for directional drilling, logging-while-drilling, upper completions, and artificial lift systems for a major oil company operating in Brazil. In Mexico, the Alma Marine Integrated Operations project for PEMEX began in Quarter 1 2009, and we are currently operating on two offshore rigs.
The decrease in the Latin America profit before tax operating margin was impacted by start up costs associated with the new contracts in Mexico and Brazil, an increase in our allowance for doubtful accounts in the region, and the seasonal decline in export shipments from Quarter 4 2008 to Quarter 1 2009.
Europe Africa Russia Caspian
The year-over-year growth in Europe Africa Russia Caspian revenue was led by directional drilling and logging-while-drilling in Norway, Libya and Angola; drilling fluids in Libya; wireline systems in Angola and Libya; and completion systems in Nigeria and Libya. Sequentially, the decrease in Europe Africa Russia Caspian revenue was attributable to decreased revenue from Russia, the Caspian and the UK, as well as the negative impact of unfavorable foreign currency changes relative to the US dollar.
Baker Hughes has been awarded a significant portion of a West African deepwater project by a major international oil company which will start operations in Quarter 2 2009. Product lines awarded include directional drilling, logging-while-drilling, wireline and completions.
Middle East Asia Pacific
The increase in Middle East Asia Pacific revenue in Quarter 1 2009 compared to Quarter 1 2008 was led by directional drilling systems, logging-while-drilling, and drilling fluids and artificial lift. Sequentially, comparing Quarter 1 2009 to Quarter 4 2008 the decrease in revenue was primarily in Saudi Arabia, Indonesia and Australia.
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