Baker Hughes announced that net income for the second quarter 2009 was $87 million or $0.28 per diluted share compared to $379 million or $1.23 per diluted share for the second quarter 2008 and $195 million or $0.63 per diluted share for the first quarter 2009. Net income for the second quarter 2009 includes expenses of $54 million before tax ($0.13 per share) comprised of $16 million ($0.04 per share) associated with employee severance and reorganization costs and $38 million ($0.09 per share) associated with increasing our allowance for doubtful accounts.
As previously reported, net income for the first quarter 2009 included expenses of $83 million before tax ($0.19 per share) comprised of $54 million ($0.12 per share) associated with employee severance and $29 million ($0.07 per share) associated with increasing our allowance for doubtful accounts. Net income for the second quarter 2008 included a net charge of $62 million ($40 million after-tax or $0.13 per share), related to the settlement of litigation.
Revenue for the second quarter 2009 was $2.34 billion, down 22% compared to $3.00 billion for the second quarter 2008 and down 12% compared to $2.67 billion for the first quarter 2009.
Chad C. Deaton, Baker Hughes chairman, president and chief executive officer, said, "Our second quarter results reflect trends in the North America and International markets. For North America, the decline in activity has been severe; however, in recent weeks the market has been stabilizing. We believe the decline in the US rig count is now behind us and we expect a gradual increase in drilling activity beginning in 2010. Pricing deterioration has slowed and with our cost cutting efforts we expect the second quarter 2009 to have marked the bottom for North America profitability.
"Internationally, the decline in activity has been less severe and isolated to specific geographic areas. The recent strengthening of oil prices provides support for customer activity in the second half of 2009 and sets the stage for incremental growth in spending in 2010; however, price concessions negotiated in the first half of 2009 will drive international profitability lower in the second half of the year.
"Geographically, activity in the Russia and Caspian geomarkets has bottomed and is benefitting from the recent increase in oil prices. Activity in the Middle East Asia Pacific and Latin America regions will increase modestly. We were awarded new work or renewed international contracts in the second quarter for more than $1.5 billion including contracts for artificial lift in the Andean (Colombia / Ecuador / Peru) geomarket; intelligent completions in Brazil; directional drilling, drilling fluids, drill bits, wireline and oilfield chemicals offshore Nigeria; wireline in the North Africa and Caspian geomarkets, and wireline and completions in the Australasia and Southeast Asia geomarkets.
"Our new geographic organization is now in place. It has been well received by our customers and employees and is focused on new market opportunities. Our investments in infrastructure, organization and technology are positioning the company to grow share and profitability as the next cycle unfolds."
During the second quarter 2009, debt increased $16 million to $1.83 billion and cash and short-term investments increased $183 million to $1.36 billion as compared to the first quarter 2009. Capital expenditures were $291 million, depreciation and amortization expense was $182 million and dividend payments were $46 million in the second quarter 2009.
In North America our customers continued to adapt to a market characterized by low natural gas prices, strong production, decreased demand and ample natural gas in storage by trimming their spending in the second quarter 2009. This was reflected in the North America rig count which averaged 1,024 in the second quarter 2009, down 50% compared to the second quarter 2008 and down 39% sequentially from the first quarter 2009.
North America profit before tax and profit before tax operating margin were impacted by reduced activity, a more severe than normal spring break up in Canada, further price deterioration and severance costs, which were partially offset by our cost reduction and productivity improvement programs. In the second quarter we were awarded a contract for directional drilling, logging-while-drilling, wireline logging, and drilling and completion fluids by Petrobras. Revision of services on this significant five-year deepwater Gulf of Mexico contract is expected to begin in the third quarter 2009.
The year-over-year growth in Latin America revenue was led by our Mexico / Central America geomarket, where operations on the Alma Marine Integrated Operations project for PEMEX increased from two to four offshore rigs. The Andean geomarket, led by increased revenue for directional drilling and completions and the Brazil geomarket also contributed to year-over-year growth. Sequentially, revenue declined as decreases in Venezuela and Southern Cone (Argentina /Bolivia/Chile) geomarket revenue was offset partially by an increase in Mexico / Central America geomarket revenue.
In the second quarter 2009 Baker Hughes was awarded a five-year contract for artificial lift in Colombia valued in excess of $100 million.
Europe Africa Russia Caspian
The year-over-year revenue decline in the Europe Africa Russia Caspian region was led by the overall decline in spending in the Russia and Caspian geomarkets, where customer activity decreased by approximately 30%. Also contributing to the year-on-year decline were project delays and completions of existing projects in the Norway, Sub Sahara Africa, Nigeria and North Africa geomarkets. Sequential revenue decreases in the Norway, Nigeria, Libya and Caspian geomarkets were partially offset by increases in the UK, North Africa and Russia geomarkets.
We were awarded over $1 billion in contracts in the second quarter 2009 including key contracts in Norway, Central Europe, deepwater projects off West Africa and projects throughout Russia.
Middle East Asia Pacific
Compared to the second quarter 2008, revenue for the second quarter 2009 was down as revenue increases in the Southeast Asia and Gulf geomarkets were offset by lower revenue throughout the region. Sequentially, reduced activity in the Indonesia, Egypt and India/Southwest Asia geomarkets was offset by increases in wireline and completions revenue in the Southeast Asia geomarket, directional drilling in the Gulf geomarket, and increased completions revenue in the Australasia geomarket. The activity decrease in the Indonesia geomarket in the second quarter 2009 reflected completion of a major project for an international oil company.
We are continuing to invest throughout the region with major facilities scheduled to open in the second half of 2009 and 2010 in India, China, Saudi Arabia and Qatar. We were awarded over $400 million in the second quarter 2009, including significant wins for wireline in the Australasia and Southeast Asia geomarkets.
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