Baker Hughes Announces First Quarter Results

                 Baker Hughes Announces First Quarter Results

PR Newswire

HOUSTON, April 19, 2013

HOUSTON, April 19,2013 /PRNewswire/ -- Baker Hughes Incorporated (NYSE: BHI)
announced today adjusted net income (a non-GAAP measure) for the first quarter
of 2013 of $290 million or $0.65 per diluted share. This compares to net
income of $0.49 per diluted share for the fourth quarter of 2012, and $0.86
per diluted share for the first quarter of 2012.

Adjusted net income for the first quarter of 2013 excludes a foreign exchange
loss of $23 million before and after-tax ($0.05 per diluted share) related to
the devaluation of Venezuela's currency in February 2013.

On a GAAP basis, net income attributable to Baker Hughes for the first quarter
of 2013 was $267 million or $0.60 per diluted share compared to net income of
$0.49 per diluted share for the fourth quarter of 2012, and $0.86 per diluted
share for the first quarter of 2012. Please see Table 1 for a reconciliation
of GAAP to non-GAAP financial measures.

Revenue for the first quarter of 2013 was $5.23billion, down 2% compared to
$5.33billion for the fourth quarter of 2012 and down 2% compared to
$5.36billion for the first quarter of 2012.

"Our first quarter results reflect improvement in our North America segment,"
said Martin Craighead, Baker Hughes' President and Chief Executive Officer.
"The increased revenues and profit margins in North America are due to higher
activity levels in Canada, along with improved utilization in our Pressure
Pumping business despite a 3% decline in the U.S. onshore rig count since last
quarter. Following five consecutive quarters of declines in the U.S. rig
count, we are now forecasting a modest increase for the remainder of the
year."

Craighead continued, "Across our international segments, we saw our typical
seasonal declines during the quarter, with particular weakness in our
Europe/Africa/Russia Caspian segment. However, I am pleased with the
improving performance of our Middle East region where we continue to grow our
integrated operations business, and expand our product offering to include
Pressure Pumping services. For the first time, the Middle East/Asia Pacific
segment has ended the quarter as our largest international segment. This
reflects the investments we have made over the years to extend our global
infrastructure and expand our capabilities to win complex integrated
operations work.

"During the quarter, the Gulf of Mexico was impacted by industry-wide delays.
However, we are very encouraged by the long-term potential of this deepwater
market, as well as for Norway, where we have leading positions. Both of these
markets demand the products and services that only high-technology, quality
service providers such as Baker Hughes can provide," he said.

Cash increased $86 million to $1.10 billion as of March31, 2013, compared to
$1.02 billion at December31, 2012. Debt increased by $176 million to
$5.09billion compared to the fourth quarter of 2012.

Capital expenditures were $490million, a decrease of $237 million compared to
the fourth quarter of 2012. Depreciation and amortization expense was
$415million, and dividend payments were $66million in the first quarter of
2013.

Adjusted EBITDA (a non-GAAP measure) in the first quarter of 2013 was
$893million, an increase of $36 million compared to the fourth quarter of
2012. A reconciliation of net income attributable to Baker Hughes to Adjusted
EBITDA is provided in Table 2. Supplemental financial information for revenue
and adjusted operating profit before tax (a non-GAAP measure) is provided in
Table 5.



Consolidated Condensed Statements of Income

(Unaudited)
                                              Three Months Ended
                                              March 31,           December 31,
(Inmillions, except per share amounts)       2013      2012      2012
Revenue                                       $ 5,230   $ 5,355   $   5,325
Costs and Expenses:
Cost of revenue                               4,326     4,265     4,441
Research and engineering                      127       124       127
Marketing, general and administrative         322       339       317
Total costs and expenses                      4,775     4,728     4,885
Operating income                              455       627       440
Interest expense, net                         (55)      (54)      (57)
Income before income taxes                    400       573       383
Income taxes                                  (132)     (193)     (168)
Net income                                    268       380       215
Net income attributable to noncontrolling     (1)       (1)       (1)
interests
Net income attributable to Baker Hughes       $ 267     $ 379     $   214
Basic earnings per share attributable to      $ 0.60    $ 0.86    $   0.49
Baker Hughes
Diluted earnings per share attributable to    $ 0.60    $ 0.86    $   0.49
Baker Hughes
Weighted average shares outstanding, basic    443       439       440
Weighted average shares outstanding, diluted  444       440       441
Depreciation and amortization expense         $ 415     $ 363     $   417
Capital expenditures                          $ 490     $ 671     $   727

Consolidated Condensed Balance Sheets

(Unaudited)
                                                       March 31,  December 31,
(In millions)                                          2013       2012
ASSETS
Current Assets:
Cash and cash equivalents                              $ 1,101    $  1,015
Accounts receivable - less allowance for doubtful
accounts                                               5,096      4,815

(2013 - $279, 2012 - $308)
Inventories, net                                       3,880      3,781
Other current assets                                   758        806
Total current assets                                   10,835     10,417
Property, plant and equipment, net                     8,753      8,707
Goodwill                                               5,956      5,958
Intangible assets, net                                 963        993
Other assets                                           647        614
Total assets                                           $ 27,154   $  26,689
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable                                       $ 2,024    $  1,737
Short-term debt and current portion of long-term debt  1,248      1,079
Accrued employee compensation                          613        646
Other accrued liabilities                              611        662
Total current liabilities                              4,496      4,124
Long-term debt                                         3,844      3,837
Deferred income taxes and other tax liabilities        721        745
Long-term liabilities                                  675        715
Equity                                                 17,418     17,268
Total liabilities and equity                           $ 27,154   $  26,689

Consolidated Condensed Statements of Cash Flows

(Unaudited)
                                                  Three Months Ended March 31,
(In millions)                                     2013                2012
Cash flows from operating activities:
Net income                                      $ 268            $    380
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation and amortization                     415                 363
Other, primarily working capital                  (297)               (819)
Net cash flows provided by (used in) operating    386                 (76)
activities
Cash flows from investing activities:
Expenditures for capital assets                   (490)               (671)
Other                                             94                  103
Net cash flows used in investing activities       (396)               (568)
Cash flows from financing activities:
Net proceeds from issuance of debt                176                 449
Dividends                                         (66)                (65)
Other                                             (10)                (13)
Net cash flows provided by financing activities   100                 371
Effect of foreign exchange rate changes on cash   (4)                 3
Increase (decrease) in cash and cash              86                  (270)
equivalents
Cash and cash equivalents, beginning of period    1,015               1,050
Cash and cash equivalents, end of period        $ 1,101          $    780



Table 1: Reconciliation of GAAP and Non-GAAP Financial Measures

The following table reconciles net income attributable to Baker Hughes, which
is the directly comparable financial result determined in accordance with
Generally Accepted Accounting Principles (GAAP), to adjusted net income^1 (a
non-GAAP financial measure). This excludes identified items with respect to
the first quarter of 2013. There were no identified items requiring
adjustment for the first and fourth quarters of 2012.

                                             Three Months Ended March 31, 2013
                                                               Diluted
(Unaudited)                                  Net
                                                               Earnings
(Inmillions, except per share amounts)      Income
                                                               PerShare
Net income attributable to Baker Hughes      $    267          $    0.60
(GAAP)
Identified items:
Devaluation of Venezuelan currency^2         $    23           $    0.05
Adjusted net income (non-GAAP)^1             $    290          $    0.65

   Adjusted net income is a non-GAAP measure comprised of net income
   attributable to Baker Hughes excluding the impact of certain identified
1  items. The Company believes that adjusted net income is useful to
   investors because it is a consistent measure of the underlying results of
   the Company's business. Furthermore, management uses adjusted net income
   as a measure of the performance of the Company's operations.
   Foreign exchange loss of $23 million before and after-tax due to the
2  devaluation of Venezuela's currency from the prior exchange rate of 4.3
   Bolivars Fuertes per U.S. Dollar to 6.3 Bolivars Fuertes per U.S. Dollar,
   which applied to our local currency denominated balances.



Table 2: Calculation of EBIT, EBITDA and Adjusted EBITDA (non-GAAP measures)^1
                                                  Three Months Ended
                                                  March 31,       December 31,
(In millions)                                     2013    2012    2012
Net income attributable to Baker Hughes           $ 267   $ 379   $   214
Net income attributable to noncontrolling         1       1       1
interests
Income taxes                                      132     193     168
Income before income taxes                        400     573     383
Interest expense, net                             55      54      57
Earnings before interest and taxes (EBIT)         455     627     440
 Depreciation and amortization expense     415     363     417
Earnings before interest, taxes, depreciation
and                                               870     990     857

amortization (EBITDA)
Adjustments to EBITDA
Devaluation of Venezuelan currency^2              23      —       —
Adjusted EBITDA                                   $ 893   $ 990   $   857

   EBIT, EBITDA and Adjusted EBITDA (as defined in the calculations above) are
   non-GAAP measures. Management is providing these measures because it
1  believes that such measures are widely accepted financial indicators used
   by investors and analysts to analyze and compare companies on the basis of
   operating performance.
   Foreign exchange loss of $23 million before and after-tax due to the
   devaluation of Venezuela's currency from the prior exchange rate of 4.3
2  Bolivars Fuertes per U.S. Dollar to 6.3 Bolivars Fuertes per U.S. Dollar,
   which applied to our local currency denominated balances. There were no
   identified items requiring adjustment for the first and fourth quarters of
   2012.

Table 3: Segment Revenue, Profit Before Tax, and Profit Before Tax Margin^1
                                       Three Months Ended
                                       March 31,               December 31,
(In millions)                          2013         2012       2012
Segment Revenue
North America                          $  2,603     $ 2,863    $  2,559
Latin America                          590          573        639
Europe/Africa/Russia Caspian           854          893        950
Middle East/Asia Pacific               894          745        882
Industrial Services and Other          289          281        295
Total Operations                       $  5,230     $ 5,355    $  5,325
Profit Before Tax
North America                          $  235       $ 401      $  222
Latin America^2                        49           67         8
Europe/Africa/Russia Caspian           93           153        173
Middle East/Asia Pacific               116          75         81
Industrial Services and Other          24           22         27
Total Operations                       $  517       $ 718      $  511
Corporate and Other Profit Before Tax
Interest expense, net                  (55)         (54)       (57)
Corporate and other                    (62)         (91)       (71)
Corporate, net interest and other      (117)        (145)      (128)
Profit Before Tax                      $  400       $ 573      $  383
Profit Before Tax Margin^1
North America                          9         %  14      %  9         %
Latin America^2                        8         %  12      %  1         %
Europe/Africa/Russia Caspian           11        %  17      %  18        %
Middle East/Asia Pacific               13        %  10      %  9         %
Industrial Services and Other          8         %  8       %  9         %
Total Operations                       10        %  13      %  10        %

   Profit before tax margin is a non-GAAP measure defined as profit before tax
   ("income before income taxes") divided by revenue. Management uses the
1  profit before tax margin because it believes it is a widely accepted
   financial indicator used by investors and analysts to analyze and compare
   companies on the basis of operating performance.
   Profit before tax and profit before tax margin include a foreign exchange
2  loss of $23 million before-tax due to the devaluation of Venezuela's
   currency in the first quarter of 2013, and a provision for bad debt of $63
   million before-tax in Latin America in the fourth quarter of 2012.

Table 4: Adjustments to Operating Profit Before Tax^1
                                             Three Months Ended
(In millions)
                                              March 31, 2013
Adjustments to Operating Profit Before Tax
North America                              $ —
Latin America^2                              23
Europe/Africa/Russia Caspian                 —
Middle East/Asia Pacific                     —
Industrial Services                          —
Total Operations                           $ 23

1  There were no items identified requiring adjustment in the first and fourth
   quarters of 2012.
   Foreign exchange loss of $23 million before-tax due to the devaluation of
2  Venezuela's currency from the prior exchange rate of 4.3 Bolivars Fuertes
   per U.S. Dollar to 6.3 Bolivars Fuertes per U.S. Dollar, which applied to
   our local currency denominated balances.



Table 5: Supplemental Financial Information Excluding Certain Identified
Items

The following table contains non-GAAP measures of operating profit before tax
and operating profit before tax margin, excluding the $23 million charge for
the devaluation of the Venezuelan currency recorded in the first quarter of
2013 (see Table 4). There were no items requiring adjustment for the first
and fourth quarters of 2012.

                                     Three Months Ended
                                     March 31,             December 31,
(In millions)                        2013       2012       2012
Segment Revenue
North America                        $ 2,603    $ 2,863    $  2,559
Latin America                        590        573        639
Europe/Africa/Russia Caspian         854        893        950
Middle East/Asia Pacific             894        745        882
Industrial Services and Other        289        281        295
Total Operations                     $ 5,230    $ 5,355    $  5,325
Operating Profit Before Tax^1
North America                        $ 235      $ 401      $  222
Latin America^2                      72         67         8
Europe/Africa/Russia Caspian         93         153        173
Middle East/Asia Pacific             116        75         81
Industrial Services and Other        24         22         27
Total Operations                     $ 540      $ 718      $  511
Operating Profit Before Tax Margin^1
North America                        9       %  14      %  9         %
Latin America^2                      12      %  12      %  1         %
Europe/Africa/Russia Caspian         11      %  17      %  18        %
Middle East/Asia Pacific             13      %  10      %  9         %
Industrial Services and Other        8       %  8       %  9         %
Total Operations                     10      %  13      %  10        %

   Operating profit before tax is a non-GAAP measure defined as profit before
   tax ("income before income taxes") less certain identified costs.
   Operating profit before tax margin is a non-GAAP measure defined as
1  operating profit before tax divided by revenue. Management uses each of
   these measures because it believes they are widely accepted financial
   indicators used by investors and analysts to analyze and compare companies
   on the basis of operating performance and that these measures may be used
   by investors to make informed investment decisions.
   Profit before tax and profit before tax margin in the fourth quarter of
2  2012 include a provision for bad debt of $63 million before-tax in Latin
   America.

Baker Hughes Operational Highlights

In March 2013, Baker Hughes participated in the first successful marine
methane-hydrate production test well for a Japanese customer. The test was
conducted from a drillship in the Nankai Trough, approximately 60 km off the
southeast coast of Japan. We were contracted to conduct an engineering study
to design a completion system that would reduce the pressure in the hydrate
reservoir enough to break the hydrate down to methane and water, control sand
during production, and acquire large amounts of downhole data to be used in
subsequent reservoir modeling. Baker Hughes also provided the completion
fluids, pressure pumping, electronic submersible pump and wellbore
intervention services for the test well.

Baker Hughes introduced its JewelSuite™ 3D subsurface modeling software with
3D geomechanics functionality that enables customers to minimize drilling risk
and optimize well design. JewelSuite builds on the Baker Hughes JewelEarth™
platform and is designed to enable our customers to find sweet spots in the
shale plays, understand conductivity better, optimize well placements and
ultimately plan the ideal fracture design. The system combines Baker Hughes'
JewelSuite reservoir modeling software with Abaqus™ Finite Element Analysis
software.

In Russia, Baker Hughes was awarded two major contracts for our FracPoint™
technology to supply more than 80 sets of openhole completions in Russia to be
delivered over the next three years. These contracts represent the largest
international awards for Baker Hughes FracPoint technology to date.

Supplemental Financial Information

Supplemental financial information can be found on the Company's website at:
www.bakerhughes.com/investorin the Financial Information section.

Conference Call

The Company has scheduled a conference call to discuss management's outlook
and the results reported in today's earnings announcement. The call will
begin at 8a.m. Eastern time, 7a.m. Central time on Friday, April 19, 2013,
the content of which is not part of this earnings release. A slide
presentation providing summary financial and statistical information that will
be discussed on the conference call will also be posted to the Company's
website and available for real-time viewing. To access the call, please call
the conference call operator at: 800-446-1671 in the U.S., or 847-413-3362 for
international calls. Please call in 20 minutes prior to the scheduled start
time and ask for the "Baker Hughes Conference Call." A replay of the call
will be available through Friday, May 3, 2013. The number for the replay is:
888-843-7419 in the United States, or 630-652-3042 for international calls,
and the access code is: 34404573. To access the webcast, go to our Events and
Presentations page on the Company's website at:
http://www.bakerhughes.com/investor.

Forward-Looking Statements

This news release (and oral statements made regarding the subjects of this
release, including on the conference call announced herein) contain
forward-looking statements within the meaning of Section27A of the Securities
Act of 1933, as amended, and Section21E of the Securities Exchange Act of
1934, as amended, (each a "forward–looking statement"). The words
"anticipate," "believe," "ensure," "expect," "if," "intend," "estimate,"
"project," "forecasts," "predict," "outlook," "aim," "will," "could,"
"should," "potential," "would," "may," "probable," "likely," and similar
expressions, and the negative thereof, are intended to identify
forward–looking statements. There are many risks and uncertainties that could
cause actual results to differ materially from our forward-looking
statements. These forward-looking statements are also affected by the risk
factors described in the Company's Annual Report on Form 10-K for the year
ended December31,2012 and those set forth from time-to-time in other filings
with the Securities and Exchange Commission ("SEC"). The documents are
available through the Company's website at:
http://www.bakerhughes.com/investoror through the SEC's Electronic Data
Gathering and Analysis Retrieval System ("EDGAR") at: http://www.sec.gov. We
undertake no obligation to publicly update or revise any forward–looking
statement.

Our expectations regarding our business outlook and business plans; the
business plans of our customers; oil and natural gas market conditions; cost
and availability of resources; economic, legal and regulatory conditions and
other matters are only our forecasts regarding these matters.

These forward looking statements, including forecasts, may be substantially
different from actual results, which are affected by many risks including the
following risk factors and the timing of any of these risk factors:

Economic conditions – the impact of worldwide economic conditions and
sovereign debt crises in Europe; the effect that declines in credit
availability may have on worldwide economic growth and demand for
hydrocarbons; the ability of our customers to finance their exploration and
development plans; and foreign currency exchange fluctuations and changes in
the capital markets in locations where we operate.

Oil and gas market conditions – the level of petroleum industry exploration,
development and production expenditures; the price of, volatility in pricing
of, and the demand for crude oil and natural gas; drilling activity; drilling
permits for and regulation of the shelf and the deepwater drilling; excess
productive capacity; crude and product inventories; LNG supply and demand;
seasonal and other adverse weather conditions that affect the demand for
energy; severe weather conditions, such as tornadoes and hurricanes, that
affect exploration and production activities; Organization of Petroleum
Exporting Countries ("OPEC") policy and the adherence by OPEC nations to their
OPEC production quotas.

Terrorism and geopolitical risks – war, military action, terrorist activities
or extended periods of international conflict, particularly involving any
petroleum–producing or consuming regions; labor disruptions, civil unrest or
security conditions where we operate; expropriation of assets by governmental
action; cybersecurity risks and cyber incidents or attacks.

Price, market share, contract terms, and customer payments – our ability to
obtain market prices for our products and services; the ability of our
competitors to capture market share; our ability to retain or increase our
market share; changes in our strategic direction; the effect of industry
capacity relative to demand for the markets in which we participate; our
ability to negotiate acceptable terms and conditions with our customers,
especially national oil companies, to successfully execute these contracts,
and receive payment in accordance with the terms of our contracts with our
customers; our ability to manage warranty claims and improve performance and
quality; our ability to effectively manage our commercial agents.

Costs and availability of resources – our ability to manage the costs,
availability, distribution and delivery of sufficient raw materials and
components (especially steel alloys, chromium, copper, carbide, lead, nickel,
titanium, beryllium, barite, synthetic and natural diamonds, sand, gel,
chemicals, and electronic components); our ability to manage energy-related
costs; our ability to manage compliance-related costs; our ability to recruit,
train and retain the skilled and diverse workforce necessary to meet our
business needs and manage the associated costs; the effect of manufacturing
and subcontracting performance and capacity; the availability of essential
electronic components used in our products; the effect of competition,
particularly our ability to introduce new technology on a forecasted schedule
and at forecasted costs; potential impairment of long-lived assets;
unanticipated changes in the levels of our capital expenditures; the need to
replace any unanticipated losses in capital assets; labor-related actions,
including strikes, slowdowns and facility occupations; our ability to maintain
information security.

Litigation and changes in laws or regulatory conditions – the potential for
unexpected litigation or proceedings and our ability to obtain adequate
insurance on commercially reasonable terms; the legislative, regulatory and
business environment in the U.S. and other countries in which we operate;
outcome of government and legal proceedings, as well as costs arising from
compliance and ongoing or additional investigations in any of the countries
where the Company does business; new laws, regulations and policies that could
have a significant impact on the future operations and conduct of all
businesses; laws, regulations or restrictions on hydraulic fracturing; any
restrictions on new or ongoing offshore drilling or permit and operational
delays or program reductions as a result of the regulations in the Gulf of
Mexico and other areas of the world; changes in export control laws or
exchange control laws; the discovery of new environmental remediation sites;
changes in environmental regulations; the discharge of hazardous materials or
hydrocarbons into the environment; restrictions on doing business in countries
subject to sanctions; customs clearance procedures; changes in accounting
standards; changes in tax laws or tax rates in the jurisdictions in which we
operate; resolution of tax assessments or audits by various tax authorities;
and the ability to fully utilize our tax loss carry forwards and tax credits.

Baker Hughes is a leading supplier of oilfield services, products, technology
and systems to the worldwide oil and natural gas industry. The Company's
58,000-plus employees today work in more than 80 countries helping customers
find, evaluate, drill, produce, transport and process hydrocarbon resources.
For more information on Baker Hughes' century-long history, visit:
www.bakerhughes.com.

Investor Contacts:
Trey Clark, +1.713.439.8039, trey.clark@bakerhughes.com
Eric Holcomb, +1.713.439.8822, eric.s.holcomb@bakerhughes.com
Media Contact:
Teresa Wong, +1.713.439.8110, teresa.wong@bakerhughes.com

SOURCE Baker Hughes

Website: http://www.bakerhughes.com
 
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