Baker Hughes: Record revenue in 4Q 2014

Baker Hughes, soon to merge with Halliburton, today reported its revenue for the fourth quarter 2014 was a record $6.6 billion, up 6% compared to $6.3 billion in the third quarter of 2014.
Adjusted EBITDA for the fourth quarter of 2014 was $1.4 billion, an increase of $261 million or 22% compared to the third quarter of 2014.

Adjusted net income for the fourth quarter of 2014 was a record $629 million ($1.44 per diluted share), up 41% compared to $447 million ($1.02 per diluted share) in the prior quarter. Adjusted net income for the fourth quarter of 2014 excludes a $34 million before and after-tax gain ($0.08 per diluted share) associated with the deconsolidation of a joint venture.

On a GAAP basis, net income attributable to Baker Hughes for the fourth quarter was $663 million ($1.52 per diluted share), a 77% increase compared to $375 million ($0.86 per diluted share) in the third quarter of 2014.

The effective tax rate on adjusted net income for the fourth quarter was 31.5%, compared to 34.6% in the third quarter of 2014. The decrease is primarily attributed to the recent extension of the U.S. research and development tax credit, as well as a more favorable geographic mix of earnings.

Free cash flow for the current quarter was a record $838 million, a 16% increase compared to $725 million for the third quarter of 2014.

For the fourth quarter, capital expenditures were $503 million, compared to $425 million in the third quarter of 2014. Depreciation and amortization expense for the fourth quarter was $468 million, up 3% compared to $455 million in the previous quarter.

Martin Craighead, Baker Hughes Chairman and Chief Executive Officer commented, “Our fourth quarter results punctuate a record year for our company in 2014. We delivered very strong growth in revenue, earnings and free cash flow during the fourth quarter. In spite of increasing concerns of challenging market conditions, we remained focused on achieving the performance objectives that we laid out last year. This was made possible by managing the business more efficiently and delivering on our strategy of converting innovations into earnings through new technologies that provide value to customers and competitive differentiation for Baker Hughes.”

Bearish sentiment

Craighead added, Baker Hughes Chairman and Chief Executive Officer commented, “When we reflect on the marketplace, the bearish sentiment that has pervaded our industry is understandable, considering the steep drop in commodity prices in recent months. While market demand ended up being more resilient in the fourth quarter than many had predicted, the recent declines seen in rig counts will clearly affect results in 2015.

“We are taking proactive steps to manage the business through these challenges, and we are well positioned financially for the months ahead. Our strategy remains unchanged as we continue to focus on execution and delivering new technologies that lower the cost of well construction, optimize well production, and increase ultimate recoveries. Regarding our pending merger, I am pleased with the overall progress and the efforts of the integration teams to develop plans for an efficient and effective combination.”