Baker Hughes 2004 Annual Report Download - page 68
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Please find page 68 of the 2004 Baker Hughes annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.gasproduction.In2004,ourcustomers’spendingdirectedto
bothworldwideoilandNorthAmericanoilandnaturalgas
projectsincreased.Theseincreasesweredrivenbytheper-
ceived,multi-yearrequirementtoproducemorehydrocarbons
tomeetthegrowthindemand,offsetproductiondeclines,
increaseinventorylevelsandrebuildexcessproductivecapacity.
Theincreasesweresupportedbyhistoricallyhighoilandnatu-
ralgasprices.Ourcustomers’spendingonoilprojectsis
expectedtocontinuetogrowin2005andinthenearfuture,
withabiastowardsthoseprojectsintheMiddleEast,Russia
andtheCaspianregionandAfrica.SpendinginNorthAmerica
isdominatedbyspendingonnaturalgasprojects.InNorth
America,customeractivityisexpectedtogrowmodestlyin
2005comparedwith2004levels,whichwerethehighestin
overtwodecades.
In2004,wereportedrevenuesof$6,103.8million,a
16.2%increasecomparedwith2003.Incomefromcontinu-
ingoperationsfor2004was$528.2millioncomparedwith
$177.9millionin2003.Includedinincomefromcontinuing
operationsfor2003arecharges,netoftax,of$105.9million
relatedtoourshareofaWesternGecorestructuringcharge
and$45.3millionrelatedtotheimpairmentofourinvestment
inWesternGeco.Bothourrevenuesandoperatingprofitsset
alltimerecordsin2004.
During2004,theBakerHughesrigcountrosetoitshigh-
estlevelsince1986,asoilandnaturalgascompaniesaround
theworldrecognizedtheneedtoincreaseproductivecapacity
tomeetthegrowingdemandforhydrocarbons.Oilandnatu-
ralgaspriceswereathistorichighsin2004,reflectingstrong
demandandrelativelylowinventories.Thelackofexcesspro-
ductivecapacityandseveralgeopoliticalandweatherevents
alsocontributedtohigherandmorevolatilecommodityprices
in2004.In2004,ourrevenuesincreased16.2%compared
with2003,outpacingthe10.1%increaseintheworldwide
averagerigcountfor2004comparedwith2003.InNorth
America,our2004revenuesincreased14.4%comparedwith
2003,whiletherigcountincreased10.9%for2004compared
with2003,drivenprimarilybyland-baseddrillingfornatural
gas.OutsideNorthAmerica,our2004revenuesincreased
17.5%comparedwith2003,whiletherigcountincreased
8.6%for2004comparedwith2003.Revenuegrowthwas
particularlynoteworthyinRussiaandtheCaspianregion,Latin
America,theMiddleEast,AfricaandAsia.OurEuropeanreve-
nuesin2004wereupmodestlycomparedwith2003,despite
a15.2%dropintheNorthSearigcount.
Thecriticalsuccessfactorsforourbusinessareembodied
inourlong-termstrategy,whichwecallourStrategicFrame-
work.Thisstrategyincludesthedevelopmentandmainte-
nanceofahighperformanceculturefoundedonourCore
ValuesandKeystoSuccess;ourproductlinefocusedorganiza-
tionandourfocusonbest-in-classopportunities;maintaining
ourfinancialflexibilityandfinancialdiscipline;andexecution
ofourstrategiesforproductdevelopmentandcommercializa-
tion,manufacturingqualityandservicequality.
Ourongoingefforttodevelopandmaintainahighperfor-
manceculturestartswithourCoreValuesofintegrity,team-
work,performanceandlearningandwithourKeystoSuccess.
Weemploysuccessionplanningeffortstodevelopleaders
acrossallourbusinessesthatembodytheseCoreValuesand
representthediversityofourcustomerbase.Wehireandtrain
employeesfromaroundtheworldtoensurethatwehavea
well-trainedworkforceinplacetosupportourbusinessplans.
Ourfocusonbest-in-classopportunitiesstartswithour
productlinefocusedorganizationstructure.Webelievethat
throughourproductlinefocuseddivisions,wedevelopthe
technologiesthatdeliverbest-in-classvaluetoourcustomers.
Asanenterprise,wearealsofocusedonthosemarketsthat
webelieveprovidebest-in-classopportunitiesforgrowth.Our
managementteamhasidentifiedmarketsforimmediatefocus
includingRussiaandtheCaspianregionandNOCs.
Ourfocusonfinancialflexibilityandfinancialdisciplineis
thebackboneofourefforttodeliverdifferentialgrowthat
superiormarginswhileearninganacceptablereturnonour
investmentsthroughoutthebusinesscycle.Investmentsare
givenpriorityandfundeddependingontheirabilitytoprovide
risk-adjustedreturnsinexcessofourcostofcapital.Oureffort
toobtainthebestpricewecanforourproductsandservices
beginswithourapproachtocapitaldiscipline.Overthepast
fewyears,wehaveinvestedforgrowthinourbusiness,repaid
debt,paiddividendsandrepurchasedstock,andweexpectto
maintaintheflexibilitytobeabletoundertakesuchactivities
inthefuture.
ThelastelementofourStrategicFrameworkfocuseson
ourabilitytoidentify,developandcommercializenewprod-
uctsandservicesthatwillleadtodifferentialgrowthatsupe-
riormarginsinourbusiness.Theeffortextendstoeveryphase
ofouroperations,includingcontinuousimprovementpro-
gramsinourmanufacturingfacilitiesandfieldoperations
thatsupportourgoalofflawlessexecutionatthewellsite.
Theexecutionofour2005businessplanandtheability
tomeetour2005financialobjectivesaredependentona
numberoffactors.Thesefactorsinclude,butarenotlimited
to,ourabilityto:managerawmaterialandcomponentcosts
(especiallysteelalloys,copperandchemicals)whichare
expectedtoincreasein2005comparedwith2004;continue
tomakeongoingimprovementsintheproductivityofour
manufacturingorganization;recruit,trainandretaintheskilled
anddiverseworkforcenecessarytomeetourbusinessneeds;
expandourbusinessinareasthataregrowingrapidly(suchas
RussiaandtheCaspianregion)withcustomerswhosespend-
ingisexpectedtoincreasethemostrapidly(suchasNOCs),
andinareasinwhichweareunderrepresented(suchasthe
MiddleEast);andrealizepriceincreasescommensuratewith
thevalueweprovidetoourcustomers.Forafulldiscussion
ofriskfactorsandforward-lookingstatements,pleasesee
the“RiskFactorsRelatedtotheWorldwideOilandNatural
GasIndustry”,“RiskFactorsRelatedtoOurBusiness”and
“Forward-LookingStatements”sectionscontainedherein.
18BakerHughesIncorporated