Baker Hughes 2004 Annual Report Download - page 8

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To฀Our฀Stockholders
2004฀was฀a฀strong฀year฀in฀which฀Baker฀
Hughes฀delivered฀record฀revenues฀and฀
operating฀profits.฀We฀continued฀to฀provide฀
Best-in-Class฀products฀and฀services฀in฀a฀
growing฀oilfield฀market,฀and฀we฀introduced฀
new฀technologies฀that฀helped฀customers฀
improve฀their฀exploration฀and฀production฀
programs.฀At฀the฀same฀time,฀we฀main-
tained฀capital฀discipline฀and฀our฀emphasis฀
on฀achieving฀returns฀that฀exceed฀our฀cost฀
of฀capital.฀Building฀for฀the฀future,฀we฀
increased฀our฀focus฀on฀oilfield฀services,฀
advanced฀our฀high฀performance฀culture,฀
and฀began฀implementing฀our฀long-term฀
Strategic฀Framework.
During฀the฀year,฀the฀worldwide฀rig฀
count฀rose฀to฀its฀highest฀level฀since฀1986,฀
as฀prices฀for฀oil฀and฀natural฀gas฀reached฀
historic฀highs.฀In฀2004,฀Baker฀Hughes’฀฀
business฀grew฀faster฀than฀drilling฀activity.฀
Revenues฀of฀$6.1฀billion฀were฀up฀16.2%฀
from฀the฀prior฀year,฀while฀the฀worldwide฀
rotary฀rig฀count฀rose฀10.1%.฀Operating฀
profit฀after฀tax฀was฀$528.2฀million฀in฀2004,฀
up฀61.0%฀from฀$328.0฀million฀(excluding฀
non-operational฀charges)฀in฀2003.฀(See฀
the฀“Selected฀Financial฀Highlights”฀for฀฀
reconciliation฀of฀operating฀profit฀after฀tax฀
to฀income฀from฀continuing฀operations.)฀
Our฀oilfield฀operating฀margins,฀excluding฀
WesternGeco,฀were฀16.9%฀in฀2004,฀up฀
from฀14.4%฀in฀the฀prior฀year,฀reflecting฀
higher฀demand฀and฀stronger฀pricing.
Despite฀strong฀commodity฀prices฀in฀
2004,฀several฀factors฀restrained฀upstream฀
activity.฀These฀included฀a฀disciplined฀capital฀
approach฀by฀large฀integrated฀customers,฀
strikes฀in฀Norway,฀strikes฀and฀political฀dis-
ruption฀in฀Nigeria,฀and฀hurricanes฀in฀the฀
Gulf฀of฀Mexico.฀Activity฀fell฀in฀the฀North฀
Sea฀and฀did฀not฀increase฀significantly฀in฀฀
the฀Gulf฀of฀Mexico.฀Both฀are฀important฀
markets฀for฀Baker฀Hughes.
Oilfield฀Focus
During฀the฀year,฀we฀completed฀the฀
divestiture฀of฀our฀remaining฀non-oilfield฀
operations.฀In฀January฀2004,฀we฀closed฀on฀
the฀sale฀of฀BIRD฀Machine฀to฀Group฀Andritz฀
of฀Austria.฀In฀March,฀we฀sold฀our฀remain-
ing฀interest฀in฀Petreco฀International฀to฀฀
Cooper฀Cameron฀Corporation.฀And฀in฀฀
September,฀we฀sold฀Baker฀Hughes฀Mining฀
Tools฀to฀Atlas฀Copco฀North฀America,฀Inc.
Operations฀Highlights
During฀2004,฀all฀seven฀Baker฀Hughes฀
product฀line฀divisions฀increased฀revenues,฀
margins฀and฀operating฀profits,฀and฀฀
This฀Annual฀Report฀to฀Stockholders,฀including฀the฀letter฀to฀stockholders฀from฀Chairman฀Chad฀C.฀Deaton,฀contains฀forward-looking฀state-
ments฀within฀the฀meaning฀of฀Section฀27A฀of฀the฀Securities฀Act฀of฀1933,฀as฀amended,฀and฀Section฀21E฀of฀the฀Securities฀Exchange฀Act฀of฀
1934,฀as฀amended.฀The฀words฀“will,”฀“expect,”฀“should,”฀“scheduled,”฀“plan,”฀“aim,”฀“ensure,”฀“believe,”฀“promise,”฀“anticipate,”฀“could”฀
and฀similar฀expressions฀are฀intended฀to฀identify฀forward-looking฀statements.฀Baker฀Hughes’฀expectations฀regarding฀these฀matters฀are฀only฀
its฀forecasts.฀These฀forecasts฀may฀be฀substantially฀different฀from฀actual฀results,฀which฀are฀affected฀by฀many฀factors,฀including฀those฀listed฀
in฀“Management’s฀Discussion฀and฀Analysis฀of฀Financial฀Condition฀and฀Results฀of฀Operations”฀contained฀in฀Item฀7฀of฀the฀Annual฀Report฀on฀
Form฀10-K฀of฀Baker฀Hughes฀Incorporated฀for฀its฀year฀ended฀December฀31,฀2004.฀The฀use฀of฀“Baker฀Hughes,”฀“our,”฀“we”฀and฀similar฀terms฀
are฀not฀intended฀to฀describe฀or฀imply฀particular฀corporate฀organizations฀or฀relationships.
4฀฀฀฀Baker฀Hughes฀Incorporated