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25
reducing discretionary spending, and lowering costs within our supply chain. As previously announced in late
January 2015, we are undertaking a workforce reduction of approximately 7,000 positions and will record a charge
in the range of $160 million to $185 million for severance during the first quarter of 2015. Additionally, we are
reviewing our operations for other cost saving or consolidation opportunities that may result in asset impairments
and further workforce reductions. Although these actions will reduce our cost base, we still anticipate margin
contraction to occur globally throughout 2015.
The International Energy Agency indicates in their January 2015 report that a rebalancing of the market could
begin as early as the second half of the year; however, this does not mean that we will return to 2014 oil prices, as
the market has clearly undergone a historical change as result of the U.S. oil production growth.
Technology will be a critical differentiator for oilfield service providers in this new environment, as our
customers’ need for innovative solutions is more important than ever before. As such, we remain committed to our
strategy of leveraging our strength in technology development to deliver differentiating new products and services
which are designed to solve our customer’s three biggest challenges: efficient well construction; optimized well
production and increase ultimate recovery. The current market conditions notwithstanding, the long term outlook for
our industry remains strong. The world’s demand for energy will continue to rise, and the supply of energy will
continue to increase in complexity, requiring greater service intensity and more advanced technology for oilfield
service.
BUSINESS ENVIRONMENT
We operate in more than 80 countries helping customers find, evaluate, drill, produce, transport and process
hydrocarbon resources. Our revenue is predominately generated from the sale of products and services to major,
national, and independent oil and natural gas companies worldwide, and is dependent on spending by our
customers for oil and natural gas exploration, field development and production. This spending is dependent on a
number of factors, including our customers’ forecasts of future energy demand and supply, their access to
resources to develop and produce oil and natural gas, their ability to fund their capital programs, the impact of new
government regulations and most importantly, their expectations for oil and gas prices as a key driver of their cash
flows.
Oil and Natural Gas Prices
Oil and natural gas prices are summarized in the table below as averages of the daily closing prices during
each of the periods indicated.
2014 2013 2012
Brent oil prices ($/Bbl) (1) $ 98.88 $ 108.81 $ 111.96
WTI oil prices ($/Bbl) (2) 93.03 97.98 94.12
Natural gas prices ($/mmBtu) (3) 4.35 3.73 2.76
(1) Bloomberg Dated Brent (“Brent”) Oil Spot Price per Barrel
(2) Bloomberg West Texas Intermediate (“WTI”) Cushing Crude Oil Spot Price per Barrel
(3) Bloomberg Henry Hub Natural Gas Spot Price per million British Thermal Unit
Outside North America, customer spending is most heavily influenced by Brent oil prices, which fluctuated
significantly throughout the year, ranging from a high of $115.00/Bbl in June 2014 to a low of $55.76/Bbl in
December 2014. Brent oil prices were the highest in the second quarter of 2014 as geopolitical disputes in the
Middle East and Africa reduced output and threatened future production. In September 2014, oil prices began to
steadily decline as rapidly increasing production from the tight oil plays in North America, coupled with unfavorable
economic data from Europe and Asia, led to negative demand forecasts and fears of a global economic downturn,
which in turn, caused an imbalance in the market. OPEC's decision in late November to maintain its current crude
oil production target, despite lower oil prices, put additional downward pressure on price expectations, and as a
result, Brent oil prices exited 2014 reflecting a 52% reduction compared to the peak earlier in the year.