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32
OPERATING INCOME:
Favorable
Percentage
Millions of dollars
2012
2011
(Unfavorable)
Change
Completion and Production
$
3,144
$
3,733
$
(589
)
(16
)%
Drilling and Evaluation
1,675
1,403
272
19
Corporate and other
(660
)
(399
)
(261
)
65
Total operating income
$
4,159
$
4,737
$
(578
)
(12
)%
By geographic region:
Completion and Production:
North America
$
2,260
$
3,341
$
(1,081
)
(32
)%
Latin America
206
159
47
30
Europe/Africa/CIS
347
48
299
623
Middle East/Asia
331
185
146
79
Total
3,144
3,733
(589
)
(16
)
Drilling and Evaluation:
North America
680
641
39
6
Latin America
393
305
88
29
Europe/Africa/CIS
246
191
55
29
Middle East/Asia
356
266
90
34
Total
1,675
1,403
272
19
Total operating income by region
(excluding Corporate and other):
North America
2,940
3,982
(1,042
)
(26
)
Latin America
599
464
135
29
Europe/Africa/CIS
593
239
354
148
Middle East/Asia
687
451
236
52
The 15% increase in consolidated revenue in 2012 compared to 2011 was primarily due to higher activity in Latin
America, Middle East/Asia, and North America. On a consolidated basis, all product service lines experienced revenue growth
from 2011. Revenue outside of North America was 44% of consolidated revenue in 2012 and 42% of consolidated revenue in
2011.
The 12% decrease in consolidated operating income compared to 2011 was mainly due to higher costs, particularly of
guar gum, and pricing pressure for production enhancement services in North America. Operating income in 2012 was
negatively impacted by a $300 million, pre-tax, loss contingency related to the Macondo well incident reflected in Corporate
and other expenses. Additionally, our results were impacted by a $48 million, pre-tax, charge related to an earn-out adjustment
due to significantly better than expected performance of a past acquisition in the Latin America and North America regions as
well as a $20 million, pre-tax, gain related to the settlement of a patent infringement lawsuit that was recorded in Corporate and
other expense. Operating income in 2011 was adversely impacted by a $25 million, pre-tax, impairment charge on an asset held
for sale in the Europe/Africa/CIS region, $11 million, pre-tax, of employee separation costs in the Eastern Hemisphere, and a
$59 million, pre-tax, charge in Libya, to reserve for certain doubtful accounts receivable and inventory. During 2012, we
received $42 million related to the Libya reserve that was established in 2011 for receivables.
Following is a discussion of our results of operations by reportable segment.
Completion and Production revenue increased in all geographic regions compared to 2011, with strong international
growth. North America revenue rose 11%, primarily due to increased cementing services and completions tools sales, as well as
higher activity in production enhancement from an increased demand for hydraulic fracturing in the United States. Latin
America revenue increased 27% due to improved activity in most product service lines in Mexico, Brazil, and Venezuela.
Europe/Africa/CIS revenue increased 20%, driven by strong demand for completion tools across the region and increased
cementing services in Mozambique and Nigeria. Middle East/Asia revenue grew 24% due to higher activity in all product
service lines in Australia, Malaysia, and Indonesia, partially offset by lower completion tools sales in China and decreased
activity in Singapore. Revenue outside of North America was 30% of total segment revenue in 2012 and 28% of total segment
revenue in 2011.