Baker Hughes 2007 Annual Report Download - page 89

6 Baker Hughes Incorporated
Specific opportunities for competitive differentiation include:
•฀ the฀ability฀to฀lift฀fluids฀of฀differing฀physical฀properties฀and฀
chemical compositions,
•฀ system฀reliability฀and฀run฀life,
•฀ the฀ability฀of฀the฀system฀to฀optimize฀production,
•฀ operating฀efficiency,฀and
•฀ service฀delivery.
Centrilift’s primary competitors in the ESP market include
Schlumberger and John Wood Group PLC (ESP Inc.). In the
PCP market, the primary competitors include Weatherford,
Robbins & Myers, Inc. and Kudu Industries, Inc.
Key business drivers for Centrilift include oil production
levels, as well as the current and expected future price of
oil, the volume of water produced in mature basins and gas
dewatering in coal bed methane and other gas wells.
ProductionQuest
The ProductionQuest business unit is a provider of perma-
nent monitoring systems and chemical automation systems.
Permanent Monitoring Systems. Permanent downhole
gauges are used in oil and gas wells to measure temperature,
pressure, flow and other parameters in order to monitor well
production as well as to confirm the integrity of the completion
and production equipment in the well. ProductionQuest is a
leading provider of electronic gauges including the engineering,
application and field services necessary to complete an installa-
tion of a permanent monitoring system. In addition, they pro-
vide chemical injection line installation and services for treating
wells for corrosion, paraffin, scale and other well performance
problems. They also provide fiber optic based permanent down-
hole gauge technology for measuring pressure, temperature
and distributed temperature. The benefits of fiber optic sensing
include reliability, high temperature properties and the ability
to obtain distributed readings.
Chemical Automation Systems. Chemical automation
systems remotely monitor chemical tank levels that are resident
in producing field locations for well treatment or production
stimulation as well as continuously monitor and control chemi-
cals being injected in individual wells. By using these systems,
a producer can ensure proper chemical injection through real-
time monitoring and can also remotely modify the injection
parameters to ensure optimized production.
The main drivers of customer purchasing decisions for both
permanent monitoring and chemical automation include appli-
cation engineering expertise, ability to integrate a complete
system, product reliability, functionality and local field support.
Specific opportunities for competitive differentiation include:
•฀ the฀ability฀to฀provide฀application฀engineering฀and฀
economic return analysis,
•฀ product฀innovation,
•฀ gauge฀measurement฀accuracy,
•฀ product฀life฀and฀performance,฀and
•฀ installation฀and฀service฀capabilities.
ProductionQuest’s primary competitors include
Schlumberger, Halliburton and Weatherford.
Key business drivers for ProductionQuest include the
level of oil and gas prices, total daily oil and gas produc-
tion and capital spending for critical wells (offshore, subsea,
high production onshore and remotely located onshore).
WESTERNGECO
WesternGeco was a seismic venture in which we owned
30% and Schlumberger owned 70%. On April 28, 2006, we
sold our 30% interest to Schlumberger for $2.4 billion in cash
and recorded a pre-tax gain of $1,743.5 million ($1,035.2 million
after-tax).
For additional information related to WesternGeco, see the
“Related Party Transactions” section in Item 7 and Note 5 of
the Notes to Consolidated Financial Statements in Item 8, both
contained herein.
MARKETING, COMPETITION AND ECONOMIC CONDITIONS
We market our products and services on a product line
basis primarily through our own sales organizations, although
certain of our products and services are marketed through
independent distributors, commercial agents, licensees or sales
representatives. Over the past several years, we have signifi-
cantly reduced the number of commercial agents that we use
to conduct our business. In the markets in which we formerly
utilized commercial agents, we have established our own
marketing operations and are continuing to build direct rela-
tionships with our customers. We ordinarily provide technical
and advisory services to assist in our customers’ use of our
products and services. Stock points and service centers for
our products and services are located in areas of drilling and
production activity throughout the world.
Our products and services are sold in highly competitive
markets, and revenues and earnings can be affected by changes
in competitive prices, fluctuations in the level of drilling, work-
over and completion activity in major markets, general economic
conditions, foreign currency exchange fluctuations and govern-
mental regulations. We compete with the oil and natural gas
industry’s largest diversified oilfield services providers, as well
as many small companies. We believe that the principal com-
petitive factors in our industries are product and service quality,
availability and reliability, health, safety and environmental
standards, technical proficiency and price.
Further information is contained in “Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of
Operations” and Note 13 of the Notes to Consolidated Finan-
cial Statements in Item 8, both contained herein.
INTERNATIONAL OPERATIONS
We operate in over 90 countries around the world and
our corporate headquarters is in Houston, Texas. We have
significant manufacturing operations in various countries,
including, but not limited to, the United States (Texas, Oklahoma
and Louisiana), the United Kingdom (Scotland and Northern
Ireland), Germany (Celle), and South America (Venezuela and
Argentina). As of December 31, 2007, we had approximately
35,800 employees of which approximately 57% work outside
the United States.
The business operations of our divisions are organized
around four primary geographic regions: North America,
Latin America, Middle East and Asia Pacific, and Europe, Africa,
Russia and the Caspian. Each region has a council comprised
of regional vice presidents from each division as well as repre-
sentatives from various functions such as human resources,
legal including compliance, marketing, finance and treasury,