Baker Hughes 2013 Annual Report Download - page 54

2013 Annual Report 24
due to high oil price differentials as compared to WTI and wet weather in southern Alberta and Saskatchewan.
Overall, Canada rig counts decreased 3% in 2013 compared to 2012.
Outside North America, the rig count increased 5% in 2013 compared to 2012. The rig count in Latin America
was relatively flat as increased rig activity in Argentina and Ecuador was offset by reductions in Brazil and
Colombia. The rig count in Continental Europe increased by 18% with higher activity in Turkey, the Balkans, and
Sakhalin. The North Sea rig count increased by 5%, primarily due to increased activity in Norway. In Africa, the rig
count increased primarily due to the resumption of drilling activities in Libya, as well as higher activity in Algeria and
Kenya. The rig count increased 5% in the Middle East due to higher activity in Iraq, Abu Dhabi and Pakistan offset
by a reduction in Egypt due to political unrest.
2012 Compared to 2011
The rig count in North America decreased 1% in 2012 compared to 2011 as natural gas-directed rig counts
declined 36%, largely offset by an increase in oil-directed rig counts of 28%. The natural gas-directed rig count
reflected a 37% decrease in the U.S. and a 27% decrease in Canada. The oil-directed rig count increased 38% in
the U.S., but was slightly offset by a 6% decrease in Canada. Natural gas-directed drilling was negatively impacted
by the continued weakness in North America natural gas prices which discouraged new investment in natural gas
fields. The growth in oil-directed drilling in the U.S. was primarily a result of strong oil prices and the industry’s
ability to apply drilling and completion techniques to unconventional oil reservoirs that were originally applied to
similar natural gas reservoirs. In Canada, many operators curtailed their drilling plans in the second half of 2012
due to reduced cash flows from natural gas activities and high oil price differentials as compared to WTI. Overall,
Canada rig counts declined 13% in 2012 compared to 2011.
Outside North America, the rig count increased 6% in 2012 compared to 2011. Starting June 2012, the Middle
East rig count included Iraq. Excluding Iraq, which had an average of 43 rigs in 2012, the international rig count
increased 2%. The rig count in Latin America was relatively flat as increased rig activity in Mexico and Ecuador was
offset by reductions in Colombia and Venezuela. The rig count in Europe was also flat, with gains in the North Sea
due to higher activity in the U.K. offset by reductions in Continental Europe. In Africa, the rig count increased
primarily due to the resumption of drilling activities in Libya, as well as higher activity in Algeria. The rig count
increased in the Middle East due to higher activity in Saudi Arabia, Oman and Abu Dhabi, as well as the inclusion of
Iraq. In Asia Pacific, the rig count decreased as a result of decreased activity in Indonesia and offshore China,
partially offset by increased activity in Malaysia and Australia.
Baker Hughes Well Count
Baker Hughes began providing U.S. well count data to the oil and natural gas industry in July 2013. The Baker
Hughes Well Count is an extension of the Baker Hughes Rig Count, and provides a quarterly census of the number
of new onshore oil and natural gas wells where drilling began, or spud, in the U.S. The Baker Hughes Well Count
includes wells that are identified to be significant consumers of oilfield services and supplies, and excludes wells
categorized as workover, plugged and abandoned or completed. Well count trends are governed by oil company
exploration and development spending in the U.S., which in turn is influenced by the current and expected price of
oil and natural gas. Well counts therefore may reflect the strength and stability of energy prices. However, there
are many other factors that can influence the well count, including new technologies, pad drilling, weather, seasonal
spending and changes to local regulations. We believe the counting process and resulting data is reliable; however,
it is subject to our ability to obtain accurate and timely information.
During 2013, 35,676 wells were spud on land in the U.S. This compares to 36,824 wells spud in 2012, or a
reduction of 3%.
RESULTS OF OPERATIONS
The discussions below relating to significant line items from our consolidated statements of income are based
on available information and represent our analysis of significant changes or events that impact the comparability of
reported amounts. Where appropriate, we have identified specific events and changes that affect comparability or
trends and, where reasonably practicable, have quantified the impact of such items. In addition, the discussions