Baker Hughes 2015 Annual Report Download - page 36

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2015 Compared to 2014
The rig count in North America decreased 47% in 2015 compared to 2014 primarily driven by a 52% decline in
oil-directed rigs, as a result of reduced spending from our customers as they adapt to a lower oil price environment.
The oil-directed rig count decreased 51% in the U.S. as lower WTI prices have forced operators to reduce their
exploration and development spending in order to protect their cash flows, as they focus more on production
optimization opportunities. In Canada, the oil-directed rig count has decreased by 61% as many operators curtailed
their drilling plans as most heavy oil sands projects are not economical at current oil prices. The natural gas-
directed rig count in North America declined 32% in 2015 as natural gas prices deteriorated 40% compared to the
2014 average, with natural gas-directed drilling declining 32% in the U.S. and 33% in Canada.
Outside North America, the rig count decreased 13% in 2015 compared to 2014, also driven by reduced
customer spending and a lower oil price environment. The rig count in Latin America decreased 20% as a result of
customer budgetary constraints across most of the region, primarily in Mexico, Colombia, and Ecuador. The one
exception was in the emerging unconventional plays in Argentina where activity remained relatively stable in 2015.
The North Sea rig count decreased by 7%, largely due to a decline in the drilling activity in the Netherlands. The rig
count in Continental Europe decreased by 24%, mainly as a result of reduced drilling in Turkey and Romania. In
Africa, the rig count decreased 21%, predominantly due to reduced customer spending across the majority of the
region, particularly in Libya, Chad, Angola, and Nigeria. The 2015 rig count in the Middle East remained unchanged
from 2014 as activity declines in Iraq and Egypt were offset by increased activity in Saudi Arabia, Oman, Abu Dhabi
and Kuwait. The rig count in Asia Pacific decreased 13% as a consequence of reduced drilling activity primarily in
India, Indonesia, Australia and New Zealand.
2014 Compared to 2013
The rig count in North America increased 6% in 2014 compared to 2013 primarily driven by a 9% growth in oil-
directed rigs. The oil-directed rig count increased 11% in the U.S. as a result of increased exploration and
production spending, but decreased by 6% in Canada where many operators curtailed their oil-directed drilling
plans in the second half of 2014 due to high oil price differentials as compared to WTI and wet weather in southern
Alberta and Saskatchewan. The natural gas-directed rig count in North America declined 2% reflecting a 13%
decrease in the U.S. partially offset by a 34% increase in Canada. Natural gas-directed drilling in the U.S. was
negatively impacted by the continued weakness in North America natural gas prices which discouraged new
investment in natural gas fields. In Canada, the increase in natural gas-directed rigs was driven by drilling in
condensate rich zones in Alberta to service the oil sands drilling activity. Overall, Canada rig counts increased 7%
in 2014 compared to 2013.
Outside North America, the rig count increased 3% in 2014 compared to 2013. The rig count in Latin America
decreased 5% as a result of reduced rig activity in Brazil and Mexico, partially offset by an increase in activity in the
emerging unconventional plays in Argentina. The North Sea rig count decreased by 5%, primarily due to a decline
in the rig activity in Norway. The rig count in Continental Europe increased by 13% with higher activity in Turkey
and Romania. In Africa, the rig count increased 7% primarily due to higher activity in Kenya, Angola, and Chad.
The rig count increased 9% in the Middle East due to higher activity in Saudi Arabia, Oman and Kuwait, slightly
offset by a reduction in Iraq due to political unrest. The rig count in Asia Pacific increased 3% due to increased
activity in offshore China, partially offset by activity reduction in Indonesia, Malaysia and New Zealand.
RESULTS OF OPERATIONS
The discussions below relating to significant line items from our consolidated statements of income (loss) 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 below for revenue and cost of revenue are on a total basis as the business drivers for product sales
and services are similar. All dollar amounts in tabulations in this section are in millions of dollars, unless otherwise
stated.