Driven by decade-high oil prices, industry leader Baker Hughes Incorporated reported operating profit after tax from continuing operations for the third quarter of 2000, excluding non-operational items, was $70.6 million, up 456% compared with $12.7 million for the third quarter of 1999, and up 72% compared with $41 million for the second quarter of 2000.
Net income for the third quarter of 2000 was $66.7 million compared to $13.2 million for the third quarter of 1999. Results for the third quarter of 2000 include the impact of losses, net of tax, totaling $3.9 million related to the company's holdings of Varco International, Inc. stock and the sale of the Norward product line of Baker Atlas.
Michael E. Wiley, Baker Hughes chairman, president, and CEO, said "I am very pleased with the results for the quarter. We are committed to building on our competitive positions to continually improve performance in every division. We have increased our operational earnings in each quarter of this year. Our focus on the balance sheet, coupled with improving earnings, has also resulted in a reduction of debt in excess of $200 million during the quarter."
Mr. Wiley continued, "North American natural gas driven exploration and production spending is expected to remain strong. While rig and manpower availability will cause the rate of revenue growth to moderate in the future, the quality of North American revenues should continue to improve as pricing increases are realized. Outside of North America, where Baker Hughes generates approximately two-thirds of its revenues, our customers are planning increases in exploration and production spending on the order of 15-20 percent next year. We are positioned to benefit from the expansion of international spending in 2001."
He added, "Three of our divisions, Baker Oil Tools, Centrilift and Hughes Christensen, had returns exceeding their cost of capital in the third quarter, and two others, Baker Atlas and Baker Petrolite had returns exceeding their cost of capital, excluding goodwill. Excluding Western Geophysical and E&P Solutions, in the first nine months of 2000, Baker Hughes invested $148 million in oilfield operations. In the fourth quarter, we expect to invest approximately $80 million."
In connection with the company's strategy to substantially exit the oil and gas exploration business, it announced that, subsequent to September 30, 2000, it sold its interests in its China oil and gas properties, signed an agreement to sell its Gulf of Mexico properties and is negotiating the sale of an additional property. The proceeds from these sales are expected to be approximately $53 million. In addition, the company will write off its remaining exploration properties.
The company will record an after-tax loss of approximately $75 million in the fourth quarter as a result of these sales and asset write-offs. In taking these actions, the company will avoid one-quarter of a billion dollars in future capital expenditures over the next few years. The company will retain its interest in the OPL-230 property in Nigeria, which currently produces approximately 25,000 bpd.
The company announced Andrew J. Szescila, senior vice president and president - oilfield operations, has been named COO of Baker Hughes Incorporated. He has served as president of Hughes Christensen, BJ Services International and Baker Service Tools as well as marketing vice president for various divisions. He joined Baker Oil Tools in 1973 as a region engineer. Mr. Szescila, 52, earned a B.S. degree from Mississippi State University.
The company also announced that Greg Nakanishi, 49, will join Baker Hughes as vice president, human resources on November 1, 2000.
Mr. Nakanishi was founder and president of GN Resources, a management consulting firm specializing in improving organizational and personal performance. He has also held a variety of Human Resources positions with Tenneco and Amoco, including executive director of human resources for Tenngasco. Mr. Nakanishi received a B.A. degree in Psychology from California State University and a M.S. degree in Human Resources Management from Purdue University.
On November 8, 2000, Alan R. Crain, 49, will also join Baker Hughes as vice president and general counsel. Mr. Crain has broad experience as a corporate legal executive, having served as executive vice president, general counsel and secretary for Crown Cork & Seal Company, and as vice president and general counsel for Union Texas Petroleum. Mr. Crain has also held legal positions at Pennzoil and El Paso Energy. Mr. Crain received his J.D. and M.B.A. degrees from Syracuse University, in addition to M.S. and B.S. degrees in Management Engineering from Rensselaer Polytechnic Institute.
Venture Clears U.S. Antitrust Review
Baker Hughes said that the waiting period pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, with respect to the company's formation of its Western GECO venture with Schlumberger Limited was terminated. The formation of the venture is expected to be completed prior to the end of the year.