Baker Hughes 4Q14 Earnings Call Notes

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This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

seeing wells drilled but not completed

“The average U.S. rig count in the first quarter is projected to be approximately 15% lower than the fourth quarter average. Additionally, we are seeing a growing inventory of wells drilled but not completed as some customers are electing to delay completions and defer production.”

Down cycles happen once or twice a decade in this industry

“As Kimberly just mentioned our industry is clearly in the early stages of a down cycle. The same sort of cycle we enter once or twice a decade. As with past cycles, the early days are always marked with a high degree of uncertainty which customers will cut spending and by how much, how fast will rig counts drop and where and when we’re going to reach the bottom? And we don’t have precise answers to all these questions and no one frankly does, but we’ve been through this before and many times infact.”

rig counts typically fall sharply

“What we’ve learned in the past is that when the market turns down, it turns swiftly. In each of the last three downturns dating back to the nineties we seen North American rig counts fall between 40% and 60% in the space of only 12 months. International rigs don’t tend to fall sharply but begin to drop steadily a couple of months after the first signs of weakness appear in North America. ”

You can’t just hope that prices are going to go back to $100

“This industry can’t simply hope and wait for oil to climb back over $100 a barrel, instead we must adapt to a new reality of sustained lower commodity prices”

Some product lines will be more insulated

“in terms of some of other ones, such as artificial lift and chemicals, make up a significant part of our North American portfolio. You know, I fully expect those to be not fully insulated, but more insulated if you will.”

This downturn won’t be as severe as the last one because it’s a different market, no worldwide recession

” There’s no way we would expect the decrementals to be as severe as they were in that downturn you referenced. And partly, we think it’s a bit of a different market, Jud, you know that was a worldwide economic recession and we saw across the broad customers react and certainly this is setting up to be a tough one.”

This company has never been stronger

“this company has never been stronger, whether it’s the talent in place, whether it’s a portfolio, whether it’s the adherence to processes and controls, supply chain infrastructure, roofline whatever it is.

So, whatever the market will throw to us over the next couple of years and you’re right on, it’s a very difficult thing to predict. This company is very well positioned to perform better than I think as any time in its history.”

The workforce cuts are going to be different this time around because we’re a very different company than we have been

“As to the percentages, this gets back to the earlier discussion. We’re very, very different company in terms of completion. We’re more people intensive than we’ve ever been, a lot of that has associated with the pressure pumping business which is a very people intensive business. So I think I would be cautious about looking at the relative percentages because its – we’re different company in terms of mix than we were in those previous downturns.”