Baker Hughes Earnings Call Insights: Normalized Margin Levels and Pricing for the International Marketplace
Normalized Margin Levels
James West – Barclays Capital: Martin, on the European the business – Europe, Africa and CIS business obviously, Peter articulated the margins would start to move up in Q2, but you still have the impact of the startup cost. As we think about 3Q and I guess early fourth quarter, could we be back to kind of more normalized Baker Hughes margin levels at that point and of course, we would probably be in a much higher revenue base too with your leadership position that you may achieve in the North Sea.
Martin S. Craighead – President and CEO: I think that’s a reasonable assumption, James. So yeah, I’d agree with that.
James West – Barclays Capital: Then just one (little) follow-up for me on the pressure pumping business, I think you mentioned your 40% 24-hour operations today. Is there scope for you guys to take that percentage higher from here or are they leveling out?
Martin S. Craighead – President and CEO: No, our target for our team is 50% of the fleet by the end of the year and a lot of that is, you know James, is driven by the customer mix, which is trending in the right direction. So I’m confident we’ll get there 50% of the fleet.
Pricing for the International Marketplace
Kurt Hallead – RBC Capital Markets: So, Martin, I kind of have to say the tone of your commentary, as it relates to the international market in general, I think, are the most, I think, optimistic or positive that I’ve heard from many service company, probably going back to 2007-2008 timeframe. It seems like a significant amount of that as per your commentary hinges on Saudi. So how close do you think we are in terms of now, is this like a second half pricing event in your view for the international marketplace? Or is it more a building block for pricing inflection going out into 2014? Then maybe when you answer that question, can you help us put it in the context of, is it – do you think it could be similar to kind of the inflection that we saw from ’06 to ’08?
Martin S. Craighead – President and CEO: I would answer it this way, Kurt. Certainly, the Middle East is the center of the world right now for the growth in activity, but it’s not limited to there. We try to take a measured tone with the outlook and I appreciate the fact that you recognize how positive we are, but it’s kind of a steady as she goes but trending in the right direction with maybe an increasing upward bias, we have been looking for a while for the catalyst, if you will, somebody to come out in the Eastern Hemisphere particularly and have very ambitious plans about expanding their product and probably no surprise. Once again, it’s – Saudi has stepped up and is mobilizing these rigs. What we learned in the ’05, ’06 sequence was that Saudi’s neighbor generally follow suite and it drives a certain mentality across operators all across the Eastern Hemisphere in terms of access to people and equipment, and particularly the higher technology products and services that Saudi absorbs. I am very optimistic. I think we’ve all been frustrated with the lack of pricing traction. I wouldn’t expect that it’s going to be that meaningful in the second half as you know, given the tendering cycles and delay of projects after a project is awarded in terms of when it starts. But given the momentum we’re building into the second half of this year, all across the international, and particularly our position in Europe, in Africa and of course, the Middle East and we haven’t even mentioned Iraq. Given that momentum, ’14 I think is going to be stronger and I’d be cautious about comparing it to the numbers we posted back in ’05, ’06 internationally, but it’s a little early to tell if we can get there, but certainly it’s going in the right directions. There is no doubt about it.
Kurt Hallead – RBC Capital Markets: Then I have a follow up, coming back around to the North American dynamic, you mentioned that well count would be kind of flat, I think year-over-year. Given the efficiencies and so on and so forth, in the incremental cash flow, how would you characterize the bias to that? Would you be more biased that you could see that number move up? If they were to move up on the well count, do you think there’s a possibility that could have rapidly accelerated in the second half of the year?
Martin S. Craighead – President and CEO: I wouldn’t say it’s going to rapidly accelerate, but I’ll say that I think there is a little bit more optimism out there with the favorability we have gotten on gas recently versus – (in the Granite) it has just recently happened, there is a little bit of slight correction on oil side, but I think the movement in gas has gotten a little bit more of an impact right now in terms of the temperament of our customers. As I said, I don’t expect any kind of reactivation in the dry gas basins. If there was a pickup, it’d probably be the Marcellus first and the Haynesville last. But just putting a little bit more money in our customers’ pockets, I think, there’s a lot of oil directed drilling out there that’s kind of on the margin and we could see it move in the right direction. So, I think again it’s looking good in the second half, but we’re not predicting any kind of take off in North American at this stage. I don’t know Peter, you…
Peter Ragauss – SVP and CFO: Just mathematically, obviously, the rig count we are projecting modest growth from here, the rig count goes up and the efficiencies continue then the well count mathematically goes up high-single digits or double digits from here. Q1 was a nice recovery over Q4. So if that trend continues, number of wells drilled and the number of wells completed goes up and the number of stages goes up and it’s very positive.
A Closer Look: Baker Hughes Earnings Cheat Sheet>>