“Due to the annual spring break-up, the Canada rig count dropped 70% sequentially, while the United States rig count decreased 1%. We continued to see activity shift from natural gas to oil basins during the quarter. Oil and liquids-directed activity accounted for over 70% of the rig count at the end of the second quarter, while natural gas-directed rigs finished the quarter at a 12-year low.
“North America operating income decreased 19% from the first quarter, impacted by escalating costs associated with guar gum, a blending additive used in our hydraulic fracturing processes. Operating income was also impacted by the annual Canadian spring break-up, pricing pressure in hydraulic fracturing operations, and economic costs associated with equipment relocations, partially offset by improved Gulf of Mexico activity. We expect the guar cost and equipment relocation issues to subside as we enter 2013.
“In Latin America, revenue and operating income were up 13% sequentially, with only a 1% increase in rig count. Results were positively impacted by activity growth and pricing improvements in Venezuela and Mexico, as well as increased development of managed projects across the region. For the remainder of the year, we expect our margins for consulting and software services in Latin America to expand.
“In the Eastern Hemisphere our market share growth strategy is playing out as expected, as evidenced by the record revenues and improved margins achieved this quarter. Relative to a sequential rig count gain of 5%, Eastern Hemisphere revenue was up 15%. Compared to the second quarter of 2011, the Eastern Hemisphere rig count was up 8%, while revenue was up 23%. We continue to make progress in markets that had been negatively impacting our results and are optimistic about activity levels expanding in the second half of 2012.“Europe/Africa/CIS had a strong recovery from the seasonal weather impact in the first quarter. The Europe and Eurasia areas as a whole are generating margins higher than our current Eastern Hemisphere average. Libya continues to recover, while the investments and restructuring efforts made last year in Africa continue to pay off.