During the quarter, we recorded a $300 million charge, which amounts to $190 million after-tax or $0.20 per diluted share for estimated loss contingencies related to the Macondo well incident. In our discussion today, we will be excluding the impact of this charge on our financial results. As always, we will welcome questions after we complete our prepared remarks. Dave?David J. Lesar Thank you, Kelly, and good morning to everyone. I'm very pleased to report the following results that were achieved in the first quarter. Total revenue of $6.9 billion and operating income of $1.3 billion represents growth over the first quarter of 2011 of 30% and 63%, respectively, which I believe demonstrates how well we have executed against our targeted investment strategies. These are very strong results, especially considering the industry disruptions in North America related to rate movements and the harsh weather we experienced in the Eastern Hemisphere in Q1. Despite these challenges, we achieved record revenue during the first quarter in our North America region. Globally, both our cementing and Baroid product lines achieved record revenues in the first quarter, with cementing also setting a record for operating income. Looking at the North America results for the first quarter. Our revenue grew sequentially by 1% compared to a U.S. rig count decline of 1%. Now while 1% seems small, it's actually the net impact of a significant rig shift that is taking place in the U.S. between natural gas and oil. And operating income was down sequentially by 5%, driven by the inefficiencies associated with equipment relocations, cost inflation and certain pricing pressures in certain basins. Last quarter, we spoke in detail about the disruptions resulting from rig movements between basins. Depressed natural gas prices have accelerated the shift from natural gas to oil plays during the quarter. In the U.S., the natural gas rig count declined 151 rigs or 19% just since the beginning of the year. And that slightly outpaced the oil-directed rig count increase of 125 rigs or 10% over the same period. So while the total rig count only declined 1%, the shift from natural gas to oil was dramatic and disruptive to operations.
In our fourth quarter call, we talked about 8 frac fleets moving from primarily natural gas plays to liquids plays. We now have an additional 5 fleets that have moved or in the process of moving this quarter. Due to the stability of oil prices, oils in the liquids-rich plays are generating higher returns for our customers. This shift is very positive for us as completing these wells requires higher levels of service intensity due to the advanced fluid and completion technologies, which creates an additional opportunity for us to differentiate ourselves from our competition. While these moves are beneficial to us in the long run, they do not come without a short-term impact on our margins. With spot natural gas prices down approximately 50% from this time last year due to the resiliency of natural gas productions in a very mild winter, so at the current prices, we expect to see further declines in the natural gas rig count until we begin to see a meaningful decrease in production levels. Over time, we believe any future weakness in natural gas rig count will be offset by an increase in oil and liquids-rich activity, resulting in an overall yearly percentage increase in the U.S. rig count in the mid-single-digits.Also on our last call, we provided our outlook for North America margins for the first quarter. Our revenue was strong this quarter due to better-than-expected activity levels. But our margins were just below our expectations, given that the dropoff in natural gas rig count was more pronounced than we anticipated. Continued significant cost inflation also negatively impacted our margins. As a reminder, there is often a delay between vendor price increases and when we are able to pass these increases to our customers. In the natural gas basins, in particular, this is becoming more difficult and we are working with our vendors for price relief. However, this will take time and may continue to impact margins throughout the remainder of 2012. Read the rest of this transcript for free on seekingalpha.com