Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the condensed consolidated financial statements and the related notes in Item 1 thereof.
Given the current volatile conditions in the industry, our business is affected by a number of macro factors that affect our outlook and expectations.All of our outlook expectations are based solely on what we see in the market today and are subject to changing conditions in the industry.
• International onshore activity: If commodity prices remain at current levels, we expect onshore spending outside North America to continue to improve in 2022 compared to 2021 in all regions except the Russian Caspian Sea.
• Offshore projects: We expect the revival of offshore activity and the number of subsea tree awards to increase in 2022 compared to 2021.
• LNG projects: We are long-term optimistic about the LNG market and see natural gas as a transition and destination fuel.We continue to view the long-term economics of the LNG industry as positive.
The table below summarizes oil and gas prices as an average of the daily closing prices for each of the periods shown.
Rigs drilling in certain locations (such as the Russian Caspian region and onshore China) are not included because this information is not readily available.
TPS segment operating income was $218 million in the second quarter of 2022, compared to $220 million in the second quarter of 2021.The decline in revenue was primarily due to lower volumes and unfavorable foreign currency translation effects, partially offset by price, favorable business mix and growth in cost productivity.
Operating income for the DS segment in the second quarter of 2022 was $18 million, compared to $25 million in the second quarter of 2021.The decline in profitability was mainly due to lower cost productivity and inflationary pressures.
In the second quarter of 2022, company expenses were $108 million compared to $111 million in the second quarter of 2021.The $3 million decrease was primarily due to cost efficiencies and past restructuring actions.
In the second quarter of 2022, after deducting interest income, we incurred interest expense of $60 million, a decrease of $5 million compared to the second quarter of 2021.The decrease was mainly due to an increase in interest income.
Operating income for the DS segment was $33 million in the first six months of 2022, compared to $49 million in the first six months of 2021.The decline in profitability was primarily due to lower cost productivity and inflationary pressures, partially offset by higher volumes and prices.
For the first six months of 2021, income tax provisions were $213 million.The difference between the US statutory tax rate of 21% and the effective tax rate is primarily related to the loss of no tax benefit due to changes in valuation allowances and unrecognized tax benefits.
For the six months ended June 30, cash flows provided (used for) by various activities are as follows:
Cash flow from operating activities generated cash flow of $393 million and $1,184 million for the six months ended June 30, 2022 and June 30, 2021, respectively.
For the six months ended June 30, 2021, accounts receivable, inventory and contract assets were primarily due to our improved working capital processes.Accounts Payable is also a source of cash as volume increases.
Cash flow from investing activities used cash of $430 million and $130 million for the six months ended June 30, 2022 and June 30, 2021, respectively.
Cash flow from financing activities used cash flow of $868 million and $1,285 million for the six months ended June 30, 2022 and June 30, 2021, respectively.
International Operations: As of June 30, 2022, our cash held outside the United States represented 60% of our total cash balance.We may not be able to use this cash quickly and efficiently due to possible challenges associated with exchange or cash controls.Therefore, our cash balances may not represent our ability to use that cash quickly and efficiently.
Our key accounting estimation process is consistent with the process described in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II of our 2021 Annual Report.