Bloomberg News

Baker Hughes Falls as Fracking Prices Drop: Dallas Mover

October 19, 2012

Baker Hughes Inc. (BHI:US), the world’s third-largest oilfield-services provider, declined the most in more than six months after quarterly profit plunged 60 percent on reduced North American demand for hydraulic fracturing.

Baker Hughes, based in Houston, fell (BHI:US) 4.9 percent to $44.75 at the close in New York, the most since March 21.

Third-quarter net income dropped to $279 million, or 63 cents a share, from $706 million, or $1.61, a year earlier, Baker Hughes said today in a statement. Excluding charges related to developing software and closing a manufacturing plant, the company missed by 10 cents the average (BHI:US) of 30 analysts’ estimates compiled by Bloomberg.

“Margins fell sequentially in every region,” J. David Anderson, a New York-based analyst at JP Morgan & Co., wrote in a note today. While investors “could have stomached” poor North America results, they’ll be more unhappy with what happened outside the U.S. and Canada, according to the note.

Operating profit margin in North America fell to 11 percent from 22 percent a year earlier. The combined rig counts in Brazil, Colombia and Norway dropped 17 percent compared to the second quarter, the company said.

“These are all meaningful markets for Baker Hughes,” Chief Executive Officer Martin Craighead told analysts and investors today on a conference call. He said he was “disappointed” with the company’s international results in the third quarter.

Profits Drop

Baker Hughes helps companies drill and complete oil and natural gas wells and access the fuels by fracking, which blasts water mixed with sand and chemicals underground to free trapped hydrocarbons from shale formations. The company is the world’s second-largest provider of fracking services.

Four of the biggest service companies, including Halliburton Co. (HAL:US) and Schlumberger Ltd. (SLB:US), will see their collective third-quarter operating profit drop by more than $1 billion in North America compared to a year earlier, according to estimates from Houston-based Tudor Pickering Holt & Co.

Prices charged for fracking services throughout the industry are expected to drop 14 percent this year and another 8 percent next year, according to PacWest Consulting Partners LLC, a Houston-based oil and gas adviser.

Schlumberger and Halliburton are the world’s first and second-largest oilfield-services providers.

To contact the reporter on this story: David Wethe in Houston at dwethe@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net


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Companies Mentioned

  • BHI
    (Baker Hughes Inc)
    • $56.34 USD
    • -0.10
    • -0.18%
  • HAL
    (Halliburton Co)
    • $39.7 USD
    • -0.18
    • -0.45%
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