Baker Hughes CEO: North America 2Q Margins Expected To Decline
24 Abril 2012 - 11:04AM
Dow Jones News
Baker Hughes Inc.'s (BHI) North America margins for the second
quarter are expected to decline, Chief Executive Martin Craighead
said Tuesday.
Margins have already declined sequentially in the first quarter
due to the logistical challenges produced by the migration of
natural gas-directed rigs toward more profitable oilfields, and the
rapid build-up of pressure-pumping and hydraulic fracturing
capacity that resulted from the recent shale boom.
In a conference call with investors, Craighead said that
second-quarter margins will "decline primarily due to seasonality
in Canada" and continued weakness in pricing for its pressure
pumping services. "Pricing in pressure pumping will likely continue
to decrease throughout the end of the year," he said.
The third-largest oilfield services provider, after Schlumberger
Ltd. (SLB) and Halliburton Co. (HAL), is also facing execution
challenges in its pressure-pumping business, which analysts say are
due to an inability to retain the workforce it inherited from its
acquisition of BJ Services in 2009.
Craighead said that he has "made changes" in the leadership team
for the pressure pumping business. "I'm confident that this team
will deliver on expectations," he said. The company is also heavily
investing in improving transportation and logistics for hydraulic
fracturing, Craighead added.
Craighead said that he has no concerns about access to guar,
"even though the price is horrific." Guar, a legume whose juices
are used in hydraulic fracturing, is in high demand and its
skyrocketing price is helping thin margins for oilfield service
providers.
Craighead said that a margin rebound is expected in the second
half of the year, as activity in the U.S. Gulf of Mexico ramps up
and international drilling keeps its strength.
"We're pretty optimistic in our international margins overall,"
Craighead said.
-By Angel Gonzalez, Dow Jones Newswires;
713-547-9214;angel.gonzalez@dowjones.com
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