--Baker Hughes stock up nearly 9% on earnings beat
--Oil field services companies beat analyst estimates amid
strong oil field activity
(Updates throughout with background; comments from analyst,
executive; new share price.)
By Alison Sider
HOUSTON--Oil field services companies Schlumberger Ltd. (SLB)
and Baker Hughes Inc. (BHI) on Friday surprised Wall Street with
better-than-forecast second-quarter results at a time when their
businesses face rising costs in North America and global economic
uncertainty.
Schlumberger, the world's largest oil field services company,
reported a second-quarter profit of $1.4 billion, or $1.05 a share,
up 4.8% from a year earlier. Revenue jumped 16% to $10.45 billion.
Analysts polled by Thomson Reuters had most recently forecast
earnings of $1 a share on revenue of $10.41 billion.
Baker Hughes reported increased profit of 30% to $439 million,
or $1 a share. The year-earlier period included expenses of 16
cents a share related to the company's operations in Libya. Revenue
rose 12% to $5.33 billion. Analysts surveyed by Thomson Reuters
recently expected earnings of 77 cents a share on $5.26 billion in
revenue.
The earnings dispelled gloomy perceptions among analysts focused
on weakness in the hydraulic fracturing business in North America,
a big chunk of major oil field services companies' bread and
butter. There, rigs have been migrating en masse from unprofitable
natural gas areas to harder-to-tap oil shale, resulting in expenses
and inefficiencies that oil field service providers cannot fully
pass on to the energy producers that hire them amid a glut of
hydraulic fracturing capacity.
Even lowly guar--a bean that's used in hydraulic fracturing
fluid--had upset investors, as a recent shortage of the product led
Halliburton Co. (HAL), which reports results Monday, to recently
lower its earnings outlook.
But oil field activity seems to have held on better than
expected in the face of declining prices, leading to
narrower-than-forecast declines. Bill Herbert, an analyst with
Simmons & Co., said that could mean North American margins will
bottom out at a higher level than expected.
The companies also said that a widely feared global economic
slowdown, resulting from the euro-zone crisis and faltering growth
in China and the U.S., hasn't produced a massive pullback in oil
drilling, which has been the main pillar of the energy industry
both in North America and abroad amid a market glut for natural
gas.
"They haven't seen customers pull back in terms of activity.
That's a positive for the whole sector," said Phil Weiss, an
analyst at Argus Research.
And prices for guar are dropping, said Baker Hughes Chief
Executive Martin Craighead, who added that the company was looking
for ways to replace the product.
Stock prices for both companies rose Friday. Baker Hughes was
trading up 8.7% recently, at $45.40. Schlumberger's stock was up 26
cents at $68.90.
Schlumberger's earnings were attributed mostly to strong results
in its international operations, which CEO Paal Kibsgaard said are
on track to grow through the rest of the year.
"Absent a future setback to the world economy, [we maintain] our
stated view that international activity will grow in excess of 10%
this year," he said, highlighting Russia as the fastest-growing
market for the company.
In North America, rising activity in the deep waters of the Gulf
of Mexico helped offset stagnation in hydraulic fracturing margins.
Schlumberger's revenue in the region fell 1.7%, but the company
said they actually grew if seasonal factors in Canada are taken
out.
Revenue at Baker Hughes's North American oil field operations,
the company's largest geographic business by revenue, grew 13%,
although the segment's pretax profit fell 18%. Baker Hughes had
warned that its North America margins for the second quarter would
decline, due mostly to seasonality in Canada. The decline, however,
was narrower than most analysts expected.
-Melodie Warner and Angel Gonzalez contributed to this
article.
Write to Alison Sider at alison.sider@dowjones.com
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