Oil Service Giant Baker Hughes says Main Challenges are in the Rearview Mirror

Energy services company Baker Hughes reported stronger than expected third quarter earnings on Wednesday before the market open. The company still reported a loss of $17 million for the three-months for the second-straight quarterly loss this year after making $72 million in the first three months. The company took large charges after pulling out of Russia after the Ukraine invasion. $BKR shares were up 6.2% at $25.67 after the release.

Updated: Peers Halliburton reported Tuesday and Schlumberger reported Friday.

Baker Hughes Drill Bit

Baker Hughes: $BKR Reported Before Open Wednesday

Baker Hughes (BKR) Q3 2022 Earnings and Revenues Miss Estimates:

  • Net loss of $17 million, or 2 cents per share, for the three months ended Sept. 30, compared with a profit of $8 million, or 1 cent per share, a year earlier.
  • Adjusted profit of $264 million, or 26 cents a share, up from $141 million a year earlier. The profit topped analysts’ forecasts for 24 cents per share, according to Refinitiv data.
  • Revenues increased by 6 percent to $5.4 million from $5.1 billion in the third quarter of 2021.
  • Restructuring and impairment charges totaled $230 million
  • Margins of 9.4% topped expectations of 8%.
  • Oilfield business segments accounted for 63% of revenue during the quarter through September.
  • Oilfield equipment revenue from its oilfield equipment unit fell 7% year-over-year, driven in part by lower volumes in its Subsea Production Systems business
  • TPS revenue declined 8% over that period amid lower equipment and project volumes.

We were generally pleased with our third quarter results with strong performance in OFS, while TPS successfully managed multiple challenges. We also saw strong orders performance with continued momentum in OFE as well as TPS.

CEO, Lorenzo Simonelli conference call:

Two New Segments, OFSE and IET

“Last month, we announced a restructuring and re-segmentation of the company into two reporting segments, OFSE (oil field services and equipment) and IET (industrial and energy technology). These changes are designed to sharpen our focus, improve operational execution and better position Baker Hughes to capitalize on the quickly changing energy markets.”

BKR is looking for the reorganization to improve operations and profitability and may yield more than $150 million in cost savings. The new structure was made official Oct. 1st, the first day of the fourth quarter.


Demand Destruction Fear

“The macro outlook has grown increasingly uncertain as the global economy is dealing with strong inflationary pressures, a rising interest rate environment, and sizeable fluctuations in global currencies,” said Chief Executive Lorenzo Simonelli in a statement.

Simonelli offered a positive outlook for next year, saying: “Many of the key challenges should be behind us.” BKR anticipates double-digit revenue growth in its international oilfield services business in 2023 and modest growth in its North America business, driven largely by public firms.

The Ukraine invasion by Russia and the global supply crunch has hit customers but also the cost of materials for BKR. Baker Hughes has been negatively impacted in the second quarter by a $365 million charge from its Russian operations and supply chain inflation.

Western sanctions on Russia’s energy industry hit supplies. which disrupted operations and led to higher costs for chemicals. Its digital solutions unit was also again negatively impacted by supply chain problems related to semiconductors, boards and displays.

Baker Hughes Peer’s Earnings

General Electric Demerger

On June 26 $GE announced it will divest its 62.5 percent stake in Baker Hughes in the next two or three years in a bid to simplify its structure and boost shareholder returns. GE acquired the Baker Hughes in July 2017, creating the second largest oilfield services provider by revenue.

Baker Hughes today announced will keep technology, capabilities and infrastructure obtained through the merger despite its breakup with GE.

“There are agreements in place to ensure there is a seamless separation. We’ll work with GE as they evaluate the timing and structure,” Simonelli said..

Source: BKR

Live From The Pit