Baker Hughes Inc., the world's third biggest oilfield services company, reported sharply lower third-quarter operating earnings, but said business had begun to improve as this year's recovery in oil and gas prices led to a gradual increase in drilling activity.
The Houston-based company said pre-tax operating profit, excluding unusual one-time items, fell to $14.2 million from $100.9 million in the third quarter of 1998. Revenues fell to $1.21 billion from $1.58 billion.
Earnings per share beat Wall Street analysts' expectations by a penny, according to First Call/Thomson Financial.
Net income, including one-time items, rose to $13.1 million from a loss of $534.5 million in the third quarter of 1998, when Baker Hughes took a charge of $751 million to cover merger and restructuring costs.
"Although the third quarter's results reflected continued weakness in overall oilfield activity levels, we did see a bottoming and sequential improvement in North America," President and CEO Max Lukens said.
Baker Hughes' oil and gas drilling-focused companies benefited from this trend in the third quarter, he said, and companies focused on well completions were expected to benefit in the fourth quarter. "With the exception of seismic, we expect activity in the Western Hemisphere to continue to improve in the fourth quarter while we expect activity in the Eastern Hemisphere to be flat before increasing in 2000," he said.
Lukens said that
Baker Hughes expected "flattish earnings" in the fourth quarter as improving results from the bulk of its oilfield service businesses were offset by a decline from its seismic business. "As to the year 2000, we expect to see an expansion of the recovery that is now apparent in North America to Latin America this quarter and to the eastern hemisphere next year," he said.
Lukens said independent oil companies had driven the early industry recovery in North America so far, adding that the major integrated companies would likely retain a cautious stance towards exploration and production in the first half of 2000. "We believe we'll see increased spending in the second half of 2000 as our major customers become more comfortable with the sustainability of oil and gas prices," he said.