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.