Baker Hughes' Reports Lower Profits, Revenue for 1Q 2013

Oilfield services provider Baker Hughes Inc. reported lower profits and revenue for the first quarter amid higher activity levels in Canada and improved utilization in its pressure pumping business.

The company's net income fell to $267 million, or $.60 per share, from $379 million, or $.086 per share last year. Revenue for the first quarter of 2013 was $5.23 billion, down 2 percent compared to $5.33 billion for the fourth quarter of 2012 and down 2 percent compared to $5.36 billion for the first quarter of 2012.

"Our first quarter results reflect improvement in our North America segment," said Martin Craighead, Baker Hughes' president and chief executive officer, in a released statement. "The increased revenues and profit margins in North America are due to higher activity levels in Canada, along with improved utilization in our pressure pumping business despite a 3 percent decline in the U.S. onshore rig count since last quarter. Following five consecutive quarters of declines in the U.S. rig count, we are now forecasting a modest increase for the remainder of the year."

The company also reported that adjusted net income for the first quarter of this year excludes a foreign exchange loss of $23 million before and after-tax ($.05 per diluted share) on the devaluation of Venezuela's currency in February.

Baker Hughes' revenue decreased 9 percent in North America to $2.603 billion and slipped 4 percent in Europe/Africa/Russian Caspian to $854 million.

"We believe Baker Hughes' 1Q13 earnings release has positive implications for the stock," noted analyst James West in Barclays Earnings at a Glance analysis. "Results in North America improved sequentially with higher revenue and stronger operating margins and the company showed solid growth, especially for margins, in the Middle East/Asia Pacific region as well."

Baker Hughes' cash increased roughly 8 percent from last quarter to $1.1 billion and its capital expenditure for the quarter was $490 million, compared to $727 million in 4Q 2012, West reported. Additionally, Baker's debt increased from $176 million to more than $5 billion.

An area worth noting in the company's lineup is the Middle East/Asia Pacific region. Revenue for this segment, $894 million, improved 1 percent sequentially and was higher than Barclay's forecast of $864 million.

"Operating income of $116 million rose 45 percent from the previous quarter and far exceeded our $77 million estimate," West stated. "The margin at 13 percent expanded from 9 percent in the prior period and was well above our 8.9 percent forecast."

"Offset was impressive in the Middle East/Asia Pacific region, which suggests BHI is making progress in Iraq," Tudor Pickering Holt also noted in its daily Energy Thoughts analysis.   


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