Baker Hughes' Profit Misses on Weak Drilling Activity Outside N. America
Oct 16 (Reuters) – Baker Hughes Inc, the world's No.3 oilfield services provider, reported a lower-than-expected profit for the first time in five quarters as political tensions in Libya and Iraq, and a sharp fall in drilling activity in the Gulf of Mexico weighed on margins.
The company's shares fell nearly 6.7 percent to $50.06 in premarket trading on Thursday.
Baker Hughes said pretax profit margins in its operations in Europe, Africa and the Russia Caspian region slumped to 8 percent in the quarter ended Sept. 30 from 17 percent a year earlier.
North America, which accounted for more than half of total revenue, was a brightest spot in the company's operations.
Increased demand for pressure pumping, used in hydraulic fracturing to extract oil and gas from shale rock, and a seasonal rebound in activity in Canada helped the company report a 10 percent rise in third-quarter profit.
Revenue from North America rose to $3.15 billion, a 10 percent – the highest among its five reporting divisions.
Baker Hughes expects higher revenue and margins in North America in the fourth quarter due to a rebound in drilling activity in the Gulf of Mexico and improved profitability in its key pressure pumping business, Chief Executive Martin Craighead said in a statement.
Demand for pressure pumping, which analysts estimate account for a fifth of Baker Hughes's revenue, is recovering from a supply glut as drilling activity ramps up in Texas's Permian Basin and North Dakota's Bakken shale field.
Baker Hughes's net income rose to $375 million, or 86 cents per share, in the third quarter, from $341 million, or 77 cents per share, a year earlier.
Excluding items, Baker Hughes earned $1.02 per share. The average analyst estimate was for a profit of $1.13, according to Thomson Reuters I/B/E/S.
Revenue rose 8 percent to $6.25 billion, narrowly missing the average analyst estimate of $6.29 billion.
Up to Wednesday's close Baker Hughes shares had fallen nearly 26 percent due to a big slide in oil prices. The stock closed at $53.63 on the New York Stock Exchange.
(Reporting By Swetha Gopinath and Kanika Sikka in Bangalore; Editing by Savio D'Souza)
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