Schlumberger, Baker Hughes miss Q2 earnings forecasts

Baker Hughes
Two oilfield service giants, Schlumberger and Baker Hughes did not meet second quarter revenue forecasts as slow international growth overshadowed record US crude production. 

Two oilfield service giants, Schlumberger and Baker Hughes did not meet second quarter revenue forecasts as slow international growth overshadowed record US crude production.  Company photo.

Baker Hughes total Q2 revenue $5.55 billion

Schlumberger and Baker Hughes, two oilfield service juggernauts, both missed their second quarter revenue predictions as slow international growth overshadowed record-high US production.

According to Reuters, due to its heavy international exposure, Schlumberger is a harbinger for the world’s oil and gas industry.

The Houston-based company’s overall revenue was up by 11 per cent in the second quarter to $8.3 billion, shy of analysts’ expectations of $8.36 billion, according to Thomson Reuters. International business revenue grew by 4 per cent to $5.07 billion, but was 1.4 per cent below 2017 Q2, dragging down the company’s overall performance.

Schlumberger’s North America operations’ revenue jumped about 43 per cent to $3.14 billion.

Over at Baker Hughes, analysts had predicted total revenue in the second quarter to hit $5.57 billion, but the company reported total revenue of $5.55 billion.  Reuters reports that Baker Hughes’ revenues were negatively impacted by oilfield equipment and turbomachinery businesses.

Strong North American activity helped boost Baker Hughes’ oilfield services unit revenues by 14 per cent over last year to approximately $2.9 billion.

Analysts say the companies’ performances reflect the slow recovery in international markets, where oil projects are often more expensive, are continuing to drag down earnings for these types of large integrated service companies, despite rising US production.

Last week, the Energy Information Administration reported US production hit a record-high 11 million barrels per day (b/d).

Despite coming up short, Wall Street analysts say stronger-than-expected sequential growth in international markets and positive comments from company executives.

“Both companies were much more optimistic about the global land and offshore recovery than in previous conference calls,” James West, a senior managing director for investment banking firm Evercore ISI told Reuters.

Schlumberger CEO Paal Kibsgaard said in a conference call that “the broader-based recovery has finally started”.  The company now expects its international equipment to be completely booked in the fourth quarter of this year.  It is also forecasting double digit growth in that same segment in 2019.

Lorenzo Simonelli, Baker Hughes CEO, said his company sees positive signs from a number of international markets.  He also expects longer-cycle activity will drive growth in its oilfield equipment and turbomachinery businesses.

“This is what people have been looking for – the inflection in the international business. It is starting to materialize now,” Societe Generale analyst Edward Muztafago told Reuters.

Despite their optimism, both companies are concerned about pipeline bottlenecks in the Permian Basin which have sent the price of local crude down by a discount of almost $15 a barrel versus benchmark prices at Cushing, Oklahoma.

Even still, Schlumberger says it will continue to deploy hydraulic fracturing fleets.

Schlumberger shares were trading at $65.69 by 2:58 p.m., EDT, down .61 per cent. Baker Hughes shares rose .61 percent at $32.60.

In June, General Electric reported it will divest its stake in Baker Hughes to simplify its business and increase shareholder returns.  The move comes less than a year after the conglomerate merged with Baker Hughes.




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