Baker Hughes CEO Sounds Upbeat about a BHI Recovery
Will Baker Hughes's Upbeat Outlook Play Out in Its 4Q15 Results?
What does BHI’s CEO think?
Baker Hughes’s (BHI) chairman and CEO, Martin Craighead, sounded upbeat about BHI’s recovery despite weakness in the energy market.
In the company’s fiscal 3Q15 press release, he commented, “As our customers focus increasingly on managing cash, we are experiencing a current shift in spend favoring production optimization projects over exploration and development. As such, we are seeing stronger interest in our production offerings, particularly upstream and refinery chemicals that provide our customers with optimized production from existing wells and increased ultimate recovery.”
Baker Hughes’s revenue growth by geography
Baker Hughes’s (BHI) revenues in North America have been the hardest hit after the US rig count started falling since October 2014. BHI’s North America revenues fell 59% in fiscal 3Q15 from fiscal 4Q14. In comparison, BHI’S aggregate international operations revenue fell 30% from fiscal 4Q14 to 3Q15. BHI’s most resilient segment between 4Q14 and 3Q15 was its Industrial Services segment, which recorded 2% higher revenue.
In fiscal 3Q15, BHI recorded total revenues of $3.8 billion, down 39% from the $6.3 billion recorded in 3Q14. RPC (RES), BHI’s smaller-market-cap peer, recorded $292 million in fiscal 3Q15 revenues, down 53% compared to a year ago. BHI is 1.5% of the Vanguard Energy ETF (VDE). VDE is an ETF that tracks an index made up of stocks of large, mid-size, and small US energy companies.
Baker Hughes’s growth drivers
US onshore market weakness and pricing pressure, particularly in stimulation, drilling services, and completions product lines
a higher share of lower-margin energy products in Gulf of Mexico production
reduced activity in Africa and Continental Europe following a rig count fall in the past year
a reduction in integrated energy operations in Iraq and lower rates for BHI’s products in the Middle East and Asia-Pacific
a seasonal activity increase in the Industrial Services segment’s process and pipeline services business
Next, we’ll discuss how BHI’s performed versus its outlook over the past three quarters.
Browse this series on Market Realist:
