Baker Hughes Inc. (BHI), one of the largest oilfield service companies in the world, reported fourth-quarter 2009 earnings of 43 cents per share, compared to the Zacks Consensus Estimate of 34 cents and year-ago earnings of $1.49.
The substantial fall in earnings year-over-year was due to significantly lower activity levels, contraction in customer spending and price deterioration. Including one-time items, Baker Hughes’ earnings were 27 cents per share.
Similar to Baker Hughes, sector leaders Schlumberger Ltd. (SLB) and Halliburton Company (HAL) have both posted fourth-quarter profits that beat the Zacks Consensus Estimates.
Revenue from Baker Hughes’ oilfield operations was $2.43 billion, down nearly 24% year-over-year but up 9% sequentially. Pre-tax operating profits decreased nearly 66% year-over-year but increased more than 29% sequentially to $242 million. Pre-tax operating margin for the quarter was 10%, compared to 22% in the year-ago quarter and 8% in the previous quarter.
Of the total quarterly revenue, North America, Europe/Africa/Russia/Caspian, Middle East/Asia Pacific and Latin America regions accounted for 37%, 30%, 20% and 13%, respectively.
Revenue from the Drilling and Evaluation segment decreased 28% year-over-year and increased 8% sequentially to $1.14 billion. The segment’s pre-tax operating profits were down 83% year-over-year and up 37% sequentially. Pre-tax operating margin in the quarter was 5%, compared to 21% in the year-earlier quarter and 4% in the previous quarter.
In the Completion and Production segment, revenue was down approximately 20% year-over-year and up more than 9% sequentially to $1.29 billion. The segment’s pre-tax operating profits decreased 50% year-over-year and increased 27% over the previous quarter, while pre-tax operating margin was 14%, compared to 23% in the year-earlier quarter and 12% in the previous quarter.
At the end of the quarter, Baker Hughes had $1.59 billion in cash and cash equivalents, while long-term debt stood at $1.80 billion, representing a debt-to-capitalization ratio of 19.8%. The company spent $292 million and $1.09 billion on capital expenditures during the fourth-quarter and full-year 2009, respectively.
Given a reduced E&P spending amid feeble energy demand, the entire oilfield service sector has been shabby over the past year. But Baker Hughes has witnessed an increase in revenue in all regions over the third quarter. In addition, the company’s noteworthy cost-cutting measures will positively impact the bottom line, in our view.
However, since international activity appears to be stabilizing in many areas and increasing modestly in some, the price concessions that were negotiated in the last year will impact the company’s profitability in the near-term.
We currently have a Neutral recommendation for Baker Hughes shares.
Read the full analyst report on “BHI”
Read the full analyst report on “SLB”
Read the full analyst report on “HAL”
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