Reuters: Global Markets: Baker Hughes sees margin, revenue hit by North American drilling slump

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Baker Hughes sees margin, revenue hit by North American drilling slump Dec 18th 2012, 13:01 Tue Dec 18, 2012 8:01am EST (Reuters) - Baker Hughes Inc (BHI.N), the world's third-largest oilfield services company, said current-quarter margins and revenue would be below its expectations due to lower land drilling activity and further price erosion in the pressure pumping business. Oilfield service companies have had far less work and pricing power this year, with weak natural gas prices dragging down the number of rigs targeting gas. Margins have also been squeezed by new pressure pumping equipment flooding the U.S. market. The equipment is used in hydraulic fracturing, or fracking, to extract oil and gas from shale rock formations. Baker Hughes said it expects its operating profit margin in North America to be between 8.5 percent and 9.5 percent for the quarter ending December 31, down from 11.7 percent in the third quarter. The company did not provide its prior expectations for fourth-quarter margins. Analysts on average are expecting revenue of $5.28 billion, according to Thomson Reuters I/B/E/S, lower than the $5.39 billion the company reported last year. The drop in drilling activity coupled with a slump in the pressure pumping business in North America led to a weaker-than-expected third quarter for Baker Hughes. Fourth-quarter operating margin from international operations will be in line with the 12 percent reported in the third quarter, the Houston-based company said. The downbeat forecast comes days after Schlumberger Ltd (SLB.N), the world's top oilfield services provider, said its fourth-quarter earnings would be hurt by weaker-than-expected drilling activity in North America. Baker Hughes's shares were down 1.6 percent before the bell. The stock has fallen 16 percent this year to Monday's close of $40.64. (Reporting by Swetha Gopinath in Bangalore; Editing by Sriraj Kalluvila) Link this Share this Digg this Email Reprints

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