Baker Hughes: Outlook remains challenging
Houston, 20 October (Argus) — Baker Hughes said the drilling market will remain challenging through 2017 despite some recent improvement.
While the company's North America rig count has increased by 40pc from a year earlier, the growth decelerated in third quarter, with the US land count growing by just 6pc from the end of the second quarter. In addition, the company expects the offshore subsea market to remain challenged, with little sign of any significant recovery in 2018. International drilling activity also remains muted with the rig count holding flat year-to-date.
"We have seen some improvement in activity but we have not seen meaningful increases in customer capital commitments," chief executive Lorenzo Simonelli said. "Oil prices remain volatile and, as a result, our customers remain cautious."
Simonelli's comments reflect those made earlier by Schlumberger, which said that it expects onshore North American drilling activity to moderate after a sharp ramp up earlier this year that in part helped the world's largest oilfield services company post a three-fold increase in third-quarter net profit to $545mn.
North American customers have a positive outlook but "we expect activity to stay flat through the end of the year until the market has better line of sight into 2018 budgets and operators' production hedge positions," Simonelli said.
Baker Hughes completed its combination with GE's Oil & Gas business on 3 July.
The company's order book grew 18pc from a year earlier to $5.7bn in the third quarter, driven by higher demand for oilfield services and technologically-advanced digital equipment for both North America and the Middle East. Gains were partially offset by head winds in longer-cycle business as customers spent less.
Of the total, oilfield services grew by 8pc from a year earlier to $2.64bn, oilfield equipment orders rose by 45pc to $760mn and its turbo machinery division, which includes making equipment for liquefied natural gas (LNG) projects, increased by 16pc to $1.4bn. The company's overall order backlog ended the third quarter at $20.9bn.
To further capture more business, the company is taking initiatives such as building new software for the upstream business, which reduces non-productive time. In addition, to cushion its business from the swings in the oil market, it is expanding into segments such as power generation.
The company posted a net loss of $104mn in the third quarter. There was no year-earlier comparison because of the merger.