Oil Field Services Firms Beat Estimates Despite U.S. Weakness

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Two of the world’s largest oil field services firms reported earnings this morning: Baker Hughes Inc. (NYSE: BHI) and Schlumberger Ltd. (NYSE: SLB). Both handily beat earnings per share (EPS) and revenue estimates, but for different reasons.

Baker Hughes reported EPS of $1.00 on revenue of $5.32 billion, compared with a consensus estimate for EPS of $0.77 on revenue of $5.26 billion. The company posted improved revenue in every geographic segment except North America, and North America was the only segment to see profit decline.

The story is very similar for Schlumberger. The company posted adjusted EPS of $1.05 on revenue of $10.45 billion, compared with the consensus estimate for EPS of $1.00 on revenue of $10.41 billion. North American revenue declined by about 1.7% sequentially due to the expected spring weather in Canada and “continued pricing pressure in the US land hydraulic fracturing market.” International revenue grew by 9%, more than covering up the shortfall in the United States and Canada.

Schlumberger’s costs rose 30% year-over-year for the second quarter, and Baker Hughes saw costs rise by about 14%. Partly that is due to rising prices for guar beans, which the companies use in their hydraulic fracturing fluids. Halliburton Co. (NYSE: HAL) warned on this price rise in early June.

Earlier this week Nabors Industries Inc. (NYSE: NBR) warned that its earnings would be hit by higher costs due to a slowdown in pressure pumping, a slowdown noted by both Baker Hughes and Schlumberger today.

Halliburton, National Oilwell Varco Inc. (NYSE: NOV) and Weatherford International Inc. (NYSE: WFT) report quarterly results next week, and lowered expectations offer an opportunity for these companies to shine as well. The consensus estimate for Schlumberger’s second-quarter EPS dropped by $0.05 from April to July, while Baker Hughes saw its EPS estimate cut by just $0.01 over the same period. Halliburton’s EPS estimate was cut $0.13, and the other two had their EPS estimates cut by $0.03.

Schlumberger’s shares are trading up about 2% in premarket activity this morning, at $69.93 in a 52-week range of $54.79 to $95.53.

Shares of Baker Hughes are up about 5% at $43.82 in a 52-week range of $37.08 to $81.00.

Paul Ausick