* Sees 4th-qtr N America operating margin of 8.5-9.5 pct
* Says revenue to be lower than its expectations
* Susquehanna, Global Hunter cut price targets on stock
* Shares rise as much as 4 pct
Dec 18 Baker Hughes Inc, the world's
third-largest oilfield services company, said current-quarter
margins and revenue would be below its expectations, but the
weak outlook was largely expected and the company's shares rose
as much as 4 percent.
Baker Hughes cited decreased land drilling activity and
price erosion in the pressure pumping business for the weak
"I didn't find there to be much in the way of anything
(that) I didn't expect in the BHI preannouncement. Perhaps, it
wasn't as bad as some expected," Phil Weiss, senior analyst at
Argus Research, told Reuters.
The number of rigs drilling in the United States for natural
gas fell for the third straight time in the week ended Dec. 14
as producers scaled back drilling on weak gas prices. Oil
and gas companies's drilling budgets for the year are also
Barclays analysts said data on reduced North American land
drilling activity are "buying opportunities as we believe the
rig count will rebuild in 2013 as fresh capital budgets are put
Houston-based Baker Hughes said it expects its operating
profit margin in North America to be between 8.5 percent and 9.5
percent for October-December, down from 11.7 percent in the
The company did not provide its prior expectations for
Analysts on average were 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.
Analysts at Tudor, Pickering, Holt & Co cut their
fourth-quarter earnings estimate to 62 cents from 74 cents per
Baker Hughes said operating margin from international
operations will be in line with the 12 percent in the third
quarter, despite weaker-than-anticipated rig counts in Brazil
and Colombia, and delays in the North Sea and Iraq.
The company's rig count in international markets fell 17
percent in the third quarter from the second.
Baker Hughes' weak forecast comes days after Schlumberger
Ltd, the largest oilfield services company, said its
fourth-quarter earnings would be hurt by weaker-than-expected
drilling in North America.
Margins have been squeezed in pressure pumping equipment --
used to extract oil and gas from shale rock formations -- as new
equipment has flooded the U.S. market.
Demand for pumping also appears to be declining faster than
rig count, suggesting that E&P companies are drilling but not
fracture stimulating an increasing number of wells.
"However, drilling and pumping activity must equilibrate
over time and thus there will be a pumping catch up period,"
Bernstein Research analyst Scott Gruber wrote in a client note.
"We believe this occurs early next year, with pumping demand
rebounding faster and to a greater degree than rig count."
At least two brokerages cut their price targets on Baker
Hughes's stock. Susquehanna cut its price target to $42 from
$47, while Global Hunter Securities cut it to $40 from $43.