* Halliburton adj profit $0.93/share vs est $0.89
* Baker Hughes adj profit $0.62/share vs est $0.61
* Baker Hughes shares up about 2 pct
* Halliburton shares down 3 pct on weak forecast for LatAm
By Swetha Gopinath and Garima Goel
Jan 21 Oilfield service companies Halliburton Co
and Baker Hughes Inc said they expect an
improvement in North American margins, driven by a modest pickup
in onshore activity and strong deepwater drilling in the Gulf of
Halliburton and Baker Hughes, No. 2 and No. 3 in the
industry, have been expanding outside the United States and
Canada, where excess capacity and a drop in the number of rigs
drilling for natural gas has eaten into margins.
Strong activity in international markets, particularly the
Middle East and Africa, helped both companies report
stronger-than-expected fourth-quarter earnings on Tuesday.
Baker Hughes shares rose about 2 percent in morning trade.
Shares of Halliburton, which initially rose on the results, fell
3 percent after the company said in a conference call that
conditions would remain tough in Latin America.
Halliburton said it was targeting an improvement of 200
basis points in North American margins in 2014, while Baker
Hughes said it expected margins in the region to recover by at
least 105 basis points in the first quarter.
Halliburton, which expects 2014 revenue in North America to
increase by a mid-single-digit in percentage terms, said the
average U.S. land rig count was likely to increase modestly this
Baker Hughes, which publishes a closely watched tally of
active rigs, said it expected the U.S. onshore rig count to be
essentially flat this year, but added that the well count would
rise by 5 percent due to improved drilling efficiencies.
Oilfield service companies are able to secure more business
despite no growth in rig count as greater efficiency allows
clients to drill more wells with a single rig.
Baker Hughes said increased profitability in North America
would offset a seasonal decline in its international and
industrial businesses in the first quarter.
The company said it expected first-quarter earnings to rise
"slightly" from fourth-quarter adjusted earnings, excluding the
impact of disruptions in Iraq.
Baker Hughes temporarily suspended operations in southern
Iraq in November, following protests over an alleged religious
insult by a security adviser working in the area for competitor
Schlumberger Ltd, whose operations were also disrupted.
LATIN AMERICA CHALLENGES
Halliburton said it expected a seasonal decline in
first-quarter revenue in Latin America and that margins there
would be more "severe than normal" due to higher costs in Brazil
and reduced land drilling in Mexico.
Falling output from older offshore oil fields in Brazil
along with delays in bringing on new areas is weighing on
drilling activity in the country.
Halliburton expects margins for the Latin American region,
which accounted for 13 percent of operating income in the fourth
quarter, to stay in the upper single digits until activity
begins to recover in the back half of the year.
Fourth-quarter operating income from Latin America fell 21
percent, while revenue was flat at $1 billion.
"We believe that 2014 will be a very challenging year for
Latin America," Chief Operating Officer Jeffrey Miller said on a
conference call with analysts.
MIDDLE EAST DRIVES EARNINGS
Both Halliburton and Baker Hughes received nearly half of
their revenue from outside North America in the fourth quarter.
Halliburton forecast double-digit growth in earnings per
share in 2014, citing strong international demand.
"Halliburton's bullish outlook for 2014 should ease some
concerns about the outlook for global E&P (exploration and
production) spending in 2014," Barclays analysts said in a note
Barclays expects oil and gas companies to spend about $723
billion on exploration and production this year, an increase of
6.1 percent from 2013, according to a report released last
Baker Hughes said it expected the international rig count to
grow by 10 percent this year.
Baker Hughes said its revenue from Middle East and Asia
Pacific jumped 27 percent in the quarter, while Halliburton's
revenue from the same regions climbed 13 percent.
Most of their gains in the Middle East are coming from Saudi
Arabia, the world's largest oil exporter, which is lining up
dozens of rigs this year to make up for supply disruptions in
other countries, including Iran, Libya, Nigeria and Yemen.
Market leader Schlumberger, which gets almost 70 percent of
its revenue from outside North America, posted a
better-than-expected profit on Friday thanks to robust drilling
activity in Saudi Arabia and the United Arab Emirates.
Baker Hughes said revenue from its operations in Europe,
Africa, Russia and the Caspian region combined rose 10 percent
in the fourth quarter. Halliburton's revenue from the same areas
rose 15 percent.
Halliburton's income from continuing operations rose 31
percent to $770 million, or 90 cents per share, in the fourth
quarter. Revenue rose 5 percent to $7.64 billion.
Adjusted income from continuing operations was 93 cents per
share. On that basis, analysts on average had expected earnings
of 89 cents on revenue of $7.55 billion, according to Thomson
Net income attributable to Baker Hughes rose 16 percent to
$248 million, or 56 cents per share, in the quarter. Revenue
rose 10 percent to $5.86 billion.
Excluding one-time items, Baker Hughes earned 62 cents per
share. Analysts on average had expected earnings of 61 cents on
revenue of $5.67 billion.
Halliburton shares have risen 35 percent in the past year,
while Baker Hughes shares have risen 27 percent. The broader
Philadelphia oil service index has risen 17 percent.
Halliburton shares were trading at $49.21 in midday trading
on the New York Stock Exchange. Baker Hughes shares were trading