WRAPUP 2-Slow oilfield recovery hits Transocean, Baker Hughes
* Transocean, Baker Hughes both short of Wall St estimates
* Recovery seen slow, even if worst now behind industry
* Baker Hughes shares drop 5.9 pct, Transocean off 1.8 pct
* Oil States expecting steady activity in Q4
* Rig maker Sembcorp beats estimates (Adds Trinidad, Oil States, Transocean upgrade; updates share movement)
SAN FRANCISCO, Nov 4 (Reuters) - Rig contractor Transocean Ltd (RIG.N) and oilfield services firm Baker Hughes Inc (BHI.N) posted sharp drops in quarterly profit on Wednesday as their industry recovers slowly from the past year's slump.
Oil and gas companies, faced with commodity prices sharply down from last year, have put pressure on the companies that serve them to get costs down.
A bounce in crude prices in recent months has weakened producers' bargaining power, leading oil service companies to to predict a mild recovery next year.
Bob Long, chief executive of world-leading rig contractor Transocean, saw no major recovery for shallow-water rig rates, but was surprised they had not fallen more sharply given how oversupplied that market is.
"For whatever reason, they have been moving very slowly, and now seem to have stabilized," Long, who is set to retire early next year, told analysts on a conference call.
For Baker Hughes, a weak performance outside North America, and in Latin America in particular, took a toll in the third quarter as the Houston-based company reshuffles its business to focus on geography rather than product lines.
Chief Executive Chad Deaton said profit margins in the Eastern Hemisphere and Latin America had bottomed out, predicting that the latter could double this quarter from just 4.9 percent in the third quarter.
Overall, net profit slid 87 percent to $55 million, or 18 cents per share, from $429 million, or $1.39 per share, a year ago. Revenue fell 26 percent to $2.23 billion. [ID:nBNG75879]
Excluding charges for reorganization and allowances for doubtful accounts worth 13 cents per share, Baker Hughes earned 31 cents a share. Analysts had expected 35 cents, on revenue of $2.26 billion, according to Thomson Reuters I/B/E/S.
Tudor Pickering Holt said in a note to clients that while Wall Street expected "soft" Baker Hughes earnings due to the reorganization, the results would "test the fortitude of recent value buyers."
Larger rivals Schlumberger Ltd (SLB.N) and Halliburton Co (HAL.N) both suffered less dramatic drops in quarterly profits, but expect a lukewarm 2010 recovery and further struggles for those chasing North American natural gas. [ID:nN2248654]
Baker Hughes is buying BJ Services Co (BJS.N) to better compete with the big two in pressure pumping, and said it now expected that deal to close in the first quarter of 2010.
While North American pricing was stable after significant pressure last quarter, Baker Hughes Chief Operating Officer Martin Craighead saw no major recovery without a significant rebound in drilling or further rationalization of capacity in some product lines.
Baker Hughes shares fell 5.9 percent to $40.89.
Among other North American players, Mid-sized services company Oil States International (OIS.N) said on Wednesday it expected activity to remain steady in the fourth quarter, and its shares fell 1.1 percent, while Canada's Trinidad Drilling Ltd (TDG.TO) posted a quarterly loss. [ID:nBNG471000]
TRANSOCEAN SHY OF ESTIMATES
Switzerland-based Transocean posted a 33 percent drop in profit as it pulled more rigs off the shallow-water jackup market. [ID:nN04515197]
Excluding charges for legal issues, asset impairments, debt retirements and a tax gain, its earnings per share of $2.65 fell short of the $2.67 analysts had expected. Revenue fell 12 percent to $2.82 billion, below the $2.85 billion forecast.
Transocean shares fell 1.8 percent to $85.05, though S&P Equity Research raised its price target by $6 to $107.
While the Philadelphia Stock Exchange oil service index .OSX is up 60 percent in 2009, Transocean has jumped 82 percent thanks to its market leadership and exposure to the healthy ultra-deepwater segment.
Last month, rivals Diamond Offshore Drilling Inc (DO.N) and Noble Corp (NE.N) reported better-than-expected third-quarter profit growth, boosted by their deepwater rig earnings.
Sembcorp Marine (SCMN.SI), the world's second-biggest offshore rig maker, beat quarterly profit estimates on Wednesday and said it would build a new yard in Singapore to tap energy sector demand. [ID:nSIN12050] (Reporting by Braden Reddall, with additional reporting by Matt Daily in New York and Ajay Kamalakaran in Bangalore; Editing by Tim Dobbyn)
