(Reuters) - General Electric Co’s Baker Hughes posted quarterly profit that beat Wall Street estimates on Friday as improving oil prices prompted companies to ramp up oil and gas production.
U.S. crude futures climbed 7.5 percent in the first quarter of 2018, re-energizing oil and gas producers that held back investments in recent years amid a steep drop in prices. That boost has benefited service companies, among the hardest hit by the oil price downturn that started in mid-2014.
“Market fundamentals remain supportive, as crude oil prices are relatively rangebound, providing stability to customers as they evaluate projects,” said Baker Hughes Chief Executive Officer Lorenzo Simonelli in a statement.
Excluding items, GE Baker Hughes earned 9 cents per share, beating analysts’ estimates by 3 cents, according to Thomson Reuters I/B/E/S. Revenue rose to $5.40 billion from $5.32 billion on a combined basis a year earlier.
Results were boosted by a $124 million benefit from U.S. tax reform in December 2017.
Less than a year ago conglomerate General Electric Co combined its oilfield business with Baker Hughes, creating the second largest oilfield services company by revenue.
The combined company achieved $144 million in synergies in the first quarter of 2018, putting it on track to hit an expected $700 million by year-end, Simonelli said.
Shares were up 0.8 percent at $33.99.
Although the liquefied natural gas (LNG) and offshore markets were stagnant at the start of the year, the company was positive on both segments, Simonelli said.
So were investors. “We believe offshore and international markets have turned the corner and will soon become a more evident tailwind for the shares,” wrote James West, senior managing director for investment bank Evercore ISI in a note on Friday.
Oilfield services revenue, which accounted for half of overall sales, rose 10.1 percent to $2.64 billion in the quarter. The company was awarded a five-year contract by Kinder Morgan to provide artificial lift services in the Permian Basin as well as a wireline contract with a large international oil company in the Gulf of Mexico, it said.
The company said on Friday it was awarded a subsea equipment contract for Phase II of Chevron’s project in Australia.
Net income attributable to the company was $70 million, or 17 cents per share, in the quarter. Orders rose 8.7 percent.
Reporting by Liz Hampton in Houston and Yashaswini Swamynathan in Bengaluru; Editing by Sriraj Kalluvila and Jeffrey Benkoe