Baker Hughes Inc.’s management team reported Monday that the purchase of pressure pumping specialist BJ Services Inc. already is paying off, helping to boost quarterly profits both year/year and sequentially, with most of the uptick coming from work in North America’s unconventional basins.

Net income totaled $255 million (59 cents/share) in 3Q2010, versus $55 million (18 cents) in 3Q2009, and up from $93 million (23 cents) in 2Q2010. The latest quarter’s results included a full three months of results from BJ Services, compared with two months in 2Q2010. Revenue jumped 83% overall and was up 71% in North America year/year.

“Our performance was dominated by North America,” CEO Chad Deaton told energy analysts during a conference call. “Drilling for unconventional oil and gas in key North American basins has driven demand for drilling, pressure pumping and completion products and services…

“We are seeing strong growth in oil-directed drilling and expect to see the conventional and unconventional trend to continue into 2011. Natural gas has stabilized and is increasingly on the wetter side of the plays, with demand for drilling in unconventional reservoirs and strong demand for pressure pumping, which has offset drilling for dry gas.

“It’s important to note that pressure pumping is a key technology for developing both types of these reservoirs…” In completing the BJ Services acquisition earlier this year, “we can finally act on the opportunities that we have with new pressure pumping in North America.”

The $7 billion acquisition of BJ Services was first announced in August 2009 (see Daily GPI, Sept. 1, 2009) and moved the combined company to the No. 3 spot in market value for oilfield services behind leaders Schlumberger Ltd. and Halliburton Co. National Oilwell Varco Inc. had been the No. 3 oilfield services provider.

COO Martin Craighead said overall, onshore producers are demanding more technical services.

“Horizontal drilling more than doubled year-over-year, and it was up 13% sequentially,” he said. Producers are using “longer horizontals, more complex completions, and they are increasing [the need for] horsepower and adding more fracking [hydraulic fracturing] stages…That is supporting higher revenue per rig and enabling us to obtain higher prices.”

The onshore oilfield services market “is tight,” and the backlog to complete wells in the unconventional shale basins is estimated at “90 to 180 days” for service providers, said Craighead. An estimated 1,500-2,500 onshore wells haven’t been completed because they are awaiting different types of completion services.

Baker Hughes’ “long-term strategic plan is to fill some gaps in our portfolio,” said Deaton. “One of those had been pressure pumping, which we addressed.” Now the company is working to “build out our reservoir capability.”

Looking ahead to 2011, Deaton told analysts that he thought the company’s North American segment would be even “better” than this year.

“When we started the pressure pumping over the last couple of months we saw a lot of price improvement,” said the CEO. However, by mid-2011 there “will be a headwind for pressure pumping, no doubt it’s coming. We’re building out our horsepower, and we are glad we did begin to build it out. The adjustments are based on what we see.

“We still see a lot of wells behind the pipe that still need fracking…around 1,500 to 2,500 wells. There’s a lot of frack jobs and that takes lots of equipment.”

Baker Hughes is estimating that the horsepower market will increase from the current 6.5 million “to 8.5 million hp by the end of next year,” Deaton said. “Those are street numbers; it doesn’t take into account attrition. We’re burning through 15% [of horsepower] a year…Over a million net horsepower will be added here in the next few quarters…

“Right now there is a big backlog. We don’t know how strongly it will be faring in second half to determine if we’re going to add equipment through next year. There are a lot of variables right now. We’re watching it to see if it slows down a little bit and see if it’s more like business in the past.”