Houston-based Baker Hughes Inc. (BHI) on Tuesday said its quarterly earnings rose nearly 7% as North American markets, especially onshore, rebounded from a year ago. The company also is seeing a willingness “like never before” to invest in new technology, the COO said.
“Operationally, BHI’s performance improved during the quarter in North America, Russia and Asia Pacific,” CEO Chad C. Deaton told financial analysts during a conference call. Onshore U.S. operations were much stronger than a year ago. However, the deepwater Gulf of Mexico (GOM) drilling moratorium has begun to impact results.
Because of the GOM moratorium, “we have deployed people and equipment to U.S. land operations and to international offshore markets where deepwater drilling continues,” he said. “The drilling moratorium negatively impacted our business on the [Outer Continental] Shelf and in deepwater by 3 cents/share during the quarter and has a potential negative impact per share of 8-11 cents per quarter in the second half of the year.
“Looking forward, we expect our North America land business to remain strong compared to last year as unconventional gas and oil-directed drilling in the U.S. continues to grow and as the Canada market, where we are a significant participant, rebounds seasonally.”
COO Martin Craighead, who gained the title of president in July, noted that the North American horizontal rig count in 2Q2010 jumped 102% year/year and was up 18% sequentially from the first three months. Ninety percent of the rigs are “concentrated in six active plays” onshore, he said.
“Across all product lines…all areas…we have seen price improvement in the United States,” said Craighead. “We are seeing some improvement in key basins, and customers are prepared for supply tightening. There’s a strong focus by customers to improve their efficiency,” but “some drilling is getting tougher, not easier. We are seeing a willingness like never before to pay for technology…not by all, but it is gaining some traction.”
During the quarter Hess Corp. awarded BHI a five-year contract for directional drilling services, drillbits, drilling fluids, pressure pumping, cased hole wireline and packers and completion systems in North Dakota’s Bakken formation. Also in the liquids-rich play, BHI installed its first FracPoint multi-stage hydraulic fractionation system to be instrumented with downhole fiber optic and electronic monitoring sensors in a 20,000-foot horizontal well. The system enables customers to acquire real-time downhole data during fracturing operations.
A new electrical submersible pumping system also was installed in the GOM at two vertical subsea boosting stations on the seabed at Royal Dutch Shell plc’s Perdido Field in 8,000 feet of water. The Perdido pumping systems are designed to boost up to 125,000 bbl of fluid per day.
Net income was $93 million (23 cents/share) in 2Q2010 versus $87 million (28 cents) in 2Q2009. BHI completed its acquisition of BJ Services in late April, which affected BHI’s earnings for May and June. The latest quarter’s results also include a charge for acquisition-related costs of $56 million (13 cents/share).
Revenue for the quarter totaled $3.37 billion, which was 44% higher than in the year-ago period and up 33% from the first three months of this year. Revenue in North American oilfield operations, BHI’s largest geographic market, more than doubled.
Rowan also reported a quarterly profit on Tuesday backed by gains in land rig utilization. Clients are shifting their budgets to onshore projects, CEO Matt Ralls said during a separate conference call.
Rowan, which is weighted to the offshore, has 32 land rigs and utilization in the latest quarter was 78%, up from 60% in the year-ago period. Offshore rig utilization fell slightly to 75%.
The company, which has long-term plans to spin off its land drilling unit, plans to pursue new land rig construction against term contracts rather than opening up the fleet to the spot market, Ralls said. The spin-off for now is delayed until the “opportunity presents itself.”
“We do believe at some point it will make sense to use the land rig fleet as a source of capital for further expansion into the offshore side of the business,” Ralls said on the conference call.
The CEO said he was hopeful that regulators would lift the offshore drilling moratorium as expected in November. But he took a swipe at Congress for its “overreaction” to the Gulf of Mexico oil spill.
“Like all of the energy service firms with operations in the Gulf, we are hoping that the legislation currently considered in Congress doesn’t become law,” said Ralls (see related story). “In my personal view, it’s an overreaction [and] will likely damage domestic offshore energy industry without making it meaningfully safer and managers will be considering every opportunity to reposition our fleet to minimize potential impact from this ill-conceived legislation.”
Rowan’s net income was $90.9 million (79 cents/share) in 2Q2010, versus $96.6 million (85 cents) in 2Q2009. Revenue was slightly ahead of last year at $490.1 million.
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