Steep declines in hydraulic fracturing and cementing services in North American operations, coupled with reduced pricing for services, sent BJ Services Co. earnings into a spiral in fiscal 1Q2010, the company said late Monday.

The company reported an operating loss in the quarter of $10.8 million, versus income of $221.3 million in fiscal 1Q2009. The net loss from continuing operations was $8.4 million (minus 3 cents/share), compared with net income of 51 cents in the year-ago period. Revenue in the quarter ending Dec. 31, 2009 was $931.5 million, or about one-third lower than the $1.4 billion in revenues reported in 1Q2009. The 1Q2010 results included costs of $3.1 million related to the pending merger with Baker Hughes Inc. (see Daily GPI, Sept. 1, 2009).

The company did not hold a conference call with analysts about the quarterly or year-end earnings.

“Our first quarter results reflected the second consecutive quarter of sequential improvement in revenue, operating income and operating income margin,” said CEO Bill Stewart. “U.S. drilling activity, particularly with respect to oil exploration, as measured by average active drilling rigs, increased 14% sequentially, but declined 42% compared to the same period a year ago.

“Natural gas drilling was 7% higher sequentially, and North America natural gas prices have improved somewhat as supply and demand are beginning to get more in balance. Our Canadian operations improved significantly from the previous quarter, primarily reflecting increased activity in the Montney and Horn River gas plays and the Bakken and other emerging oil plays…”

BJ Services “experienced increased service activity and a generally stable to slightly improved pressure pumping pricing environment in the U.S. and Canada markets during the quarter, as capacity utilization improved,” said Stewart. “We continue to focus on our customers and meeting their needs, as we draw closer to the completion of the merger with Baker Hughes, expected to occur in March.”

In its U.S./Mexico pressure pumping services unit, BJ Services reported that average active drilling rigs in 1Q2010 increased 12% sequentially, but were down 42% from the period a year earlier.

“Sequentially, revenue improved most notably in the Permian Basin, South Texas, East Texas and Midcontinent,” said the company. In the company’s Canada pressure pumping unit, average drilling rig activity in 1Q2010 rose by half (49%) sequentially “primarily reflecting increases in fracturing and cementing activity.” However, year/year rig activity fell by one-third (32%).

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