The journey by Baker Hughes, a GE Company, has been a bumpy one since it began operating two years ago, but improvements are coming with a continued focus on innovation and technology for its global customers, CEO Lorenzo Simonelli said Tuesday.

CFO Brian Worrell and Simonelli discussed third quarter performance during a conference call and shared an optimistic outlook for the coming year.

Like its oilfield services (OFS) peers, BHGE reported an uptick in its international business, as well as the strongest performance for the offshore market in several years. The North American market also “continues to be resilient,” Simonelli said.

“Drilling-related activity remains stable, which bodes well for our portfolio. We see softness in fracture-related completions activity as the North American pressure pumping market weakens into the fourth quarter.”

Takeaway capacity constraints in the Lower 48 “are leading to an increase in drilled but uncompleted wells,” but “drilling-related activities remain stable” worldwide. “The North American rig count was up 10% in the third quarter, primarily driven by the seasonal Canadian recovery. The U.S. rig count was up 1%. Internationally, rig count was up 4% with increases across Africa, Asia and Latin America.”

Beyond its minority investment in BJ Services, which provides fracture/completion services, BHGE is not “materially impacted by the current challenges in the North American pressure pumping market,” Simonelli said.

However, “we do expect some increased headwinds” in the fourth quarter, said Worrell, from ramp-up costs to execute recent equipment orders and as it readies for what it expects will be a busier 2019.

Management is optimistic about rebuilding the backlog, particularly for the longer cycle equipment businesses. The macro environment also is improving, said Simonelli.

“We expect both the North American and international markets to grow in 2019 as customers increase spending and overall rig and well counts grow.”

Net profits totaled $13 million (3 cents/share) in 3Q2018, versus a year-ago loss of $19 million (minus 5 cents). Operating income increased to $282 million from a year-ago loss of $193 million. Orders were nearly flat from 3Q2017, but they declined 5% sequentially to $5.7 billion.

Sequential revenue climbed 2% to $5.7 billion, driven by the OFS unit, which gained 4%, and oilfield equipment, up 2%. The turbomachinery business was flat from 2Q2018, while the digital solutions unit declined 1%.

From 3Q2017, revenue increased 7%, driven by a 12% gain in OFS, with digital solutions up 6% and oilfield equipment climbing 3%. Turbomachinery fell 3% year/year.

“We grew margin rates over 100 basis points in every segment sequentially,” Worrell said. “As we have outlined, we are very focused on our goal of expanding margin rates and this quarter demonstrated continued progress.”

The company is awaiting a decision by General Electric, its majority stakeholder, which in June said it would “pursue an orderly exit” within three years of its 62.5% investment, Worrell noted.

“We evaluated our next steps from a capital allocation standpoint, specifically as it pertains to our share repurchase program,” he said. We decided not to continue with our buyback in the third quarter and to wait until we have more clarity on GE’s next steps before we resume our buyback activity.”