Oilfield service companies Baker Hughes and Schlumberger posted higher than expected earnings thanks to activity growth in the U.S. Gulf of Mexico and international markets that balanced out cyclical weakness in the North American market.
Houston-based Baker Hughes reported second quarter 2012 net income of $439 million and revenue of $5.33 billion, up from revenue of $4.74 billion for second quarter 2011 and down .5 percent from $5.36 billion for this year's first quarter.
Baker Hughes expected continuing improvement in the Gulf of Mexico and international markets, said President and Chief Executive Officer Martin Craighead in a statement on Friday. The company's international business delivered improved revenue and operating profit, driven primarily by Baker Hughes' Europe and Middle East operations.
Improved results in Baker Hughes onshore U.S. business helped offset the impact of the seasonal slowdown in Canada. Initiatives to improve its pressure pumping business helped stabilize results this quarter by offsetting higher costs for certain raw materials and weak pressure pumping market conditions, said Craighead.
Baker Hughes's diluted earnings per share (EPS) of $1.00 for the second quarter of 2012 beat Global Hunter Securities' (GHS) estimate of $.79 and analyst consensus estimates of $.80, GHS said in a research note Friday.
"International results were not mind blowing, but fairly solid as activity continues to steadily grind higher," said GHS analyst Brian Uhlmer in a research note.
If commentary regarding NAM [North American Market] margin sustainability/improvements via its self-help initiatives remain positive, estimates for 2012 to move up are likely to move up from current consensus estimates of below $1 for the third and fourth quarters of this year.
Schlumberger also beat GHS/Wall Street estimates for EPS of $.97/$1.00, reporting second quarter 2012 EPS of $1.05, GHS said in a research note. The company reported income of $1.4 billion from continuing operations and revenue of $10.45 billion for second quarter 2012. Revenue was up five percent from $9.92 billion in this year's first quarter and 16 percent from $8.99 billion in second quarter 2011.
The oil services company credited activity growth in its offshore and key land markets for growth in its oilfield service revenues. Schlumberger's operations in its Latin America, Middle East and Asia areas progressed well, while Europe, CIS and Africa showed particular strength across the area.
The Canadian spring break-up and weakness in the U.S. land hydraulic fracturing market lowered results, but robust performance in Schlumberger's other land businesses and the U.S. Gulf of Mexico offset this weakness, Schlumberger reported.
However, Schlumberger CEO Paal Kibsgaard said in a statement that the present climate of uncertainty as global economies remain unsettled will likely remain sometime.
"It the midst of such uncertainty, we are maintaining focus on what we can control, which is the planning and execution of our work."
To meet this goal, the company is seeking to extend its leadership in execution.
"We believe such actions, together with our international strength and our balanced portfolio in North America, should enable strong relative future performance," said Kibsgaard.
Despite talk of uncertainty, Schlumberger remains among the best positioned diversified service players given the increasingly constructive global deepwater environment, the company's considerable leverage to the Gulf of Mexico and ability to preserve or expand market share by leveraging its supply chain and bundled pricing conventions in the North American onshore complex, said GHS analyst Jeff Spittel in a research note.