Integrated Oilfield Services Giants Bifurcate on North American Margins, Harsh Winter

Michael Teague |

The US’s top three major integrated oilfield services providers, Baker Hughes Incorporated (BHI) , Schlumberger Limited (SLB) , and Halliburton Co. (HAL) dominated volume-trading in the oil and gas services industry throughout Thursday’s session after both BHI and SLB reported earnings ahead of the opening bell.

Shares for Baker Hughes bumped up over 4 percent to hit a 52-week high of $69.76 before paring back slightly after the company reporting first-quarter adjusted earnings of $0.84 per share on revenue of $5.73 billion, gains compared to the year-earlier period during which earnings came in at $0.65 per share on revenue of $5.23 billion. The results handily surpassed street expectations for earnings of $0.78 per share on revenue of $5.71 billion.



While the company’s Latin American revenue was down about 10 percent to $530 million, revenue from the Middle East, where services companies have been upping their investments recently, were up to $1.1 billion, an increase of 23 percent. Perhaps more significantly, however, was the 6.6 percent increase in North American revenue to $2.77 billion along with a vast improvement in margins on the continent. The company was able to post impressive figures even though the first quarter saw drilling and production activity hampered by a harsh winter that disrupted operations throughout central and eastern regions of the US.

Schlumberger, the world’s top publicly traded services provider, for its part saw a 19 percent increase in Mideast revenue and a 12 percent increase in North American revenue, with the latter being held back by a dip in operating margins on the continent due to drilling delays in the Gulf of Mexico. The company is significantly less exposed to North American drilling and production, from which it culls just 20 percent of its revenues.

For Q1, Schlumberger reported an adjusted EPS of $1.21 per share on revenue of $11.24 billion, compared to the prior-year period’s $0.97 per share on revenue of $10.57 billion. Consensus estimates had been for $1.20 per share on revenue of $11.49 billion. The quarter billion dollar miss of revenue cost the company throughout Thursday’s session as the stock fell 1.25 percent to $99.67 heading towards the closing bell.

Neither company was forthcoming about what they expect for the second quarter, but it is likely that neither have to worry as the entire industry is looking at a likely uptick in US activity after the harsh winter. Q1 2014 saw well counts down significantly, about 2.5 percent, from the year prior as icy and/or tempestuous conditions postponed what would otherwise have been brisk activity. And that is business that will have to be made up as the central and eastern portions of the country begin thawing out.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
BHI Baker Hughes Incorporated n/a n/a n/a 0 Trade
HAL Halliburton Company 44.46 -0.15 -0.34 7,556,586 Trade
SLB Schlumberger N.V. 66.50 -0.30 -0.45 6,621,444 Trade
DGMS Digimedical Solutions Inc 0.00 0.00 39.43 500

Comments

Emerging Growth

Margaux Resources Ltd.

Margaux Resources Ltd is a Calgary based resource company. The Company is focused on its Jersey Emeral Tungsten-Zinc property located in the southeast portion of British Columbia.

Private Markets

Quants Inc

Quants, Inc, a California Corporation, develops, markets and operates financial technology platforms and alternative investment products offering sophisticated risk management since 2010. The Company has primarily sharpened its focus with…

Voleo

Voleo is a free download that allows you to form investment clubs with your friends, family, colleagues, classmates, teammates…basically anyone you know and trust. Invest and manage a stock portfolio…