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.

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Companies

Symbol Name Price Change % Volume
BHI Baker Hughes Incorporated 66.14 -0.75 -1.12 2,923,677
HAL Halliburton Company 53.54 -0.48 -0.89 8,987,054
SLB Schlumberger N.V. 84.35 0.39 0.46 5,138,922
DGMS Digimedical Solutions Inc 0.00 0.00 0.00 0

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