Baker Hughes says only higher oil prices will spur int’l spending
Oilfield services provider Baker Hughes Inc, which is being acquired by General Electric Co , said crude oil prices would need to rise by roughly another 15 percent to spur producers to spend more on drilling outside North America.
Oil prices in the mid- to upper-$50s-per-barrel range would encourage North American producers, while prices above $65 per barrel would coax international producers to boost spending, Chief Executive Martin Craighead said.
U.S. crude oil futures were at nearly $54 per barrel at 1800 GMT on Thursday, while Brent prices were at $56.32.
While producers have put more rigs back to work in low-cost North American shale fields, such as the Permian Basin in Texas, due to higher oil prices, they have been reluctant to bet bigger on the expensive deepwater and mature oilfields outside the region.
But, Baker Hughes said its revenue from North America would fall again in the current quarter, which coupled with a bigger-than-expected fourth-quarter loss due to a higher tax rate, sent the company’s shares down about 1 percent to $62.92.
Baker Hughes said its current-quarter North America revenue would be hurt by reduced activity in the Gulf of Mexico and the spin off of its pressure pumping business.
The company said it expects revenue from the region to rise over the first half of the year as producers ramp up onshore drilling, but said any pricing improvements would be limited as the market stays oversupplied.
The company expects its international revenue to fall by “mid to upper single digits” in percentage terms this quarter, reinforcing the subdued demand predicted by rivals Halliburton Co and Schlumberger NV.
Net loss attributable to Baker Hughes rose to $417 million in the fourth quarter from $1.03 billion a year earlier when it booked a $1.25 billion impairment charge.
Excluding such items, it loss 30 cents per share, much more than analysts’ average estimate of a 11 cents loss, according to Thomson Reuters I/B/E/S. At least six analysts said the difference was due to a higher tax rate.
Written by Vishaka George and Swetha Gopinath