Houston-based oil field services firm Baker Hughes suffered a sharp decline in its Latin America operations as it reported Friday a 45 percent drop in second-quarter earnings, despite a small increase in revenue.
The company also cited charges for bad debt provisions in Latin America and an inventory charge related to its pressure pumping operations in North America. The company posted a profit of $240 million, or 54 cents a share, during the April-to-June quarter, compared to a profit of $439 million, or $1 a share, a year earlier.
Revenue in the quarter rose 3 percent to $5.49 billion, compared to $5.33 billion a year earlier.
“Our second quarter results reflect mixed performance across our international operating segments,” Chief Executive Officer Martin Craighead said in a written statement.
Weakness in Brazil and Mexico were blamed for much of the decline in Latin America.
Craighead said the company is trying to reduce costs in Latin America to improve its performance there.
“This process should be substantially complete in the third quarter leading to increased profitability in the second half of the year,” he said.
Wells documented: Baker Hughes adds to its famous rig count
In a conference call with analysts and investors, Craighead and Chief Financial Officer Peter Ragauss said the company is cutting staff in Latin America to boost profits, and it is redeploying assets from there to areas where it is seeing growth, including Norway and the Middle East.
“Unfortunately, these issues overshadowed growth in other regions,” Craighead said.
On the positive front, the company said it saw strong performance in the quarter in its Gulf of Mexico operations, boosting revenue in North America 3 percent sequentially, despite seasonal issues in Canada.
Going forward, Ragauss said Baker Hughes is reducing its onshore rig projections from its last guidance, but still believes activity will improve. Offshore rig projections remain unchanged, he said, adding that drilling efficiencies will continue to improve.
Ragauss said the company will be able to consider further “shareholder distributions” like dividends or a share buy back when excess cash continues to be delivered “on a reliable basis.”
For the first half of the year, profit fell to $507 million, or $1.14 a share, compared to a profit of $818 million, or $1.86 a share, a year earlier. Six-month revenue edged up to $10.72 billion from $10.68 billion a year earlier.
The news follows Baker Hughes’ announcement Thursday that it is adding a new quarterly well count to the data that it collects and releases to the industry. It has been issuing a rig count since 1944.