Baker Hughes posted a 30 percent increase in second quarter profits as overseas drilling grew and the company improved operational problems in its U.S. hydraulic fracturing business.
The oilfield services supplier posted net income of $439 million, or $1 per diluted share, for the three month period ending June 30. During the same period last year, the Houston-based company recorded $338 million in profits, or 77 cents per diluted share.
Revenue rose 12 percent to $5.3 billion compared to the second quarter of 2011.
Company executives said rising activity in the Gulf of Mexico will help business in the United States, as deep-water rig counts grow. However, they said the the overall outlook for its North American division remains difficult to predict.
Pre-tax profits in the North American business fell 18 percent for the second quarter, challenged by the hydraulic fracturing market, which has suffered from rising commodity costs and oversupply in some regions. As oil and natural gas activity has boomed in the United States, oil field service companies rapidly expanded their pressure pumping fleets, a key component of hydraulic fracturing. The oversupply has driven down prices for the service.
Further challenging the hydraulic fracturing business, the price of an important hydraulic fracturing ingredient called guar gum has surged.
“With guar beans, where our costs increase, we are not able to pass them on to customers,” said Chief Financial Officer Peter Ragauss, in a conference call with analysts Friday morning.”Pressure pumping issues in the U.S. will continue to face weak market conditions and higher guar bean costs.”
CEO Martin Craighead said guar prices are starting to coming down and the company is developing chemical alternatives to guar for use in its hydraulic fracturing services. Further, Baker Hughes has instituted new leadership in its pressure pumping business to fix operational problems. And the company has completed the logistical challenge of moving its fleets from natural gas fields to more oily ones, to capitalize on higher commodity prices, executives said.
Baker Hughes expects the number of rigs working in U.S. oil fields to grow 21 percent this year to 1,430, as natural gas rigs continue to decline.
“The initiatives to improve our pressure pumping business helped stabilize its results this quarter by offsetting the higher costs for certain raw materials and the weaker market conditions for pressure pumping,” CEO Martin Craighead said in a written statement.
Internationally, second quarter pre-tax profits for Baker Hughes’ Europe/Africa/Russia division grew more than three times to $156 million.
Baker Hughes shares were up $4.02 to $45.77 in morning trading on the New York Stock Exchange.