Baker Hughes earnings up 47 percent

HOUSTON — Oilfield service company Baker Hughes’ profits rose 47 percent in the second quarter amid unprecedented demand for its services in North America, the company said Thursday morning.

The Houston-based company’s second-quarter income totaled $353 million or $0.80 per share, up from $240 million or $0.54 per share during the same period a year ago.

“Our results reflect improved execution and the rapid deployment of innovative new products and services around the world,” CEO Martin Craighead said in a statement.

Revenue for the period was also up 8 percent in the quarter to $5.9 billion.

Company officials said they see the Permian Basin as the biggest source of demand growth in the U.S. onshore, as the area has an increasing number of rigs and a growing proportion of horizontal wells. They said market forces in the U.S. and in particular the Permian have been favorable to all of Baker Hughes’ product lines, especially its pressure pumping services.

“They were better than what all of us were expecting,” said Marshall Adkins, an analyst with Raymond James & Associates, of the quarter’s results. “The key to Baker Hughes is they have big exposure in North America, and North America is clearly going gangbusters.”

Craighead said going forward, he expects the the company’s revenue to grow faster than the U.S. rig count and well count because operators’ “intensity” at each site is likely to increase as they spend more money per-well in an effort to overcome technical challenges.

The company saw revenue growth in every region except Latin America, where several service companies have experienced a slowdown recently.

Baker Hughes used the quarterly update to tout a new two-year contract it won in the second quarter to provide several services in Brazil. It also highlighted its growing deepwater market share in West Africa, where the company was awarded several multi-year contracts to provide directional drilling and other services to deepwater operators in Angola and Nigeria.

Company officials, in a conference a call with analysts Thursday morning, estimated that as much as half of Baker Hughes’ revenue comes from products developed in roughly the last two years.

“These results are a reflection of our strategy to convert innovations to earnings,” Craighead said on the call.

The company had two significant one-time costs in the second quarter, including $39 million in after-tax costs to settle litigation related to labor claims. It also had $12 million in costs association with the devaluation of Venezuelan currency.