US oilfield services firm Baker Hughes announced yesterday that its operating profit before tax for the first quarter of 2012 is expected to be lower than the fourth quarter of 2011, primarily due to rapidly changing market conditions in the Pressure Pumping product line in North America and seasonality in all international markets.
The US energy landscape is tilting towards oil exploration and away from shale, as the intensive fracking drive has driven natural gas prices in the US to rates too low to be commercially viable for all but the the most prolific prospects tappable at the lowest costs.
“As a result of the continued shift in U.S. rig activity from natural gas to oil and liquids-rich basins and other market forces, the company’s Pressure Pumping product line is currently experiencing: decreased fleet utilization, lower pricing, higher than expected personnel and logistics costs, and shortages of and higher costs for critical raw materials, such as gel,” Baker Hughes said in a statement.
Overall, the company expects North America operating profit before tax margin(1) for the first quarter of 2012 to be between 13.2% and 14.2% compared to 18.7% in the fourth quarter of 2011.
The operating profit before tax margin outlook for international operations for the first quarter of 2012 is expected to be between 12.2% and 13.2% compared to 15.6% in the fourth quarter of 2011 due to seasonality of product sales, weather, geographic mix, and project delays in Latin America.
The company is reviewing its budgets for the year, and expects to adjust 2012 capital expenditures for the Pressure Pumping product line to align with current market conditions.
Baker Hughes will hold its Q1 earnings conference call on April 24, 2012.
