(By Balaseshan) Baker Hughes Inc. (NYSE: BHI) warned on its fourth-quarter results due to weaker-than-expected drilling activity in North America and activity, operational delays at its International operations.
Competitors Halliburton Co. (NYSE: HAL) and Schlumberger Ltd (NYSE: SLB) have also been affected by the shift in drilling. On Friday, Schlumberger said its fourth-quarter earnings will be negatively impacted by continued contractual delays in the Europe, CIS and Africa as well as weaker-than-anticipated drilling activity in North America.
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On Tuesday, Baker Hughes said it expects North America revenue and profit margins to be lower than previous expectations due to weaker than anticipated onshore activity and further price erosion within Pressure Pumping operations.
As a result, North America operating profit before tax margin is now expected to be between 8.5% and 9.5% for the fourth quarter of 2012, as compared to 11.7% in the third quarter of 2012.
BHI said International operations are being adversely impacted by several factors, including weaker than anticipated rig count activity in Brazil and Colombia, activity delays in the North Sea, and continued operational delays in Iraq.
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Despite these factors, International operating profit before tax margin is expected to be similar to the 12.0% reported in the third quarter of 2012 (excluding the impact of bad debts recognized in Latin America and Europe).
The results for the third quarter of 2012 exclude the impact of a $43 million before-tax charge related to internally developed software and other information technology assets, and a $20 million before-tax charge associated with the closure of a chemical manufacturing facility in the United Kingdom. Currently, there are no adjustments included in the outlook for the fourth quarter of 2012.
BHI closed Monday's regular session down 1.10% at $40.64. The stock has been trading between $37.08 and $52.96 for the past 52 weeks.