Baker Hughes posts fourth quarter profit as rising oil prices boost demand for drilling

A Baker Hughes sign is displayed outside the oil logistics company’s local office in Sherwood Park near Edmonton, Alberta, Canada November 13, 2016. REUTERS/Chris Helgren/File Photo

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Jan 20 (Reuters) – Shares of Baker Hughes (BKR.O) rose sharply on Thursday after the company reported adjusted quarterly profit and beat analysts’ profit expectations, rising crude oil and oil prices. natural gas fueling demand for its equipment and services.

Oil prices jumped more than 50% last year amid global economic recovery from the COVID-19 pandemic and as OPEC+ cut supplies. Rising crude prices spurred more drilling activity, with the number of U.S. rigs up 68% year-over-year to 586 at the end of the fourth quarter, according to data from Baker Hughes.

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“We believe the broader macroeconomic recovery should translate into increased energy demand for 2022 and relatively tight oil and natural gas supplies,” Baker CEO Lorenzo Simonelli said. In North America, Simonelli expects private energy companies to continue to drive growth, while publicly traded companies will remain disciplined.

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Shares of Baker Hughes were up about 5% in early trading at $27.60 each.

Wall Street analysts said the report was positive, praising Baker’s free cash flow of $645 million, which beat forecasts, and higher-than-expected EBITDA.

Investment firm Tudor, Pickering, Holt & Co called earnings a “very good way to rebound,” saying revenue and operating profit in three of Baker’s four reporting segments beat expectations.

The company booked some $7.7 billion in orders in 2021 in its Turbomachinery and Process Solutions unit, driven largely by those related to liquefied natural gas (LNG).

“We believe the increased LNG order activity provides a strong indication that a new LNG cycle is beginning to take shape,” Simonelli told investors on a conference call. It expects 2022 orders to be in line with 2021.

Simonelli said disruptions from the pandemic continued to impact operations and warned that supply chain and inflationary pressures that have driven up costs and delivery issues at its oil services business units and digital solutions would likely continue in the first half of 2022.

Adjusted net income for the fourth quarter was $224 million, or 25 cents per share, missing analysts’ estimates by 3 cents, according to Refinitiv IBES data. In the same quarter last year, Baker reported a loss of $50 million, or 7 cents per share, last year.

Revenue for the quarter was $5.52 billion, which beat Wall Street’s forecast of $5.49 billion.

For the full year, the company reported a loss of $219 million, compared to a loss of $9.94 billion in 2020.

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Reporting by Arunima Kumar in Bengaluru; edited by Amy Caren Daniel, Chizu Nomiyama and Marguerita Choy

Our standards: The Thomson Reuters Trust Principles.

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Felix J. Dixon