Oil field service firms’ profits decline

Two of Houston’s biggest oil field service companies on Tuesday reported much lower profits in the second quarter as the pain from the oil bust continued, especially in North America.

Fluctuations in foreign currency exchange rates with the U.S. dollar also tempered demand for oil equipment in international markets. But those overseas markets held up better than the U.S. land market, where oil companies have sidelined hundreds of rigs in the last few months.

Baker Hughes lost $188 million, a net loss of 43 cents a share, in the second quarter, compared to its $353 million profit, 80 cents a share, in the same April-June period last year. Revenue fell from $5.94 billion to $3.97 billion.

The Houston company, the world’s third-largest oil field services company, saw its worst revenue decline in North America, where sales dropped 26 percent under its firstquarter revenue. Revenue declined 11 percent in Latin America, 3 percent in Europe and Africa and 7 percent in the Middle East.

But Baker Hughes, which is set to sell itself to Halliburton by the end of the year, also managed to curb its losses. Chief Executive Martin Craighead said the company whittled its so-called decremental margins — the number of net-income dollars lost per

dollar of revenue lost – to 35 percent of what it was last year, a significant improvement over the 2009 oil-industry downturn.

“Even though the severity of the revenue decline has compressed our margins, we have minimized the impact by aggressively reducing the costs and rightsizing our operational footprint,” Craighead said in a written statement. The company said in April it would lay off 10,500 employees, about 17 percent of its workforce.

The four biggest oil field service companies, Schlumberger, Halliburton, Baker Hughes and Weatherford International, have committed to cut 49,500 jobs around the globe amid low oil prices.

The U.S. benchmark crude edged up 21 cents Tuesday to $50.36 a barrel on the New York Mercantile Exchange. Brent, the international standard, rose 39 cents to $57.04 a barrel on the ICE Futures Europe.

Meanwhile, FMC Technologies posted a 52 percent decline in profits in the second quarter, as its land-based business continued to get hammered as drilling activity slowed to a crawl in North American shale plays.

The Houston company, which primarily assembles subsea technology used to goose oil out of deep-sea fields, had a net income of $107.9 million, or 46 cents a share, in the second quarter, compared to $226.3 million, or 95 cents a share, in the same April-June period last year. Revenues fell from $1.9 billion to $1.7 billion.

FMC’s subsea orders held up much better than its land business. Sales from its subsea technology business declined 7 percent compared to the first quarter as a stronger U.S. dollar and foreign exchange fluctuations tempered demand from overseas.

About $1 billion in new orders came in during the three-month period.

“Subsea orders were stronger in the second quarter,” FMC CEO John Gremp said in a written statement, adding the company is becoming more confident it will bring in $3 billion of subsea awards this year.

He added the company’s surface business was “severely impacted by the decline in North American activity” and that the firm continues “to take actions to change our business model and improve our operating effectiveness to address current market conditions and to be well positioned as the market improves.”

Its land technologies took a 29-percent hit to revenue, declining to $363.3 million in the second quarter.

FMC’s energy infrastructure business fell 32 percent, down to $101.4 million. It said its backlog has grown to $5.3 billion, of which almost 90 percent of which comes from its subsea unit.

Craighead, the Baker Hughes CEO, said he expected the unfavorable market to persist in the second half of the year and doesn’t believe North American drilling activity will increase as long as oil prices are low. The North American rig count, he said, should remain relatively unchanged for the rest of the year.

Baker Hughes shares rose $1.18 on Tuesday to $60.64 a share on the New York Stock Exchange.

Shares in FMC, which reported earnings after the market closed, increased 16 cents to $36.53 a share.