Baker Hughes tallies first profitable quarter
Baker Hughes on Thursday reported its first profitable quarter since oil markets crashed last year, a further sign that the industry could be recovering after a devastating 2020.
The Houston oil-field services company made $653 million in the fourth quarter compared with a $170 million loss in the third quarter of 2020 and a $48 million profit in the same period a year earlier.
Oil-field service companies, which have taken the brunt of the economic fallout from the oil crash last year, are more confident about the sector’s recovery with crude prices above $50 a barrel and the rising number of operating drilling rigs indicating that drillers are ramping up production. The number of rigs is up by more than 100 since August, according to the company’s weekly tally.
“As we look ahead to 2021, we are cautiously optimistic that the global economy and oil demand will begin to recover from the impact of the global pandemic,” Baker Hughes CEO Lorenzo Simonelli told analysts in a conference call Thursday. “Assuming a successful rollout of vaccines around the world, a synchronized global recovery should help drive solid growth in oil demand over the next 12 to 18 months.”
Simonelli warned, however, that oil exploration and production companies will remain cautious as coronavirus cases continue to climb across much of the world, threatening additional economic and travel restrictions. The company said that capital spending for new oil and gas projects will likely remain flat during the first half of the year, but may grow in the second half of the year if the pandemic gets under control and crude prices continue to recover.
Baker Hughes, which slashed more than $700 million from its budget last year, plans to continue to streamline operations to reflect reduced investment in the energy sector. The company plans to close more than 100 facilities in 2021, Simonelli said.
The moves follow a year in which the company lost $9.9 billion after drilling work dried up as demand for crude tumbled during the pandemic. The staggering loss followed profits of $128 million in 2019 and $195 million in 2018.
While fourth-quarter revenue rose 10 percent to nearly $5.5 billion from $5 billion in the third quarter, ot was still down from $6.3 billion during the same period a year earlier. Annual revenue fell 13 percent to $20.7 billion, compared with $23.8 billion a year earlier.
Baker Hughes stock fell 1.5 percent to close Thursday at $22.55 per share.
Baker Hughes said it is evaluating new business opportunities in carbon capture and hydrogen to prepare for a lower carbon future. In November, it acquired Compact Carbon Capture, a Norwegian tech company developing equipment that can remove greenhouse gases from oil and natural gas operations.
The International Energy Agency estimates countries and companies will require the capture of up to 750 million tons of carbon dioxide from industrial plants by 2030, up from 40 million tons today.
“You’ve got all of these countries that are now committing to net zero; you’ve got companies that are committing to net zero and even negative net zero,” Simonelli said. “When you look at the portfolio we have, when you look at the hydrogen discussions we’re having as well as carbon capture and storage, this will be an area of growth for us and it’s very much in line with our strategy.”