Baker Hughes Earnings Top Expectations -- Update

By Chelsey Dulaney 

Baker Hughes Inc.'s results in its December quarter easily topped Wall Street expectations, as the oil-field services company benefited from stronger-than-projected demand and cost cuts.

Still, Baker Hughes Chief Executive Martin Craighead warned on Tuesday that 2015 results would likely be pressured by the recent drop in oil prices. The company said it would cut about 7,000 workers--or about 12% of its workforce--mostly during the first quarter.

Shares of the company fell 1.8% Tuesday to $55.56.

"When we reflect on the marketplace, the bearish sentiment that has pervaded our industry is understandable, considering the steep drop in commodity prices in recent months," Mr. Craighead said. "While market demand ended up being more resilient in the fourth quarter than many had predicted, the recent declines seen in rig counts will clearly affect results in 2015."

On Friday, activist investor ValueAct Capital Management LP reported a 5.1% stake in Baker Hughes--an unusual move, since Baker Hughes is in an agreement to be bought by larger rival Halliburton Co.

ValueAct didn't indicate its motives in the filing with the Securities and Exchange Commission that revealed its stake.

The deal with Halliburton, struck in November and valued at almost $35 billion at the time, underscored the new realities for energy companies in a world suddenly awash with oil. As a result, oil-field services companies, which are hired to drill and pump wells, are facing less demand for their services and pressure to cut prices.

Since the deal was struck, oil prices have continued their downward spiral.

For the fourth quarter ended Dec. 31, Baker Hughes reported a profit of $663 million, or $1.52 a share, up from $248 million, or 56 cents a share, a year earlier. Excluding a gain on deconsolidation of a join venture, adjusted per-share earnings were $1.44.

Revenue grew 13.2% to $6.64 billion.

Analysts polled by Thomson Reuters were expecting adjusted earnings of $1.07 a share on revenue of $6.41 billion.

The North American segment, the company's largest geographic business by revenue, reported a 20.4% increase in revenue to $3.3 billion. Revenue climbed 13.1% in the Middle East and Asia Pacific region, and 5% in the Europe, Africa and Russia Caspian segment. Latin America revenue edged down 2%.

Expenses, meanwhile, fell 4.5%.

Alison Sider contributed to this report.

Write to Chelsey Dulaney at [e-mail]

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