Baker Hughes said today that its operating profit before tax for the first quarter of 2012 is expected to be lower than the fourth quarter of 2011 primarily due to rapidly changing market conditions in the Pressure Pumping product line in North America and seasonality in all international markets.
As a result of the continued shift in U.S. rig activity from natural gas to oil and liquids-rich basins and other market forces, the company’s Pressure Pumping product line is currently experiencing: decreased fleet utilization, lower pricing, higher than expected personnel and logistics costs, and shortages of and higher costs for critical raw materials, such as gel.
In Canada, despite higher sequential rig count levels, the lower natural gas directed pressure pumping activity and an early spring break-up are also negatively impacting first quarter operating profit before tax.
Overall, the company expects North America operating profit before tax margin for the first quarter of 2012 to be between 13.2% and 14.2% compared to 18.7% in the fourth quarter of 2011.
The operating profit before tax margin outlook for international operations for the first quarter of 2012 is expected to be between 12.2% and 13.2% compared to 15.6% in the fourth quarter of 2011 due to seasonality of product sales, weather, geographic mix, and project delays in Latin America.
The company is reviewing its budgets for the year, and expects to adjust 2012 capital expenditures for the Pressure Pumping product line to align with current market conditions.
[mappress]
LNG World News Staff, March 21, 2012