Baker Hughes shares tumble as supply chain challenges, Russia dim outlook

US oilfield services and equipment company Baker Hughes  on Wednesday disclosed first-quarter earnings that missed analysts' forecasts, sending its shares down about 10%, on mixed results across its equipment and services units.

Oil benchmarks have undergone their most erratic period since mid-2020, with global crude prices up 38% in the first quarter after Russia’s invasion of Ukraine and shortages of materials and labour hurting oilfield services.

Shares fell 10% to $33.13 in early trading.

Baker Hughes said its results reflected a “very volatile market environment during the first few months of 2022” , with stronger orders offset by weaker profit margins on sales.

Orders in its Turbomachinery and Process Solutions business doubled from a year ago to $3bn, but margins were under pressure from supply chain issues and geopolitical events, CEO Lorenzo Simonelli said.

Pretax margins in its oilfield services and oilfield equipment units declined sequentially, and margins in its equipment segment also fell year over year. Simonelli told investors he was “disappointed” with the overall level of profitability in that unit.

Baker’s chemical production unit was among the hardest hit by supply chain issues, resulting in a roughly 170 basis point drag on oilfield services margins, the company said on a conference call.

It expects weaker revenues in its Russia-related businesses this year, particularly in its oilfield services unit, the company said. Russia accounted for about 4% of its total company revenues in the first quarter.

“Baker Hughes opened 2022 with continued strong order intake but some slippage on profit margins. Profitability improvements seen in recent quarters took a step back in Q1 as seasonality and supply chain challenges weighed on the reported results,” said Peter McNally, vice-president for the industrial materials and energy group at research firm Third Bridge.

Adjusted net income rose to $145m, or 15c per share, in the three months ended March 31, up from $91m, or 12c per share, a year ago. Wall Street analysts had anticipated earnings of 20c per share, according to Refinitiv IBES.

Rival Halliburton on Tuesday raised its forecast for customer spending in North America after its quarterly adjusted profit nearly doubled from a year earlier. Schlumberger is scheduled to report results later in the week.

Reuters