Will US Rig Count Affect Baker Hughes in 3Q17?
US rig count
The West Texas Intermediate (or WTI) crude oil price has risen ~9% since June 30. From June 30, 2017, to the week ending September 29, 2017, the US rig count remained unchanged at 940. So, the US rig count has been stagnant despite higher crude oil prices in the past three months. A slowing US rig count, which had increased significantly until 2Q17, could negatively affect Baker Hughes’s (BHGE) revenues and earnings in 3Q17.
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BHGE’s revenues from North America
In 2Q17, Baker Hughes’s revenue share from North America rose to 36% compared to 35% in 1Q17. From 1Q17 to 2Q17, BHGE’s aggregate revenues rose 6%. Read more on BHGE in Market Realist’s Baker Hughes on the Street: Key Mid-August Metrics.
By comparison, Schlumberger’s (SLB) 2Q17 revenues rose 8% over 1Q17. Flotek Industries’ (FTK) revenues rose 7%, while National Oilwell Varco’s (NOV) revenues rose 1% from 1Q17 to 2Q17. BHGE makes up 0.07% of the SPDR S&P 500 ETF (SPY). SPY rose 18% in the past year compared to BHGE’s 5% rise in this period. The S&P 500 Index (SPX-INDEX) also rose 18% in the past year.
Will international rig count affect BHGE in 3Q17?
Baker Hughes’s revenues from international operations were 64% in 2Q17. In comparison, BHGE’s share of revenues from international geographies was higher at 69% in 2Q16. From June 2016 to June 2017, the international rig count increased ~4%.
From June 2017 to August 2017, however, international rig count fell nearly 1%. A slowdown in international rig count, compounded with a stagnant US rig count, could hamper BHGE’s aggregate revenues and operating margin in 3Q17.
Next, we’ll discuss Baker Hughes’s earnings growth drivers for 2Q17.