Must-know: Baker Hughes’ Asian and Industrial Services segment

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Baker Hughes’ Asian operations

We discussed the performance of Baker Hughes’ (BHI) North America, Europe, and Africa, Russia, and Latin American operations in previous parts in this series. In this part of the series, we’ll discuss its performance in Asia and the Industrial Services segment.

Middle East Asia Pacific Revenues

Middle East and Asia Pacific

Revenues for BHI’s Middle East and Asia Pacific geographic segment increased 6.4% to $1.07 billion in 3Q14—compared to $1.01 billion in 3Q13.

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  1. There was higher demand for BHI’s drilling services. There was also high demand for the completion services product lines in Saudi Arabia. The average rig count in Saudi Arabia was 33% higher. This resulted in higher demand for rig servicing.
  2. There was higher demand for pressure pumping products in India and the United Arab Emirates (or UAE).

Middle East Asia EBT and EBT Margin

Although the operating profit increased by 4% to $155 million in 3Q14—from $149 million in the same quarter last year, the operating profit margin fell by 0.3%. Profitability was negatively affected by:

  • Demobilization costs in Iraq—we’ll discuss this in Part 10 in this series
  • An unfavorable product mix in Australia and southeast Asia.

Baker Hughes’ Industrial Services segment

BHI’s Industrial Services segment provides services and products to the downstream chemicals industry. It also provides products and services to the pipeline industries.

Recent acquisition

On September 2, 2014, BHI completed the acquisition of Weatherford International’s (or WFT) pipeline and specialty services business for $246 million. This business will be included in BHI’s Industrial Services segment. The acquisition will add subsea pipeline commissioning services and ultrasonic inspection technologies to BHI’s portfolio.

Industrial Service Revenues

Revenues from BHI’s Industrial Services segment didn’t change much from $328 million in 3Q13 to $$33 million in 3Q14.

Industrial Services EBT and EBT Margin

The operating profit and profit margin fell. From 3Q13 to 3Q14, the operating profit decreased by ~8%. The operating profit margin came down by 1% during this period. The increase in product cost in this segment led to a decrease in profitability.

Key stocks and exchange-traded funds (or ETFs)

Baker Hughes Inc. (BHI) is part of the VanEck Vectors Oil Services ETF (OIH) and the Energy Select Sector SPDR (XLE). Halliburton (HAL) and Schlumberger (SLB) are two major companies in this industry. They’re also part of OIH.

In the next parts in this series, we’ll discuss how BHI is expected to perform in the next quarter. We’ll discuss the factors that influence the results.

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