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What Are Baker Hughes’s Current Value Drivers?

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Dec. 15 2016, Updated 8:05 a.m. ET

Baker Hughes’s segment-wise performance

From 3Q15 to 3Q16, all of Baker Hughes’s (BHI) segments saw lower revenues. Its North American operations suffered the highest revenue decline, with a 51% fall, while the Industrial Services segment was the most resilient, with an ~21% fall.

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Baker Hughes’s positive value drivers

  • BHI had a nearly 24% higher North America rig count in 3Q16 compared to 2Q16. However, the 3Q16 US rig count was considerably lower than a year ago.
  • Cost savings from restructuring actions benefited BHI’s Latin America results.
  • BHI saw strong upstream activity in Saudi Arabia and Kuwait.

Baker Hughes’s negative value drivers

  • Steeply lower offshore drilling activity in the Gulf of Mexico negatively affected its North America results.
  • BHI saw lower drilling activity and unfavorable exchange rates in West Africa.
  • BHI saw project delays and reduced activity in Norway.
  • Baker Hughes saw lower prices for BHI’s products and services in BHI’s Middle East–Asia Pacific region operation.

Baker Hughes constitutes 0.10% of the iShares Core S&P 500 ETF (IVV). The energy sector makes up 7.5% of IVV.

Baker Hughes (BHI) has adopted various restructuring activities to protect its bottom line when oilfield services companies’ pricing has come under pressure. Please read the next part of this series to learn how BHI is planning to protect its margin.

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