(Reuters) - Baker Hughes, General Electric Co’s oilfield services arm, on Friday reported a slight profit miss on weaker revenues in its oilfield equipment and turbomachinery businesses, but delivered an upbeat outlook for the second half of the year.
Revenue from its oilfield equipment business, which includes deepwater drilling, fell 9.4 percent to $617 million in the second quarter, missing analysts’ estimate of $648.2 million.
The Houston-based company, however, said the macro outlook for oil markets continued to be favorable.
“North American production is increasing as operators grow rig and well counts, and we are seeing signs of increasing international activity in some geomarkets,” Chief Executive Officer Lorenzo Simonelli said.
Its shares jumped 2.4 percent to $32.53 following the company’s second-quarter conference call.
Overall revenue rose 2.4 percent to $5.55 billion, slightly below expectations of $5.57 billion. Adjusted earnings were 13 cents per share, missing estimates by 1 cent, according to Thomson Reuters I/B/E/S.
Revenue in oilfield services, which accounts for more than one-half of overall sales, gained 14 percent year over year to approximately $2.9 billion, driven by stronger activity in North America. Higher oil prices have prompted a surge in drilling activity.
U.S. oil production hit a record 11 million barrels per day last week, according to the U.S. Energy Information Administration.
Analysts for investment firm Tudor Pickering Holt & Co called the results “not particularly sexy” or a big stock mover.
Baker Hughes expects longer-cycle projects to drive growth in its oilfield equipment and turbomachinery businesses in the second half of 2018 and 2019. The company forecast that demand in LNG markets would double to about 500 million tons per year by 2030.
On June 26, GE said it will divest its 62.5 percent stake in Baker Hughes in the next two or three years in a bid to simplify its structure and boost shareholder returns. The conglomerate acquired the services firm in July 2017, creating the second largest oilfield services provider by revenue.
On Friday, Baker Hughes said it will keep technology, capabilities and infrastructure obtained through the merger despite its breakup with GE.
“There are agreements in place to ensure there is a seamless separation. We’ll work with GE as they evaluate the timing and structure,” Simonelli said.
Reporting by Laharee Chatterjee in Bengaluru; Editing by Nick Zieminski and Jeffrey Benkoe