January 31, 2019 / 3:54 PM / 10 months ago

UPDATE 3-GE's Baker Hughes upbeat on 2019 as LNG demand grows

(Adds details from earnings call, price action, analyst commentary)

By John Benny and Liz Hampton

Jan 31 (Reuters) - Baker Hughes, General Electric Co’s oilfield services arm, gave an upbeat outlook for the year on Thursday as its quarterly orders rose and sanctions of liquefied natural gas projects accelerated.

Unlike rivals Schlumberger NV and Halliburton Co , Baker Hughes has less exposure to the North American pressure pumping sector, where demand has softened in recent months. Many oilfield service companies have also been hurt by the drop in oil prices at the end of last year.

Shares were up more than 5 percent in pre-market trading but pared those gains when the market opened, standing at $24.30, up 1.5 percent, at mid-morning.

Wall Street analysts called the results positive, pointing to over $1 billion in free cash flow from operations and the highest quarterly orders in roughly three years.

The company reported $6.9 billion in orders, up from $5.7 billion last year. Orders in its oilfield equipment business more than doubled from the prior year to over $1 billion.

“We think the market will continue to increasingly appreciate BHGE’s leverage to the improving offshore, international, and LNG markets and limited exposure to North America pressure pumping,” analysts for Evercore ISI wrote in a note after the results came out.

The company gave a positive outlook for its turbomachinery and process solutions business, which supplies turbines and compressors, pointing to an acceleration of liquefied natural gas project sanctions. In the fourth quarter, Baker Hughes secured an award to provide modular turbocompressor technology for LNG Canada’s project in Kitimat, British Columbia.

“The underlying market drivers are extremely positive for turbomachinery segment,” Baker Hughes Chief Executive Officer Lorenzo Simonelli said on Thursday. He estimated a potential 100 million tonnes per annum of LNG capacity could get the green light this year.

A record amount of liquefied natural gas (LNG) production is expected in 2019 amid strong global demand, especially from China, according to a Wood Mackenzie report from earlier this month.

Simonelli also said he expected lower oil prices to have an impact on U.S., Canadian and Latin American markets in the first half of 2019, while other international markets would remain relatively stable.

Last year marked Baker Hughes’ first full year combined with General Electric, which bought a stake in the services firm in 2017. In November, General Electric reduced its ownership from roughly 62.5 percent to 50.4 percent.

Baker Hughes said it has reached commercial agreements with General Electric to position its company for the future.

Revenue in Baker Hughes’ oilfield services business, which accounts for roughly half of total sales, rose 10 percent to $3.1 billion in the reported quarter.

The company reported an adjusted net income of $120 million, or 26 cents per share, in the fourth quarter ended Dec. 31, in line with analysts’ expectations. Last year, the company reported a fourth-quarter adjusted net income of $65 million, or 15 cents per share. (Reporting by John Benny in Bengaluru; Editing by Bernadette Baum and Sonya Hepinstall)

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