January 30, 2008 / 1:48 PM / 10 years ago

UPDATE 2-Baker Hughes profit up; sees growth moderating

(Recasts first paragraph, adds share price, details from conference call, analyst comment, byline)

By Anna Driver

HOUSTON, Jan 30 (Reuters) - Baker Hughes Inc BHI.N on Wednesday said quarterly profit rose on increased spending by its overseas customers, but the oilfield services company warned of moderating growth and pricing erosion in the United States, sending its shares down 8.5 percent.

Baker Hughes and other oil service companies like Schlumberger Ltd (SLB.N) have seen North American results hurt by a slowdown in drilling in Canada and weakness in some onshore U.S. markets.

“Pricing is more challenging in today’s market than it was a year ago,” Baker Hughes Chief Executive Officer Chad Deaton told analysts on a conference call, discussing the outlook for the company’s U.S. market in 2008.

Profit in the fourth quarter rose to $400.5 million, or $1.26 per share, from $326.2 million, or $1.02 a share, a year earlier.

Analysts on average had expected $1.28 per share, according to Reuters Estimates.

Revenue rose 12 percent to $2.74 billion.

The company said it expects spending increases by its customers in North America to be “no more than moderate” in 2008, while its growth outside North America is likely to continue, although at a slower pace than in recent years.

Baker Hughes said it expects revenue outside North America to rise in the “low to mid teens” on a percentage basis in 2008, a forecast that lags its peers and a number of analysts’ forecasts.

“The bad news is that the Street continues to be too optimistic,” said Bill Herbert, analyst with investment bank and research firm Simmons & Co International. “The good news is that this adjustment process is running its course.”

Oilfield service companies have seen double-digit increases in profit and revenue in the last three years. But this year, growth forecasts have moderated and the companies’ shares have been hit hard as investors adjust expectations.

Pre-tax operating profit for Baker Hughes’ oilfield operation rose 9 percent to $662 million in the fourth quarter.

In North America, the company reported revenue of $1.12 billion, an increase of 7 percent.

Revenue rose 19 percent to $804 million in Europe, Africa, Russia and the Caspian area.

Shares of Baker Hughes were off $6.26 to $67.18 in morning trade on the New York Stock Exchange. Through Tuesday, the stock had fallen 9 percent this year, compared with a 12 percent decline in the Philadelphia Stock Exchange oilfield services index .OSX. (Editing by John Wallace)

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