Baker Hughes Profit Rises on International Growth

Baker Hughes reported an 8.5 percent increase in third-quarter profit Friday on higher international sales but the oilfield services company warned of continued uncertainty in North America.

Baker Hughes and other oil service companies like Halliburton have been hurt this year by a slowdown in drilling in the United States and Canada.

Houston-based Baker Hughes said third-quarter profit rose to $389.1 million, or $1.22 per diluted share, from $358.6 million, or $1.09 per diluted share, in the year-earlier quarter.

Analysts on average had expected a profit of $1.23 per share, according to Reuters Estimates.

Revenue jumped 16 percent, to $2.67 billion from $2.3 billion in the quarter a year ago.

"I though it was a nonevent," said Kurt Hallead, analyst with RBC Capital Markets. "The way the stock had been trading was in anticipation of a beat and they came in line. Their message is the same."

Shares of the company were off 3.2 percent, or $3.02, to $90.67 in early trade on the New York Stock Exchange.

"Third-quarter results were driven by strong international activity, a seasonal recovery in Canadian drilling, increased levels of U.S. land activity and increased revenue from the U.S. Gulf of Mexico," Chad Deaton, Baker Hughes chairman and chief executive, said in a statement.

Still, he cautioned that the outlook for the company's North American market was "uncertain" as drilling slows and natural gas inventories build.

And on a conference call with investors, Baker Hughes said it expects incremental margins in the fourth quarter of 25 percent, up from about 23 percent in the third quarter.

"I think the outlook for the near-term incrementals was less then people expected," said Pierre Conner, analyst with Capital One Southcoast.

The company said it expects revenue outside North America for full-year 2007 to be up 20 percent to 21 percent from 2006. That compares with its prior forecast for gains of 19 percent to 21 percent.

Revenue from oilfield operations climbed 16 percent in the third quarter to $2.68 billion from a year earlier while operating profit before taxes rose 15 percent to $648 million.

Baker Hughes reported revenue of $1.12 billion, an increase of 8 percent, in North America, its largest market.

Revenue rose 25 percent to $792.7 million in Europe, Africa, Russia and the Caspian area.

So far this year, shares of Baker Hughes have risen about 25 percent. That compares with an 49 percent increase in the Philadelphia Stock Exchange index of oil service companies.