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Baker Hughes Incorporated (BHI): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

2/3/2014 7:00:00 AM
Referenced Stocks:BHI

We are maintaining our Neutral recommendation on Baker Hughes Inc. Operational efficiencies in Iraq drove margin improvement. Internationally, margins improved in the Middle East/Asia Pacific region. Increased activities in the Gulf of Mexico (GoM) and new products are also having a meaningful impact on the company's performance. Baker Hughes, one of the largest oilfield service companies in the world, appears to be focusing on the international and offshore markets for near-term growth. However, high mobilization costs for the newly-integrated drilling services in Norway adversely affected earnings. Moreover, sharp declines in Latin America affected profitability and compel us to remain on the sidelines.


Houston, Texas-based Baker Hughes Inc. (BHI) is one of the largest oilfield service companies in the world, providing a range of services to the global oil and gas industry. The company is a major supplier of wellbore-related products and technology services and systems. It caters to drilling, pressure pumping, formation evaluation, completion and production, and reservoir technology. It also offers consulting services to the worldwide oil and natural gas industry.

The company is dynamic in plugging holes in its product line-up through bolt-on acquisitions. Among the diversified oilfield service players, Baker Hughes remains one of the best positioned, with significant improvement in activity levels recorded in both North America and international regions.

On Apr 28, 2010, Baker Hughes acquired 100% of the outstanding common stock of BJ Services Company in a cash and stock transaction valued at $6,897 million. BJ Services is a leading provider of pressure pumping and other oilfield services and would expand the portfolio of Baker Hughes'.

The company previously operated through two segments: Completion and Production as well as Drilling and Evaluation. Following the BJ Services merger, the company started reporting under five segments based on its geographical spread. These segments are North America (Canada, U.S., and Trinidad), Latin America (Central and South America including Mexico and excluding Trinidad), Europe/Africa/Russia Caspian or EARC (Europe, Africa excluding Egypt, and Russia and the republics of the former Soviet Union), Middle East/Asia-Pacific or MEAP (including Egypt), Industrial and Others (downstream chemicals, process and pipeline services, and reservoir and technology consulting businesses). North America, EARC, MEAP, Latin America, and Industrial and Other segments accounted for 52 %, 17%, 16%, 11% and 4%, respectively, of the total revenue in 2012.

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