A Decline in Operating Profit: Suspects Baker Hughes

Baker-HughesConsidering the changing market conditions, Baker Hughes Inc. BHI suspects the chances of its first-quarter operating profit to decline from the preceding quarter by 5.81%. According to their calculations and survey, it seems that due to market conditions, their product line has been badly affected in North America.

Similar to other oil-field-services companies, Baker Hughes is also finding it difficult to adjust when companies like Chesapeake Energy Corp. CHK -1.52% has withdrawn from natural-gas drilling among a 10-year low in the commodity's price. As told by the drilling-services provider on Wednesday, due to persisting changes in the U. S. rig activity to oil and liquids-rich basins, there has been a decreased fleet utilization, lowered pricing and increased personnel and logistics costs.

All this has further resulted into shortage and rising of costs for critical raw materials, such as gel. On Wednesday morning, the shares of Baker Hughes were found trading down by 3.8%; they valued around $46 that morning.

In the last quarter of last year, the operating profit tax margin was 18.7%; whereas this year, Baker Hughes expects it to be between 13.2% and 14.2%.

As told by the company, they are trying to adjust their capital expenditure of 2012 for their pressure-pumping product line with current market conditions. For this, they are also reviewing their budgets and requirements once again.