Baker Hughes Misses Profit Targets Following Plunge in LNG Equipment Demand

Oil and Gas companies provider Baker Hughes posted lower-than-anticipated earnings, struck by lower sales and orders in its enterprise that supplies turbines and compressors to liquefied natural gas (LNG) producers.

The unit, Turbomachinery & Course of Solutions (TPS), was certainly one of Baker Hughes’ strongest in the earlier quarters of 2019, as U.S. LNG builders built a new facility to meet global demand for a cleaner alternative to coal-fired energy plants.

Revenue in the unit dipped 8%, and orders plunged 10% year-over-year, pushed largely by a large agreement in the prior year’s quarter. Profit for that unit surged 19%, nonetheless, on productivity and price gains. The corporate expects TPS revenues to develop 20% in 2020 and margins to expand.

U.S. exports of LNG struck a record in October and November, averaging 5.8 billion cubic feet per day (bcfd) and 6.3 bcfd, respectively, based on Energy Information Administration (EIA).

Baker Hughes also reported North American income in its oilfield services unit dropped 15% from a year prior to $1.04 billion, echoing outcomes from competitors Schlumberger NV and Halliburton Co.

A slowdown in shale activity further pressured Halliburton to take a $2.2 billion charge in the fourth quarter, which adopted a $12 billion charge taken by Schlumberger in 2019. Each has warned that spending by U.S. onshore producers would drop around 10% in 2020 from last year

Wall Street analysts had been upbeat on the report, pointing to Baker’s $1.05 billion in free cash flow for the quarter, which surged 20% from a year ago and benefited from faster collections.