Baker Hughes (BHI) will likely lag its peers in revenue growth over the next two years as it continues working to fully integrate its acquisition of BJ Services and tries to improve its customer base in the North American market, says James West, Lead Oil Service and Drilling Analyst at Barclays Capital.
“The next round of self-help is going to involve trying to get a better customer base. Unfortunately a lot of these customers are working with Halliburton (HAL) and Schlumberger (SLB), and that creates a dynamic that may not be favorable for them. That said, with their margins below 10%, there is obviously clear and good margin upside for Baker as they do resolve their issues,” West said.
West also says BHI is pulling back from international markets, and he expects expects 9% spending growth outside of North America in 2013. He adds that BHI has said it expects a flattish rig count this year, although it may start to rise in the second quarter.
“They have a returns-focused strategy in certain geographies and product lines where they just are getting their return internationally. They have also given up some market share in Latin America, particularly Brazil. The combination of those two factors will likely cause their revenue growth to lag their peers over the next one to two years,” West said.
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