By Vallari Srivastava and Sumit Saha
July 27 (Reuters) – Baker Hughes said on Monday it expects annual global spending by oil and gas producers to decline modestly this year, with growth in Latin America, offshore Africa, and onshore in North America offset by lower spending in Europe and the Middle East.
Energy markets this year have been roiled by repeated flare-ups in the conflict between the U.S. and Iran, forcing producers to take a more cautious stance instead of increasing drilling activity.
“Customers remain focused on maximizing production from existing assets while preserving flexibility to respond to evolving market conditions,” CEO Lorenzo Simonelli said on a conference call with analysts after the company reported earnings on Sunday.
Shares of the oilfield services provider were up more than 6%, after it beat quarterly profit estimates, with industrial and energy technology orders doubling year-over-year to a record $7.1 billion. But Baker warned that the IET segment is expected to face a 1%-2% revenue hit from the disruptions caused by the conflict.
The company forecast third-quarter revenue from the IET segment between $3.17 billion and $3.47 billion, below analysts’ expectations of $3.79 billion, according to data compiled by LSEG.
“While the overall impact from Middle East disruptions should remain modest, we expect some increase in logistics and inflationary pressures at our regional facilities during the third quarter,” CFO Ahmed Moghal said.
However, Moghal added the impact of the Iran war is expected to be offset by strength in regions outside the Middle East.
In North America, it expects further seasonal recovery in the third quarter, with Brazil and Mexico driving growth in Latin America.
Baker Hughes is also relying on resilient growth areas such as LNG infrastructure and power grid upgrades to cushion volatility in oil prices for oilfield contractors.
Baker Hughes has received a major order from U.S. LNG producer Venture Global to manufacture 12 LNG trains as part of Venture Global’s proposed CP2 expansion, Simonelli said on the conference call.
Venture Global has not yet taken a final investment decision on building the 12 trains that could pproduce an additional 11.7 million metric tons per annum (mtpa) but has already started the permitting process. If built, it could result in CP2 being able to produce close to 47 mtpa of the superchilled gas at peak capacity.
The company said it would further expand its gas turbines and generator capacity, which is expected to come online by 2029, supporting nearly $5 billion in annual power systems revenue opportunity.
(Reporting by Vallari Srivastava and Sumit Saha in Bengaluru and Curtis Williams in Houston; Editing by Leroy Leo, Nathan Crooks and David Gregorio)
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