HOUSTON -(Dow Jones)- Baker Hughes Inc.'s (BHI) North America margins for the second quarter are expected to decline, Chief Executive Martin Craighead said Tuesday.
Margins have already declined sequentially in the first quarter due to the logistical challenges produced by the migration of natural gas-directed rigs toward more profitable oilfields, and the rapid build-up of pressure-pumping and hydraulic fracturing capacity that resulted from the recent shale boom.
In a conference call with investors, Craighead said that second-quarter margins will "decline primarily due to seasonality in Canada" and continued weakness in pricing for its pressure pumping services. "Pricing in pressure pumping will likely continue to decrease throughout the end of the year," he said.
The third-largest oilfield services provider, after Schlumberger Ltd. (SLB) and Halliburton Co. (HAL), is also facing execution challenges in its pressure-pumping business, which analysts say are due to an inability to retain the workforce it inherited from its acquisition of BJ Services in 2009.
Craighead said that he has "made changes" in the leadership team for the pressure pumping business. "I'm confident that this team will deliver on expectations," he said. The company is also heavily investing in improving transportation and logistics for hydraulic fracturing, Craighead added.
Craighead said that he has no concerns about access to guar, "even though the price is horrific." Guar, a legume whose juices are used in hydraulic fracturing, is in high demand and its skyrocketing price is helping thin margins for oilfield service providers.
Craighead said that a margin rebound is expected in the second half of the year, as activity in the U.S. Gulf of Mexico ramps up and international drilling keeps its strength.
"We're pretty optimistic in our international margins overall," Craighead said.
-By Angel Gonzalez, Dow Jones Newswires; 713-547-9214;firstname.lastname@example.org
(END) Dow Jones Newswires
April 24, 2012 09:49 ET (13:49 GMT)
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