Baker Hughes reported falling earnings and increasing losses as a result of supply chain problems and the suspension of operations in Russia, which led to a sharp sell-off in shares of the American oilfield services group.
Shares in Baker Hughes Shares of one of the largest suppliers of equipment and services to the global oil and gas industry fell 13% on Wednesday after the company reported disappointing second-quarter earnings. Shares bounced back slightly, falling 8.3% by the end of the day.
The Texas-based company said revenue fell 2% year-over-year to $5 billion, while a net loss of $839 million was significantly larger than the $68 million loss recorded in the same period last year. The numbers fell short of Wall Street’s expectations.
CEO Lorenzo Simonelli said the results reflect challenges including component shortages, supply chain inflation and the suspension of operations in Russia.
The hurdles offset the benefits of growing demand in America. slate fields as companies struggle to increase production in a tough oil market. Competitor Halliburton posted on Tuesday bumper quarter driven by what CEO Jeff Miller called the “nearly sold out” US and Canadian market.
Halliburton, Schlumberger and Baker Hughes, the three largest oilfield services groups in the world, are all run away slowly from Russia, as many Western multinationals rushed to the exit after Moscow’s invasion of Ukraine.
Baker Hughes suspended new investments in Russia in March after the US government imposed sanctions against foreign funding. On Wednesday, the company posted a $365 million impairment loss related to its operations in Russia as it decides how to settle them. It says the business is currently “up for sale” and options are being considered, including an outright sale or a management buyout.
Revenue was also cut by long delays in deliveries of parts, including chips and electronics, which impacted its ability to fulfill orders for some customers.
“We deliver 60 percent on-time delivery from our electronics and chip suppliers,” CFO Brian Worrell told analysts Tuesday. “And it’s been holding steady at 60 percent for some time.”
He said delays had more than doubled from the third quarter of last year, from 11 days to 25.
The company also acted cautiously about the industry’s outlook in view of the looming threat of a global recession.
“The demand outlook for the next 12 to 18 months is worsening as inflation erodes consumer purchasing power and central banks aggressively raise interest rates to fight inflation,” Simonelli said.
He added that years of underinvestment and Russia’s isolation could still support oil prices even if demand falls.