Baker Hughes predicts lower oil and gas spending in 2026
Baker Hughes announced on Monday that it expects global oil and gas spending to be down modestly in 2018. The company said this is due to a decline in spending in Europe, the Middle East, and offshore Africa.
The energy markets have been affected by the repeated flare-ups in the conflict between Iran and the U.S., which has forced producers to adopt a more cautious approach instead of increasing drilling activities.
Lorenzo Simonelli, CEO of the company after it reported its earnings on Sunday, said that customers are still focused on maximising production while maintaining flexibility to "respond to changing market conditions".
The shares of the oilfield services provider rose more than 6% after it exceeded quarterly profit expectations. Industrial and energy technology orders doubled year-over-year, reaching a record $7.1 billion. Baker warns that the IET sector is expected to take a revenue hit of 1%-2% due to the disruptions caused by the conflict.
According to data compiled and analyzed by LSEG, the company predicted a third-quarter revenue of between $3.17 billion - $3.47 billion from its IET segment, which is below analyst expectations of $3.79billion.
Ahmed Moghal, CFO of the company, said: "While the overall effect from Middle East disruptions is expected to be modest we do expect an increase in logistical and inflationary pressures on our regional facilities for the third quarter."
Moghal said that the strength of other regions, outside the Middle East, will likely offset the impact of the Iran War.
In Latin America, Brazil and Mexico are expected to drive growth.
Baker Hughes also relies on areas of growth that are resilient, such as upgrading the power grid and LNG infrastructure to help oilfield contractors deal with volatile oil prices.
Simonelli, who spoke at the conference call, said that Baker Hughes received a major order for 12 LNG trains from Venture Global. This is part of Venture Global’s proposed CP2 expansion.
Venture Global has started the permit process but hasn't made a final decision about the investment in the 12?trains which could produce an additional 11,7 million metric tonnes per annum. The?CP2 could produce up to 47 mtpa at its peak capacity if the project is built.
The company said it would expand its gas generators and turbine capacity. This is expected to be online by 2029. It will support nearly $5 billion of annual revenue opportunities for power systems.
(source: Reuters)
