If Schlumberger is struggling to make its estimates you know the little guys are struggling. Baker Hughes is no pipsqueak but they are one fifth the size of SLB.
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BHGE - Baker Hughes GE - Company Description
Baker Hughes, a GE company provides integrated oilfield products, services, and digital solutions worldwide. Its Oilfield Services segment offers drilling, wireline, evaluation, completion, production, and intervention services; and drilling and completions fluids, completions tools and systems, wellbore intervention tools and services, artificial lift systems, pressure pumping systems, and oilfield and industrial chemicals for integrated oil and natural gas, and oilfield service companies. The company's Oilfield Equipment segment designs and manufactures products and services, including pressure control equipment and services, subsea production systems and services, drilling equipment, and flexible pipeline systems; and onshore and offshore drilling and production systems, and equipment for floating production platforms, as well as provides a range of services related to onshore and offshore drilling activities. Its Turbomachinery & Process Solutions segment provides equipment and related services for mechanical-drive, compression, and power-generation applications across the oil and gas industry, as well as products and services to serve the downstream segments of industry. Its product portfolio includes drivers, compressors, and turnkey solutions; and pumps, valves, and compressed natural gas and small-scale liquefied natural gas solutions. This segment serves upstream, midstream, onshore and offshore, industrial, engineering, procurement, and construction companies. The company's Digital Solutions segment provides sensor-based measurement, non-destructive testing and inspection, turbine, generator and plant controls, and condition monitoring, as well as pipeline integrity solutions for a range of industries, including oil and gas, power generation, aerospace, metals, and transportation. It serves through direct and indirect channels. The company is based in Houston, Texas. Baker Hughes, a GE company is a subsidiary of General Electric Company. Company description from FinViz.com.
On Thursday energy services giant Schlumberger (SLB) reported earnings of 30 cents that matched estimates. Revenue rose only slightly to $7.879 billion but it was enough to beat estimates for $7.810 billion. Both numbers were lower than the prior quarter. The company projected lower activity in land rigs in North America and seasonal slowness in international markets. North American revenue was down -3% because of pricing weakness. They do expect the overall market to improve as production cuts overseas take effect. They also warned that four years of slowing investment in the sector would result to lower services activity in the years ahead.
If Schlumberger is struggling in this energy market then Baker Hughes GE will be struggling as well. Shares rallied with oil prices early in 2019 but now that prices have stabilized and we are losing 10 active rigs a week, their earnings should be suffering.
They make a lot of money from fracking and completing wells. With drilled and uncompleted wells now over 8,500 there is plenty of work but that number is growing instead of declining. That means production companies are not completing them. With pipelines at capacity there is no reason to spend a couple million dollars completing a well only to have it sit idle because you can't get the oil to market.
I suspect Baker Hughes is going to disappoint when they report earnings on April 30th. I am recommending we buy an inexpensive put option and hold over the report. The May $25 put is relatively inexpensive.
Buy May $25 put, currently 75 cents, no stop loss.