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Baker Hughes profits tumble
November protest in Iraq cited
Jan. 15, 2014 10:23 PM
Oil field services giant Baker Hughes Inc. has released a statement to investors saying its 2013 fourth-quarter profits will be well below Wall Street forecasts because violence forced it to suspend operations in Iraq in November.
The company was operating in the port city of Basra, nicknamed “the oil capital of Iraq.” A violent street protest erupted Nov. 11 when Shiite Muslim leaders accused a Schlumberger official of disrespecting Islam. According to news wire reports, protesters disrupted Schlumberger offices in Basra.
The same day, a violent incident occurred at a Baker Hughes facility in Basra. There were no fatalities, but both Schlumberger and Baker Hughes suspended operations. Baker Hughes issued notices to customers alerting them that it could not fulfill some contractual obligations on time.
Baker Hughes spokesperson Melanie Kania told The Daily Advertiser that Baker Hughes did not expect the resulting financial hit to affect its employees in Lafayette or Broussard.
“No, we don’t anticipate any layoffs; work in Louisiana is proceeding normally,” Kania said. “Our Iraq operations were back up in December and running normally now.”
Baker Hughes’ vice president of strategy Derek Mathieson told investors that Iraq was injecting about $50 million a month into Baker Hughes’ Middle East Asia-Pacific earnings before the Basra incident occurred.
Baker Hughes forecast its fourth quarter adjusted earnings at 60 to 62 cents per share. Wall Street analysts were expecting earnings of 78 to 80 cents per share before the Iraqi disruption occurred. Mathieson told investors Iraq would remain an important work site for Baker Hughes. Schlumberger’s Basra operations are also running normally.
Dr. Richard Stahl of the Louisiana State University Department of Economics/International Trade & Finance said he understands how the oil industry might weigh the risks of working in unstable countries.
“When a corporation is dealing with uncertainty, a realistic view of what you can and can’t control is key,” Stahl said. “Think of how insurance companies make decisions about individual customers. If a customer smokes, he’s a bigger risk. If the company can get him to quit, he’s a better risk. Companies calculate various worst-case scenarios and how much they would affect profit.”
Even in a war-torn country, an oil company can function fairly normally if it has solid contacts with government officials, relationships of trust with colleagues there and solid experience with the country’s culture.
Some oil industry analysts wonder if Basra’s cosmopolitan atmosphere can lull companies into believing the city is safer and more functional than it actually is. Basra has a literary heritage — tales of Sinbad the Sailor were created there — and once drew Christian tour groups because biblical scholars cited it as the likely Garden of Eden locale. Although car bombings plagued Basra last year, it is hosting an international oil conference.
Stahl offered an economic theory that could guide Lafayette oil industry employees who see their employers expanding into chaotic nations.
“It’s not a bad idea to remain calm when you see stock prices or company finances take a hit because something bad happened on the other side of the world,” Stahl said. “The oil industry is so globally intertwined that perception can sometimes cause a reaction that isn’t always connected to reality.”
Schlumberger did not return phone calls for comment.
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November protest in Iraq cited
Jan. 15, 2014 10:23 PM
Oil field services giant Baker Hughes Inc. has released a statement to investors saying its 2013 fourth-quarter profits will be well below Wall Street forecasts because violence forced it to suspend operations in Iraq in November.
The company was operating in the port city of Basra, nicknamed “the oil capital of Iraq.” A violent street protest erupted Nov. 11 when Shiite Muslim leaders accused a Schlumberger official of disrespecting Islam. According to news wire reports, protesters disrupted Schlumberger offices in Basra.
The same day, a violent incident occurred at a Baker Hughes facility in Basra. There were no fatalities, but both Schlumberger and Baker Hughes suspended operations. Baker Hughes issued notices to customers alerting them that it could not fulfill some contractual obligations on time.
Baker Hughes spokesperson Melanie Kania told The Daily Advertiser that Baker Hughes did not expect the resulting financial hit to affect its employees in Lafayette or Broussard.
“No, we don’t anticipate any layoffs; work in Louisiana is proceeding normally,” Kania said. “Our Iraq operations were back up in December and running normally now.”
Baker Hughes’ vice president of strategy Derek Mathieson told investors that Iraq was injecting about $50 million a month into Baker Hughes’ Middle East Asia-Pacific earnings before the Basra incident occurred.
Baker Hughes forecast its fourth quarter adjusted earnings at 60 to 62 cents per share. Wall Street analysts were expecting earnings of 78 to 80 cents per share before the Iraqi disruption occurred. Mathieson told investors Iraq would remain an important work site for Baker Hughes. Schlumberger’s Basra operations are also running normally.
Dr. Richard Stahl of the Louisiana State University Department of Economics/International Trade & Finance said he understands how the oil industry might weigh the risks of working in unstable countries.
“When a corporation is dealing with uncertainty, a realistic view of what you can and can’t control is key,” Stahl said. “Think of how insurance companies make decisions about individual customers. If a customer smokes, he’s a bigger risk. If the company can get him to quit, he’s a better risk. Companies calculate various worst-case scenarios and how much they would affect profit.”
Even in a war-torn country, an oil company can function fairly normally if it has solid contacts with government officials, relationships of trust with colleagues there and solid experience with the country’s culture.
Some oil industry analysts wonder if Basra’s cosmopolitan atmosphere can lull companies into believing the city is safer and more functional than it actually is. Basra has a literary heritage — tales of Sinbad the Sailor were created there — and once drew Christian tour groups because biblical scholars cited it as the likely Garden of Eden locale. Although car bombings plagued Basra last year, it is hosting an international oil conference.
Stahl offered an economic theory that could guide Lafayette oil industry employees who see their employers expanding into chaotic nations.
“It’s not a bad idea to remain calm when you see stock prices or company finances take a hit because something bad happened on the other side of the world,” Stahl said. “The oil industry is so globally intertwined that perception can sometimes cause a reaction that isn’t always connected to reality.”
Schlumberger did not return phone calls for comment.
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