Baker Hughes (NASDAQ: BKR) expects an “unusual set of circumstances and challenges” for the oil market through 2023.
CEO Lorenzo Simonelli said on one hand the demand outlook for the next 12-18 months is “deteriorating” as inflation erodes consumer purchasing power and banks raise interest rates to combat inflation.
But on the other hand, years of underinvestment globally and the need to replace Russian supply means broader constraints “can realistically keep commodity prices at elevated levels”.
As a result, the firm believes that “the outlook for oil prices remains volatile, but still supportive of strong activity levels as higher spending is required to re-order the global energy map”, said the Baker Hughes CEO.
He added that the oilfield services giant, reporting its first half results today, is preparing “for all of these scenarios”.
Mr Simonelli said second quarter results were “mixed” as each product company navigated “a different set of challenges” ranging from component shortages and supply chain inflation to the suspension of its Russian operations.
During the first half of the year, the Houston-headquartered firm reported pre-tax losses of $468m, about on par with the same period last year at $469m.
Revenues also remain steady for the half at $9.8bn compared to $9.9bn in H1 2021.
While the Oilfield Services and Turbomachinery and Process Solutions (TPS) segments are managing the situation “fairly well”, Oilfield Equipment and Digital Solutions have “had more difficulty”.
Cost inflation and lower productivity hit operating income for Digital Solution, while lower volume in Subsea Production Systems, among other issues, affected Oilfield Equipment.
Shares in Baker Hughes (Class A Common Stock) are up 3.9% today to $28.22 (as of 13.20).