Baker Hughes Upbeat on Gas, Down on Oil

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--Oil-related spending in the upstream sector is expected to be subdued because of supply-side pressures, though the gas outlook is favorable to 2040, Baker Hughes (Houston, Texas) said.

The company reported net revenue for the three months ending June 30 of $6.9 billion, an 8% improvement over the first quarter, but 3.3% below year-ago levels. Its earnings before interest, taxes, depreciation and amortization (EBIDTA), an alternative gauge of profitability, took a $15 million hit, however, due to an increase in tariff rates in the U.S. market.

"We executed a series of mitigation initiatives that helped limit the impact, and these actions will continue to play a critical role in managing ongoing exposure," Chief Financial Officer Ahmed Moghal said Tuesday.

Oilfield services firms such as Baker Hughes and SLB (Houston) have faced increased costs from tariffs on steel, machinery components and equipment. Steel tariffs are a particular concern for the U.S. energy sector, as the nation doesn't produce the type of metal used in oil and natural gas pipelines.

"While there's still volatility around trade policy developments, we have been successfully executing our mitigation plans, and our underlying business continues to perform well," Moghal added.

SLB, formerly Schlumberger, reported net income over the three-month period ending June 30 of $1.01 billion, a 27% improvement over first quarter levels but 9% lower from the same period in 2024. Halliburton (Houston), for its part, reported net income of $472 million, nearly double levels from the first quarter, but 33% lower year-on-year. Looking ahead, the head of the company, Jeff Miller, said the future for upstream services firm "will be softer than I previously expected."

Elsewhere, Lorenzo Simonelli, the chief executive officer at Baker Hughes, said natural gas was the clear stand out in the fossil fuels sector, supported in large part by liquefied natural gas (LNG).

"By 2040, we expect natural gas demand to grow by over 20% with global LNG increasing by at least 75%," he said. "This growth outlook creates a favorable environment for Baker Hughes."

Simonelli said his company has booked nearly $3 billion worth of gas-infrastructure equipment over the last year and a half, a trend he said would continue as the global switch from coal to natural gas evolves.

For this year, he said LNG demand appears on pace to increase by 5% year-on-year as weaker demand from China is not enough to dim the strength in the European economy. The United States is the largest exporter of LNG by far and recent data from the European Union showed U.S.-sourced LNG had overtaken Russia to claim the No. 2 spot in terms of market share, behind Norway.

In terms of oil, Simonelli said this year has been a highly volatile one for the market. The price for Brent crude oil, the global benchmark, dipped into the low $60 range in early May on macroeconomic concerns, but spiked to $77 last month during the brief war between Iran and Israel.

Looking ahead, crude oil prices could fall below the point at which some drillers can make a profit, and Simonelli expressed concerns about supply-side pressures as OPEC+ --the core members of the Organization of the Petroleum Exporting Countries (OPEC) and non-member allies such as Russia--unwinds years of voluntary production curtailments.

"Ultimately, until all excess OPEC+ barrels are absorbed by the market, we anticipate oil-related upstream spending will remain subdued," Simonelli said.

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