Another Oilfield Services Firm Falters (BJS, HAL, WFT, SLB)

This is turning into a lousy week for oilfield services company. Today’s really downbeat earnings report from BJ Services Co. (NYSE:BJS) follows on yesterday’s weak reports from Halliburton Co. (NYSE:HAL) and Weatherford International Ltd. (NYSE:WFT).

BJ reported its second quarter 2009 EPS of $0.15, down 71% sequentially and 65% year-over-year. Revenue for the quarter came was $1.05 billion, down 26% sequentially and 18% from a year ago. Analysts weren’t expecting much, but they were expecting better results than that. Average estimates were slated at EPS of $0.22 and revenues of $1.13 billion.

Perhaps even worse for BJ, operating income fell by nearly three-quarters sequentially, from $220.4 million to just $58 million. As a percentage of revenue, operating income totaled just 5.5% in the second quarter, compared with 15.4% in the company’s first quarter and 14.5% a year ago.

The company blamed a “precipitous decline in drilling activity” for the miserable earnings. According to BJ, North American drilling dropped 28% from the previous quarter and 27% year-over-year, and rig counts are at a six-year low. This climate forced companies to compete harder and reduce prices for services and products.

BJ noted that it is taking all the usual steps to fight the economic downturn. It has laid off about 11% of its global workforce, reduced capital and discretionary spending, and looking for new ways to reduce costs.

Then comes the really poor news. BJ expects “drilling activity in the United States will decline further over the next several quarters, and will not meaningfully improve until natural gas supply is in better balance with demand, which may occur some time next year.”

In pre-market trading this morning, BJ shares are down nearly 11%, to $10.70. The stock’s 52-week range is $8.34-$34.94. Schlumberger Ltd. (NYSE:SLB), the largest of the oilfield services companies, reports earnings Friday. Its shares are also down about 2% this morning.

Paul Ausick
April 21, 2009