Baker Hughes (NYSE: BHI) reported its Q4 2014 earnings on Tuesday. It was a challenging quarter for the gas and oil industry as crude oil prices declined by nearly 40%. Despite these challenges, Baker Hughes reported solid growth in Q4 2014.
Year-over-year, quarterly revenues grew by about 13% thanks in part to increased activity in North America. The company also finished with strong product sales in global markets. Pre-tax margins are also up to 16% because of a new pressure pumping products.
Nearly half of the company’s revenues comes from its North American operations, which had a very strong quarter. Revenues were at $3.30 billion, which is up 20% from the same period last year. Margins also rose from 8% to 15% from last year.
The company’s pressure pumping line of products also did well thanks to improved pricing and higher usage levels. Other products offered by Baker Hughes, including their drill bits, completion systems and artificial lifts also saw a solid quarter.
International market growth was also impressive with segments in Asia and the Middle East up 13% at $1.22 billion. Latin American market earnings are also up thanks to drilling activity in Brazil and sales to the Andean area.
While the company reported solid growth, Baker Hughes does face challenges heading into 2015. Customers are expected to push for better pricing and decease their upstream capital spending. Crude oil prices have also dropped to below $50 per barrel (a six year low). Prices will continue to be under pressure in 2015. Baker and Hughes is likely to see a decline in demand for their services and products.
In light of these challenges, Baker Hughes has announced that it will lay off 7,000 employees, primarily in this quarter. The company also plans to spend between $160 million and $185 million in severance.