The world’s third-largest oilfield services provider stated in a corporate update Wednesday that the worst supply chain issues “should be behind us,” as this could indicate U.S. crude production could meaningfully increase in 2023.
Baker Hughes Co. reported third-quarter results and posted a loss, compared with a profit last year, hit largely by $230 million in restructuring costs and impairment charges after a recent reorganization announcement.
During the quarter, Baker Hughes said it would “simplify its organization” and restructure its four product companies to concentrate on two reporting businesses. The company formally restructured into two reporting business segments early this month.
“The macro outlook has grown increasingly uncertain as the global economy is dealing with strong inflationary pressures, a rising interest rate environment, and sizeable fluctuations in global currencies,” Baker Hughes CEO Lorenzo Simonelli said in a statement.
Despite the macroeconomic headwinds, “we remain positive on the outlook for oil and gas,” Simonelli continued.
The company’s oilfield service was in a rebound, up 17% in the quarter compared to the same period last year. Sales in the unit are at the highest since the first quarter of 2020, when the pandemic closed the economy and collapsed the oil and gas industry.
The oil patch has struggled to bring on new crude production for the last two years because of supply chain bottlenecks. Many frackers have been unable to find hydraulic fracturing equipment, which led to dismal crude production growth.
However, Simonelli pointed out:
“2022 has presented some unique challenges for Baker Hughes, and as we head towards 2023 we believe many of the key challenges should be behind us.”
This could suggest that bottlenecks in the oil patch may wane next year and result in meaningful production increases.
Even though crude production could grow next year, that doesn’t necessarily mean gasoline and diesel prices at the pump will subside from elevated levels because refinery capacity has spiraled lower since President Biden was elected.
The possibility of the oil patch increasing crude production is a promising sign but a little too late as the Biden administration drains the nation’s Strategic Petroleum Reserve to dangerously low levels to depress crude prices ahead of the midterm elections.