By Avi Salzman

Oil prices have been stuck in a middling range in the low $60s per barrel that makes oil-drilling only marginally profitable. That isn't a great environment for companies that sell equipment and services to producers.

Almost all of the oil services stocks have been a terrible bet this year -- even worse than producers. Halliburton, Liberty Energy, SLB, and Baker Hughes are all down by double-digit percentages. Companies are saying that tariffs are likely to hurt their results this year.

The one firm that looks like it can weather the problems is Baker Hughes, which reported earnings results late on Tuesday. The company's advantage is that it's more levered to liquefied natural gas than its peers, and LNG is in a better position today than oil.

That's not to say that the outlook is completely sunny for Baker Hughes. The company reported better-than-expected earnings per share for the first quarter, but its guidance for second quarter results was below expectations. That sent shares down 5% in midday trading.

Baker Hughes expects production activity to decline around the world and for tariffs to reduce its 2025 earnings before interest, taxes, depreciation, and amortization by $100 million to $200 million. That's a hit to its expected $4.9 billion in Ebitda, but a manageable one.

But Baker Hughes still looks better-positioned than peers, because of its LNG division, which has signed contracts with major industry players such as Venture Global and QatarEnergy. Gas technology now makes up 32% of Baker Hughes' revenue, up from 28% a year ago. Gas-tech sales rose 12%, even as oilfield services and equipment revenue fell 8%.

The momentum should continue. CEO Lorenzo Simonelli said on the company's earnings call that "several key LNG customers in the Gulf Coast are indicating plans to further expand capacity beyond 2030."

The company sells equipment like gas turbines and compressors that are in high demand, both for LNG and for other growth areas like data centers. In fact, Baker Hughes signed deals for 350 megawatts worth of data center deals in the first quarter, its first major order in that area. Of the major oil services companies, it's the only one whose earnings are expected to grow this year, according to the latest analyst estimates compiled by FactSet.

Baker Hughes didn't even mention oil until the third page of its earnings release -- that's one reason why it looks likely to weather oil's downturn better than peers.

Write to Avi Salzman at avi.salzman@barrons.com

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April 23, 2025 13:53 ET (17:53 GMT)

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