Baker Hughes Incorporated Sees a Light Amid Oil Market Darkness

Oil-field services provider Baker Hughes recently reported strong fourth-quarter results. Unfortunately, those results were overshadowed by an increasingly uncertain short-term outlook as a result of plunging oil prices. However, CEO Martin Craighead sees the pain of the downturn leading to long-term gains for the industry.

Here we go again In opening comments during the company's quarterly conference call, Craighead emphasized the industry's cyclical nature:

Craighead noted that no matter what analyst or industry executives say, no one can actually predict these downturns, nor when the next up cycle will begin. The industry just knows these downturns happen every few years, and now it needs to adjust. He then launched into a brief history lesson:

Craighead said Baker Hughes does not believe "this cycle is going to any different" than prior cycles, and that the company has "navigated" many such pullbacks and surges in the industry.

A word of warning and one of optimismCraighead, though, said the industry needs to adjust in order to not only survive the downturn but thrive on the other side.

By using technology to lower costs, oil companies can get more out of their assets. This will improve profitability in the short term when prices are low, and it will lead to stronger long-term results should oil prices improve, which is still a very distinct possibility, according to Craighead:

Investor takeawayClearly, the industry has hit a rough patch and will remain weak for a while unless oil prices suddenly burst higher. However, the industry has endured these tough times before and will manage through this trouble as well. That said, the industry must adopt new technologies to bring costs down, as it simply can't bank on the return of $100 oil to bail it out.

The article Baker Hughes Incorporated Sees a Light Amid Oil Market Darkness originally appeared on Fool.com.

Matt DiLallo has no position in any stocks mentioned, but highly values the insight that Baker Hughes management has for investors. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.