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Image courtesy of Baker Hughes

Baker Hughes Chairman and CEO Martin Craighead said Tuesday he expects market conditions to “remain challenging near term” after his company reported a $321 million operating loss for the third quarter.

The Houston-based company reported $2.4 billion in revenue for the third quarter, down 38 percent from the year ago period and a 2 percent sequential drop.

The company said the sequential revenue decline was tied to activity declines, primarily in the Gulf of Mexico, Norway and West Africa deepwater operations as well as increasing market pricing pressures.

The revenue dip was offset by “pockets of activity increase,” mainly in the U.S. onshore, Saudi Arabia, Canada and Kuwait,” the company added.

Third quarter operating losses came in at $321 million, a sequential improvement of $249 million or 44 percent.

Net loss attributable to Baker Hughes on a GAAP basis was $429 million for the third quarter, or $1.00 per diluted share, compared to $911 million in the second quarter.

The third quarter result includes after-tax charges of $365 million related to asset impairments, restructuring, litigation settlements and goodwill impairment.

Third quarter adjusted net loss for the quarter was $64 million, or $0.15 per diluted share.

Adjusted EBITDA was jumped by $419 million sequentially to $269 million for the third quarter but was still down 48 percent compared to the third quarter of 2015

Cash flows provided by operating activities were $119 million for the quarter, a $309 million year-over-year decline.

Capital expenditures for the third quarter were $70 million, unchanged sequentially but down $108 million from the year-ago quarter.

Corporate costs were $78 million in the quarter compared to $29 million in the prior quarter and $26 million in the third quarter of 2015.

Baker Hughes said the increase in corporate costs was mainly tied litigation settlements in the third quarter.

North America operating loss before tax for the third quarter was $65 million, a $246 million improvement from the second quarter.

North America revenue ticked up 1 percent sequentially to $674 million for the third quarter.

Latin America revenue increased 3 percent sequentially to $243 million despite a 2 percent rig count reduction.

Latin America operating profit before tax was $20 million for the third quarter, compared to an operating loss before tax of $243 million in the prior quarter.

Europe/Africa/Russia Caspian revenue declined 11 percent sequentially to $519 million for the quarter primarily due to reduced activity, unfavorable exchange rates in West Africa and reduced activity in Norway as a result of project timing and labor union strikes.

Third quarter operating profit before tax for Europe/Africa/Russia Caspian was $22 million, up from an operating loss before tax of $257 million in the prior quarter.

Middle East/Asia Pacific revenue for the quarter was “relatively flat” sequentially at $649 million, Baker Hughes said.

Third quarter operating profit before tax for Middle East/Asia Pacific was $71 million, up from an operating loss before tax of $142 million in the prior quarter.

Industrial Services revenue dipped 2 percent sequentially to $268 million in the third quarter.

Baker Hughes said that decline was mainly related to project delays in the pipeline inspection and maintenance business that caused an earlier-than-usual seasonal decline.

Industrial Services operating profit before tax for the third quarter was $30 million, up from an operating loss before tax of $43 million in the second quarter.

Craighead said that Baker Hughes expects fourth quarter activity in North America “to modestly increase, as our customer community slowly begins to ramp up activity in what remains a tough pricing environment.”

Craighead added that international activity is expected to decline and pricing pressure is forecast to continue with “minimal year-end, seasonal product sales unlikely to offset those declines.”

“While we expect the market conditions to remain challenging near term, the structural changes we implemented in the past six months have created a stronger foundation for delivering on our objectives and positioning the company for growth,” Craighead said.