July 27 (Bloomberg) -- Baker Hughes Inc., the world's third- largest oilfield contractor, said second-quarter profit fell 75 percent in the absence of a gain from an asset sale recorded a year earlier.

Net income fell to $349.6 million, or $1.09 a share, from $1.4 billion, or $4.14, in the second quarter of 2006, Houston- based Baker Hughes said in a statement today. Baker Hughes' shares tumbled 5.8 percent on July 13 after the company said profit probably was $1.07 to $1.09 a share, 10 to 12 cents below analysts' expectations at the time.

Profit from oilfield services was limited by a slowdown in Canada as energy producers scaled back drilling for natural gas because of a decline in prices for the fuel. There were 144 rigs drilling in the country, on average, in the second quarter, 51 percent less than a year earlier, according to data provided by Baker Hughes. The rig count worldwide was up 2.5 percent.

``Canada hurt us, obviously,'' Chief Executive Officer Chad Deaton told analysts and investors on a conference call today. The company is moving personnel and equipment from the country to overseas markets, ``sizing Canada to what we think it ought to be,'' he said.

The results a year earlier included a gain of $1.04 billion from the sale of Baker Hughes' stake in its WesternGeco seismic- mapping joint venture to partner Schlumberger Ltd. Excluding such one-time items, profit from continuing operations fell 2.8 percent. Revenue rose 15 percent to $2.54 billion.

Segment Earnings

Pretax operating profit from Baker Hughes' drilling and evaluation unit rose 13 percent to $328.5 million and profit from the completion and production division rose 7.5 percent to $266.9 million. Operating profit excludes one-time items.

The company's directors yesterday approved $1 billion in additional stock buybacks, bringing total funds available for repurchasing shares to $1.21 billion, Baker Hughes said. The company said it repurchased 1.2 million shares during the quarter for $98.8 million.

``They do have a large cash hoard, and I'd rather see them buy back shares than haphazardly go and expand,'' said Brian Gambill, managing director at Manning & Napier Advisors Inc. in Rochester, New York, which has $17 billion under management, including about 2 million shares of Baker Hughes.

The shares fell $1.39, or 1.7 percent, to $79.87 in New York Stock Exchange composite trading. The stock, which has 18 buy recommendations from analysts and seven holds, has risen 7 percent this year.

Canadian Slowdown

Drilling in Canada fell to an eight-year low in April, when there were 81 rigs in service. The rig count dropped after Canadian gas prices tumbled as low as $3.25 per million British thermal units in September, retreating from a record $12.84 in December 2005. Prices recovered to an average of $6.45 in the second quarter, sending the rig count to 377 this week, according to Baker Hughes data.

Baker Hughes operates in more than 90 countries, with North America accounting for 41 percent of second-quarter revenue, down from 43 percent a year earlier. Sales in the region were up 7.7 percent from a year earlier, the company said.

Business in North America should improve in the coming quarters, Deaton, 54, said on the call. ``We still see the U.S. second half as having slight growth, and we see Canada coming back but still off compared to last year,'' he said.

Growth by Region

Fastest growth in the second quarter was posted in a region including Europe, Africa and the former Soviet Union, where revenue grew by 27 percent. Revenue rose 20 percent in Latin America and 14 percent in the Middle East and Asia.

Competitors that rely on Canadian drilling also were hurt by the slowdown there. Houston-based BJ Services Co., the sixth- largest oilfield contractor, this week reported a 21 percent drop in second-quarter profit because of the slump.

Schlumberger, the largest contractor, is less reliant on North American drilling. Its profit rose 47 percent in the second quarter, and No. 2 Halliburton, reported that profit more than doubled on a gain from the sale of its KBR subsidiary.

To contact the reporter on this story: Jim Kennett in Houston at jkennett@bloomberg.net.

Last Updated: July 27, 2007 16:16 EDT