Lufkin cuts outlook on labor unrest in Argentina

(Reuters) - Oilfield services provider Lufkin Industries Inc (LUFK.O) sharply cut its earnings forecast for the year as labor unrest continues to disrupt its manufacturing operations in Argentina, driving its shares down as much as 20 percent.

The company, which runs an oilfield equipment manufacturing plant in the city of Comodoro Rivadavia in Argentina, has been hit by shipment delays over the last year as pay-related labor strikes become more prevalent in the South American country.

"Argentina will continue to be an area of risk so long as the labor unrest and political uncertainty loom around the oil and gas industry in that country," Chief Executive John "Jay" Glick said in a statement.

The "current operational challenges" in Argentina have impacted customers' ability to accept deliveries, he said.

Argentina, which in April nationalized Spanish-controlled oil company YPF SA (YPFD.BA), has an energy investment plan that intends to tighten control over private companies. Petrobras (PETR4.SA), Exxon Mobil Corp (XOM.N) and Royal Dutch Shell Plc (RDSa.L) are some top energy companies operating there.

Labor disruptions hurt production in Argentina and a newly negotiated labor contract led to higher costs in the region, a company executive said on a conference call with analysts.

"We made significant headway managing the issues under our control in Argentina. The situation with the oil and gas sector will remain very uncertain for the foreseeable future," another executive said on the call.

Until natural gas prices strengthen to support higher development work, the company would continue to be impacted by weak demand in North America, he said.

Several oilfield services companies have been hit by disruptions caused due to the industry-wide shift to lucrative oil drilling from natural gas drilling, prompted by decade-low prices for the fuel.

Lufkin shares, which have fallen more than a quarter in the last year, were down 20 percent at $47.37 in afternoon trade on Monday on the Nasdaq. They touched a month-low of $47.14 earlier in the session. More than 2.0 million shares changed hands by 1300 ET, nearly 4 times their 10-day average volume.

Lufkin, which sells and services oilfield pumping units and power transmission products, slashed its full-year earnings expectation to a range of $3.00 to $3.20 per share, from $3.75 to $4.05 per share it forecast earlier.

The company trimmed its full-year revenue forecast to between $1.25 billion and $1.27 billion from $1.25 billion to $1.30 billion.

Third-quarter earnings are expected to be between 70 cents and 80 cents per share, on revenue of between $330 million and $340 million.

Analysts on average were expecting earnings of $1.09 per share and revenue of $341.21 million, according to Thomson Reuters I/B/E/S.

Lufkin's second-quarter net income rose more than 4 percent to $19.3 million, or 57 cents per share.

Adjusted earnings of 66 cents per share fell short of estimate of 82 cents.

Revenue rose 35 percent to $305.6 million but was below analysts' expectations of $307.7 million.

(Reporting By Vishal Krishnan Menon in Bangalore; Editing by Don Sebastian and Sriraj Kalluvila)