Baker Hughes Loss Widens Amid Oil Downturn
April 27 2016 - 9:50AM
Dow Jones News
Baker Hughes Inc. said its loss widened in the latest quarter as
revenue slumped amid a downturn the oil-field services company's
chief executive said is exceeding "even the most pessimistic
predictions."
Shares fell 3.7% to $44.10 in recent premarket trading as the
adjusted per-share loss was far wider than analysts had predicted
and revenue missed expectations.
The latest results come ahead of Saturday's deadline for
Halliburton Co. to complete its pending $35 billion deal to acquire
Baker Hughes. The pending deal has faced opposition from
competition authorities world-wide. Earlier this month, the U.S.
Justice Department filed an antitrust suit challenging the deal,
which would combine the world's second- and third-largest oil-field
services firms, behind only Schlumberger Ltd.
Baker Hughes didn't comment on the pending deal in its news
release Wednesday except to say it can't predict when, or if, the
pending merger will be completed.
Low commodities prices have resulted in oil company customers
reducing their spending for drilling and other well work, which in
turn has pressured oil-field services companies to reduce their
costs. Both Halliburton and Baker Hughes have cut thousands of jobs
amid the commodities downturn.
Chief Executive Martin Craighead said in prepared remarks that
during the latest quarter "the industry faced another precipitous
decline in activity" as oil producers cut spending further.
Mr. Craighead said slumping revenue in the latest quarter
reflected a 41% decline in the global rig count, lower pricing
across most markets and Baker Hughes' decision to continue to limit
its exposure to the unprofitable onshore pumping business in North
America.
The company reported that revenue in its North America business
fell 59% to $819 million in the latest quarter, reflecting a 58%
rig count-decline from a year earlier and deteriorating pricing
conditions.
Mr. Craighead stated that while Baker Hughes has taken
significant steps to manage costs it is "retaining costs in our
operating profit margins in compliance with the merger
agreement."
He added that "the unique circumstances in which we are
operating limit our ability to consider and action a broader range
of measures required to align the company with the current and
near-term market conditions."
Mr. Craighead said the company expects the North America rig
count to decline 30% in the second quarter from the first quarter,
with the U.S. rig count beginning to stabilize in the second half
of the year, but doesn't anticipate any "meaningful increase" in
activity in 2016.
Over all, Baker Hughes reported a loss of $981 million, or $2.22
a share, compared with a year-earlier loss of $589 million, or
$1.35 a share, a year earlier. Excluding merger-related costs,
restructuring-related charges and write-downs, the adjusted
per-share loss was $1.58.
Revenue decreased 42% to $2.67 billion.
Analysts polled by Thomson Reuters expected per-share loss of 34
cents and revenue of $2.85 billion.
On Friday, Halliburton postponed its first-quarter earnings
conference call until May 3, but also disclosed some 6,000 job cuts
during the three-month period ended March 31, more than the 5,000
job losses it estimated in February. Halliburton also said its
first-quarter revenue fell 40% to $4.2 billion.
Write to Tess Stynes at tess.stynes@wsj.com
(END) Dow Jones Newswires
April 27, 2016 09:35 ET (13:35 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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