Baker Hughes Incorporated, an oilfield services company that is soon to be merged with Halliburton, has reported a loss of $188 million in its second quarter of 2015 compared with a profit in the same period a year earlier.
According to Baker Hughes’ 2Q 2015 report, revenue for the current quarter was $4 billion, down 33% compared to the second quarter of 2014.
On a GAAP basis, net loss attributable to Baker Hughes for the second quarter was $188 million or $0.43 per diluted share.
The effective tax rate on net loss for the current quarter was 3.7%, compared to 37.2% on net income for the second quarter of 2014. The company says that the decrease is driven by an unfavorable change in the geographic mix of earnings and the loss of certain tax benefits.
Adjusted EBITDA (a non-GAAP measure) for the second quarter of 2015 was $459 million, a decrease of $700 million or 60% compared to the second quarter of 2014.
Free cash flow for the current quarter was $413 million compared to $72 million for the second quarter of 2014. Free cash flow excluding restructuring payments of $195 million would have been $608 million for the quarter.
CAPEX & merger
For the quarter, capital expenditures were $258 million, compared to $424 million in the second quarter of 2014. Depreciation and amortization expense for the second quarter of 2015 was $434 million, compared to $454 million in the prior year quarter.
Excluding merger-related costs of $40 million in the current quarter, corporate costs were $42 million, compared to$73 million in the second quarter of 2014. The reduction in corporate costs is a result of workforce reductions and lower discretionary spend.
Martin Craighead, Baker Hughes Chairman and Chief Executive Officer, commented, “Revenue of $4 billion for the second quarter declined 33% year-over-year, outperforming the 36% drop in the global rig count, despite incremental headwinds from deteriorating pricing and unfavorable currency changes.”
Craighead continued: “Even though the severity of the revenue decline has compressed our margins, we have minimized the impact by aggressively reducing costs and rightsizing our operational footprint. These actions have resulted in decremental margins of 35% compared to the prior year, a significant improvement from the prior industry downturn. Furthermore, earnings for the quarter were impacted by an unfavorable tax rate which resulted primarily from a change in the geographic mix of earnings.
“Looking ahead to the second half of 2015, we expect these unfavorable market dynamics to persist. In North America, we don’t anticipate activity to increase while commodity prices remain depressed as the seasonal activity rebound in Canada will likely be offset by a decline in the U.S. Internationally, rig counts are projected to continue to decline led by many onshore and shallow water markets.
“Finally, in regard to the pending merger, I continue to be pleased with the efforts of the teams working on completing regulatory filings and to develop plans for a successful integration,” Craighead concluded.
Outlook & rig counts
“For the remainder of the year, we expect unfavorable market conditions to continue across all segments,” Baker Hughes said.
Baker Hughes noted that North America rig counts are anticipated to remain relatively unchanged. Seasonal increase in activity in Canada is expected to be fully offset by lower activity levels in the U.S. onshore and an unfavorable mix of activity in the Gulf of Mexico, the company said.
In Latin America, Baker Hughes projects the rig count to continue to decline, albeit, at a slower pace.
In Europe/Africa/Russia Caspian, Baker Hughes says that the rig count is also expected to decline across most of the region, primarily in onshore and shallow water markets.
For Middle East/Asia Pacific, Baker Hughes anticipates the rig count to remain relatively stable as any rig count growth in the Middle East will likely to be offset by rig count declines in Asia Pacific.