Oilfield services provider Baker Hughes saw its loss deepen during the first quarter of 2016 when compared to the prior-year quarter.
On a GAAP basis, net loss attributable to Baker Hughes for the first quarter was $981 million, compared to a loss of $589 million in the same period last year. Included in the net income was tax valuation allowances of $502 million, adjusting items of $280 million after-tax and merger retained costs in excess of $110 million after-tax.
Adjusted net loss (a non-GAAP measure) for the quarter was $701 million. Adjusted net loss excludes impairment and restructuring charges of $145 million after-tax, merger and related costs of $92 million after-tax, and a loss on a firm purchase commitment of $43 million after-tax. These adjustments total $280 million after-tax.
Baker Hughes’ revenue for the quarter was $2.7 billion, a decrease of $724 million, or 21% sequentially, and down $1.9 billion, or 42% compared to the first quarter of 2015 and revenues of $4.6 billion.
For the quarter, capital expenditures were $86 million, a decrease of $128 million, or 60% sequentially, and down $229 million, or 73% compared to the first quarter of 2015. The reduction in capital expenditures is attributable to lower activity levels and the company’s continued focus on capital discipline.
Corporate costs were $32 million, compared to $29 million in the prior quarter and $49 million in the first quarter of 2015. The year-over-year reduction in corporate costs is mainly due to workforce reductions and lower spend.
“During the quarter, the industry faced another precipitous decline in activity, exceeding even the most pessimistic predictions, as E&P companies further cut spending in an effort to protect cash flows,” said Martin Craighead, Baker Hughes Chairman and Chief Executive Officer.
“As a result of this steep decrease in customer spending, our revenue for the first quarter was down 21% sequentially. Compared to the prior year, revenue declined 42%, driven by lower activity as evident by the 41% global rig count drop, reduced pricing across most markets, and the strategic decision to continue limiting our exposure to unprofitable onshore pressure pumping business in North America.”
Baker Hughes also said it forecasted the North America rig count to fall 30% compared to the first quarter average. For the second half of the year, Baker Hughes projected the U.S. rig count would begin to stabilize, although the company does not expect activity to meaningfully increase in 2016.
Further, the company predicted that the international rig count would drop steadily through the end of the year as the company saw limited new projects in the pipeline.
Halliburton-Baker Hughes merger
Halliburton, the world’s second largest oilfield services provider, recently said it was working to complete the merger deal with Baker Hughes, with the deadline set for April 30.
If regulatory approvals are not obtained by April 30, the Halliburton and Baker Hughes may continue to seek relevant regulatory approvals or either of the parties may terminate the merger agreement.
The proposed deal, valued at $35 million, has been hitting stumbling blocks as the antitrust authorities in the U.S., and EU are not convinced that the merger between the second and third oilfield services provider will not create a monopoly. The U.S. Department of Justice on April 6 filed a civil antitrust lawsuit seeking to block the merger, alleging that the transaction threatens to eliminate competition, raise prices and reduce innovation in the oilfield services industry.
According to Baker Hughes, if, as expected, the DOJ’s lawsuit and review by relevant competition authorities extends beyond April 30, 2016, the merger agreement does not terminate automatically; the parties may continue to defend against the DOJ’s lawsuit and seek relevant competition approvals or either of the parties may terminate the merger agreement. Baker Hughes cannot predict when, or if, the pending merger will be completed, the company stated.
Offshore Energy Today Staff