Baker Hughes announces $724 million loss for Q1 2016

Revenue of $2.7 billion for the quarter, down 21% sequentially and 42% year-over-year

Martin Craighead, Baker Hughes Chairman and Chief Executive Officer

HOUSTON- Baker Hughes says Q1 2016 was worse than expected, leading to more losses ahead of the proposed takeover by Halliburton.

“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.

For the quarter, capital expenditures were $86 million, a decrease of$128 million, or 60 per cent sequentially, and down $229 million, or 73 per cent compared to the first quarter of 2015.

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.

“As a result of this steep decrease in customer spending, our revenue for the first quarter was down 21 per cent sequentially. Compared to the prior year, revenue declined 42 per cent, driven by lower activity as evident by the 41 per cent 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,” said Craighead.

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North America revenue of $819 million for the quarter decreased 28 per cent sequentially. The decline was driven primarily by a steep drop in U.S. onshore activity as the rig count dropped 26 per cent compared to the prior quarter.

“In the second quarter, we forecast the North America rig count to fall 30 per cent compared to the first quarter average. For the second half of the year, we project the U.S. rig count will begin to stabilize, although we do not expect activity to meaningfully increase in 2016. Conversely, the international rig count is predicted to drop steadily through the end of the year as we see limited new projects in the pipeline,” said Craighead.

In Latin America, first quarter revenue was $277 million, down 35 per cent sequentially. The decline in revenue was driven mainly by the steep activity reduction in offshore Brazil, Argentina, and the Andean area, as reflected in the 33 per cent sequential rig count decline for these critical markets.

Europe/Africa/Russia Caspian revenue of $611 million for the quarter decreased 15 per cent sequentially.

Middle East/Asia Pacific revenue of $718 million for the quarter declined 12 per cent sequentially. The reduction in revenue is driven primarily by lower activity in Southeast Asia and Australia, where the rig count has dropped 18 per cent compared to the prior quarter

“In this environment, helping our customers maximize production while lowering overall costs is more critical than ever before. Our products and services put us in a remarkable position to lower the cost of well construction, optimize well production, and increase ultimate recovery as we continue to leverage opportunities to convert our capabilities into earnings,” said Craighead.