By July 28, 2016 Read More →

Baker Hughes says North America recovery unlikely this year

Baker Hughes

Baker Hughes will be launching new products in 2016, most of them for lowering costs and optimizing oil production. photo.

Baker Hughes CEO: “I don’t subscribe to the hopeful commentary”

By Amrutha Gayathri

July 28 (Reuters) – Oilfield services provider Baker Hughes Inc said it did not expect a substantial recovery in drilling and pricing in North America this year, in contrast with comments from bigger rivals Schlumberger Ltd and Halliburton Co.

Baker Hughes’ shares, however, rose about 3 percent to $45.88 after the company said it expected margins to improve across its businesses due to recent job cuts and other restructuring actions.

“I don’t subscribe to the hopeful commentary,” Baker Hughes Chief Executive Martin Craighead said on a post-earnings conference call on Thursday.

Schlumberger said last week the oil downturn appeared to have bottomed out, while Halliburton said it expected a “modest uptick” in North American rig count in the second half of 2016.

“I believe oil prices in the upper $50s (per barrel) at a minimum are required for a sustainable recovery in North America,” Craighead said.

Baker Hughes’ outlook was more “sanguine” than its peers’, said Evercore ISI analyst James West, noting that oil prices have slid from last week, when Schlumberger and Halliburton reported results.

Prices for both globally traded Brent futures and U.S. crude are down about 5 percent this week.

In May, Baker Hughes and Halliburton scrapped their long-stalled deal – valued at about $35 billion when it was announced in 2014 – due to opposition from U.S. and European antitrust regulators. The companies had hoped the merger would help them weather the worst oil price crash in a generation.

Baker Hughes said in May proceeds from a $3.5 billion breakup fee from Halliburton would fund a $1.5 billion share buyback and a $1 billion debt repayment.

Baker Hughes, which expects to save an annualized $500 million in cost by the end of 2016, said it cut 3,000 jobs in the second quarter.

The company had laid off 2,000 employees in the first quarter and 18,000 last year. Baker Hughes had about 43,000 employees at the end of 2015.

The company also said it was planning to launch new products this year, most of them for lowering costs and optimizing oil production.

Net loss attributable to the company widened to $911 million, or $2.08 per share, in the quarter ended June 30.

Excluding charges related to restructuring and asset writedown, the company reported a loss of 90 cents per share, bigger than the 62 cents analysts had expected, according to Thomson Reuters I/B/E/S.

Revenue fell 39.3 percent to $2.41 billion.

(Reporting by Amrutha Gayathri in Bengaluru; Editing by Kirti Pandey and Don Sebastian)

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