Houston-based Baker Hughes Incorporated posted a $981 million loss in the first quarter of 2016, widening significantly from the same period a year ago, according to the company’s press release. The world’s third largest oilfield services provider reported a bigger quarterly loss on Wednesday, hurt by a continued decline in drilling activity.
Baker Hughes attributed the declining profitability to low oil prices and its still-pending merger. The latest results come ahead of Saturday’s deadline for industry rival Halliburton Co. to complete its pending $35 billion deal to acquire Baker Hughes. The pending deal has faced worldwide opposition. 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 oilfield services firms, behind only Schlumberger Ltd.
Baker Hughes didn’t comment on the pending deal in its press release Wednesday except to say it can’t predict if or when the pending merger will be completed. Halliburton has delayed its conference call to May 3 — after the April 30 deadline for the merger — and is expected to offer an update at that time. Most analysts now expect the merger may be terminated by one or both of the companies based on this delay.
Low commodities prices have resulted in oil company customers reducing their spending for drilling and other well work, which in turn has pressured oilfield services companies to reduce their costs. Both Baker Hughes and Halliburton have cut thousands of jobs amid the downturn.
Revenue for the quarter came in at $2.7 billion, down $1.9 billion or 42 percent from the previous quarter of 2015. The company’s net loss grew to $981 million from $593 million in the first quarter of last year, up about 65 percent.
“We are retaining costs in our operating profit margins in compliance with the merger agreement. Additionally, 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,” said Chief Executive Officer Martin Craighead, in a written statement.
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.
“In the second quarter, we forecast the North America rig count to fall 30% 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.