Baker Hughes Expects US Rig Count To Stabilize Later In 2016

Baker Hughes Expects US Rig Count To Stabilize Later In 2016
Baker Hughes expects US rig count to begin stabilizing in the second half of 2016, while the rig count globally will drop steadily through the end of the year due to fewer new projects.

Reuters

April 27 (Reuters) - Oilfield services provider Baker Hughes Inc said on Wednesday it expects U.S. rig count will begin to stabilize in the second half of 2016, while the rig count globally will drop steadily through the end of the year due to fewer new projects.

However, the company, which also reported a bigger first-quarter loss, said it does not expect drilling activity in the United States to increase meaningfully this year, even if the rig count steadies.

Baker Hughes, whose acquisition by bigger rival Halliburton Co is pending regulatory approval, said the terms of the merger agreement required it to retain certain expenses, which limited its ability to cut costs, and hurt operating margins.

"If the deal breaks, we can see those costs going away soon," Cowen & Company analysts wrote in a note.

Baker Hughes shares rose as much as 4 percent on Wednesday. They had fallen nearly 4 percent in premarket trading after the company reported results.

If the deal is not cleared by regulators, Halliburton will have to pay Baker Hughes $3.5 billion in termination fees.

Edward Jones analyst Rob Desai said the company could use the money to buy back shares or even make acquisitions to boost its business.

Baker Hughes reiterated that the merger agreement would not terminate automatically if regulatory reviews extended beyond the April 30 deadline.

Since being announced in November 2014, the deal has faced stiff regulatory uncertainty, with the U.S. Department of Justice suing to block the deal earlier this month.

Baker Hughes said it recorded merger-retained costs of $110 million, after tax, in the first quarter. That helped widen its attributable net loss for the period to $981 million from $589 million a year earlier.

"During the quarter, the industry faced another precipitous decline in activity, exceeding even the most pessimistic predictions," Chief Executive Martin Craighead said.

Baker Hughes said it expects the industry-wide rig count in North American to fall 30 percent in the current quarter from the previous quarter.

Cowen & Company analysts said the company limiting its exposure to the unprofitable onshore pressure pumping business in North America confirmed it was losing market share in the region.

Baker Hughes North America revenue declined 59 percent in the quarter, accounting for 30 percent of its total revenue. Overall revenue fell a steeper-than-expected 41.9 percent, to $2.67 billion.

Halliburton's revenue in the quarter slumped 40.4 percent.

(Reporting by Amrutha Gayathri in Bengaluru; Editing by Anil D'Silva and Savio D'Souza)



WHAT DO YOU THINK?


Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.