Baker Hughes Swings to Loss as Revenue Tumbles 33% -- Update

By Chelsey Dulaney 

Baker Hughes Inc. on Tuesday said headwinds from tumbling oil prices will likely persist for the rest of the year, as the oil-field services company swung to a loss and reported a 33% drop in revenue for its second quarter.

"In North America, we don't anticipate activity to increase while commodity prices remain depressed," said Chief Executive Martin Craighead, who added that seasonal activity in Canada will likely be offset by a decline in the U.S., while international rig counts will continue to decline.

Still, revenue for the quarter came in above Wall Street expectations, while adjusted profit was in line.

Baker Hughes has cut thousands of jobs and closed facilities as plunging oil prices have prompted many of its clients to curtail or cancel projects. Baker Hughes and its peers are particularly struggling in the U.S., where shale producers have dialed back their operations.

Baker Hughes on Tuesday said it is focusing on growing revenue in areas more resilient to commodity price declines, such as Norway, Saudi Arabia and West Africa.

For the quarter ended June 30, Baker Hughes reported a loss of $188 million, or 43 cents a share, compared with a prior-year profit of $353 million, or 80 cents a share.

Baker Hughes said its profit was also hurt by an unfavorable tax rate due to a shift in the geographic mix of its earnings.

Excluding restructuring charges and merger costs, among other items, the company's adjusted per-share loss was 14 cents. Revenue tumbled to $3.97 billion from $5.94 billion a year earlier.

Analysts polled by Thomson Reuters were expecting an adjusted loss of 14 cents a share on revenue of $3.78 billion.

Revenue fell across all of Baker Hughes's geographic segments in the quarter, with the biggest drop in North America. The division saw a 47% decline in revenue to $1.5 billion, as average rig counts fell 51% and customers cut spending. Latin America posted a 19% decline in revenue, while revenue fell 22% in the Middle East and Asia Pacific division.

Meanwhile, Baker Hughes is moving forward with its agreement to be acquired by larger rival Halliburton Co. The deal, struck in November and valued at almost $35 billion at the time, underscored the new realities for energy companies in a world suddenly awash with oil. As a result, oil-field services companies, which are hired to drill and pump wells, are facing less demand for their services and pressure to cut prices.

Halliburton on Monday said its second-quarter earnings plunged 93% amid weak demand, particularly in North America.

Rival oil-field services firm Schlumberger Ltd. last week said it expects the North American rig count to begin to rebound in the second half of the year. That company also reported a steep earnings drop for the second quarter. Schlumberger's profits fell 30% amid plunging revenue, with a significant decline seen in North America.

Write to Chelsey Dulaney at [e-mail]

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