Halliburton's Loss Deepens--2nd Update

By Alison Sider and Anne Steele 

Halliburton Co. and Baker Hughes Inc. are taking sharply divergent paths after recently calling off a merger, once valued at $35 billion, due to regulatory opposition.

Halliburton Chief Executive Dave Lesar said Tuesday in his first live remarks since the failed merger was announced Sunday that his company still wants to be a one-stop-shop for exploration and production companies, and said it would seek other ways to grow and increase its reach worldwide.

"If we had been successful, adding the Baker Hughes assets would have given us that scale quickly," Mr. Lesar said in a conference call. "But our strategy has not changed."

That was in contrast to remarks Tuesday from Baker Hughes Chief Executive Martin Craighead, who said his company plans a more specialized business model, pulling back from some markets and services such as fracking in the U.S., to focus on developing and selling new technologies.

"There are certain markets where certain product lines frankly aren't earning their right to play," he said.

Halliburton and Baker Hughes called off their merger Sunday after the deal encountered intense regulatory pressure on several continents.

The second and third largest oil-field services providers had hoped to join forces to challenge Schlumberger Ltd., their largest rival.

Mr. Lesar said the companies knew they would face scrutiny from regulators and believed that trying to acquire Baker Hughes was worth the risk.

Obtaining U.S. antitrust approval for large, complex transactions in any industry has become more difficult in recent years, he said. And the sudden, sharp drop in oil prices made it hard to divest businesses and eroded the potential benefit from the deal.

"The unprecedented deterioration of the oil and gas industry decimated the economics of the deal," Mr. Lesar said.

On Tuesday, Halliburton reported a loss of $2.41 billion, or $2.81 a share, for the first three months of the year. The company's quarterly loss widened from $643 million, or 76 cents a share, a year earlier, because of drastically lower revenue from its North American business and charges from the failed Baker Hughes tie-up.

Excluding special items, adjusted earnings from continuing operations were 7 cents a share. Total revenue slid 40% to $4.2 billion.

The company said it recorded Baker Hughes acquisition-related costs of $378 million, or 44 cents a share, in the quarter. Halliburton had previously said it recorded companywide charges related to asset impairments and severance costs of about $2.1 billion, or $2.39 a share, in the first quarter.

Baker Hughes on Monday said it would use its $3.5 billion break-up fee to shore up its balance sheet, buying back stock and debt.

The company plans to scale back on hydraulic fracturing work in the U.S., which Mr. Craighead said has become commoditized, with customers unwilling to pay for better service or technology.

Baker Hughes also said it would step up its work selling equipment and technology to other companies, particularly in international markets.

"We will be more selective and creative as we look at opportunities for our product lines globally," Mr. Craighead said.

Though he said he didn't listen to the comments by the chief executive of the company he had planned to combine with, now a rival, Mr. Lesar said he believes the best way to prepare for a rebound in oil field activity is to work in every shale formation, offering a full suite of services.

"If you are an integrated company, you essentially can't pick and choose where you provide, who you provide it to, where you operate and what customers you work for," Mr. Lesar said.

Write to Anne Steele at [e-mail]

(END) Dow Jones Newswires

May 03, 2016 13:42 ET (17:42 GMT)

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