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2016-10-25 18:30:00

BAKER HUGHES NET LOSS $2.3 BLN

BAKER HUGHES NET LOSS $2.3 BLN

Baker Hughes Announces Third Quarter Results:

  • Revenue of $2.4 billion for the quarter, down 2% sequentially and 38% year-over-year
  • Operating losses were $321 million for the quarter, a sequential improvement of $249 million, or 44%
  • GAAP net loss per share of $1.00 for the quarter includes $0.85 per share of adjusting items
  • Cash flows from operating activities were $119 million for the quarter

 

"Our third quarter results demonstrate the progress we have made on our commitment to improve financial performance by reducing operational costs, optimizing our capital structure, and strengthening our full-service model while building broader sales channels for our products and technology," said Martin Craighead, Baker Hughes Chairman and Chief Executive Officer.

"Revenue for the third quarter declined 2% sequentially, primarily as a result of steep activity reductions and project delays in our Gulf of Mexico, West Africa, and Norwegian deepwater operations. Despite these activity headwinds, the improvement in the quarter is evident through a $249 million, or 44%, sequential reduction in our operating losses, driven mainly by the decisive actions we took to right-size our operating structure. Furthermore, this quarter we exceeded our original cost reduction goal for year-end, setting a new annualized cost savings target of $650 million for 2016.

"Looking ahead, in the fourth quarter of 2016 we expect activity in North America to modestly increase, as our customer community slowly begins to ramp up activity in what remains a tough pricing environment. Internationally, we are forecasting activity declines and pricing pressure to continue, with minimal year-end, seasonal product sales unlikely to offset those declines.

"While we expect the market conditions to remain challenging near term, the structural changes we implemented in the past six months have created a stronger foundation for delivering on our objectives and positioning the company for growth. I am pleased with our progress and, while we have more work ahead of us, I am confident that we have the right people, technology, and strategy to grow profitably and maximize return on invested capital."

2016 Third Quarter Results

Revenue for the quarter was $2.4 billion, a decrease of $55 million, or 2%, sequentially. Compared to the same quarter last year, revenue is down $1.4 billion, or 38%. Sequentially, revenue was impacted by activity declines, primarily in the Gulf of Mexico, Norway, and West Africa deepwater operations, and increasing market pricing pressures. This was partially offset by pockets of activity increase, mainly in the U.S. onshore, Saudi Arabia, Canada, and Kuwait.

On a GAAP basis, net loss attributable to Baker Hughes for the third quarter was $429 million, or $1.00 per diluted share, compared to $911 million, or $2.08 per diluted share, in the second quarter of 2016. The third quarter includes after-tax charges of $365 million, or $0.85 per diluted share, related to asset impairments, restructuring, litigation settlements, and goodwill impairment.

Adjusted net loss (a non-GAAP measure) for the quarter was $64 million, or $0.15 per diluted share. Adjusted net loss excludes the above adjustments totaling $365 million after-tax, or $0.85 per diluted share.

Adjusted EBITDA (a non-GAAP measure) was $269 million for the quarter, an increase of $419 million, or 279% sequentially, and down $253 million, or 48%, compared to the third quarter of 2015.

Cash flows provided by operating activities were $119 million for the quarter, a decrease of $3.5 billion sequentially and $309 million year-over-year. Free cash flow (a non-GAAP measure) for the quarter was $109 million, a decrease of $3.5 billion sequentially and $239 million year-over-year. The sequential decrease in cash flows is driven primarily by Halliburton's payment of the $3.5 billion termination fee in the second quarter of 2016. Compared to the prior year, the decline is driven by the increase in operational losses as a result of reduced revenue.

For the quarter, capital expenditures were $70 million, unchanged sequentially, and down $108 million, or 61%, compared to the third quarter of 2015. The reduction in capital expenditures is attributable to reduced activity levels and our continued focus on capital discipline. Depreciation and amortization expense for the quarter was $262 million, a decline of $43 million, or 14%, sequentially, and down $170 million, or 39%, compared to the same quarter last year. The decline in depreciation and amortization expense is primarily driven by asset impairments and lower capital spending.

Corporate costs were $78 million in the quarter, compared to $29 million in the prior quarter and $26 million in the third quarter of 2015. The increase in corporate costs is mainly due to litigation settlements in the third quarter.

Income tax expense was $70 million for the quarter, an effective tax rate of (19.4%), compared to (20%) in the second quarter of 2016. As a result of geographic mix of earnings and losses, goodwill impairment, asset impairments, and restructuring charges, and other discrete tax items, our tax rate has been, and will continue to be, volatile until the market stabilizes.

In the third quarter we repurchased approximately 5.3 million shares on the open market, totaling $263 million.

Consolidated Condensed Statements of Income (Loss)1

 
  Three Months Ended
  September 30, June 30,
(In millions, except per share amounts) 2016 2015 2016
Revenue, $ 2,353 3,786 2,408
Costs and expenses:      
Cost of revenue 2,059 3,375 3,112
Research and engineering 91 110 99
Marketing, general and administrative 203 211 222
Impairment and restructuring charges 304 98 1,126
Goodwill impairment 17 1,841
Merger and related costs 93 78
Merger termination fee (3,500)
Total costs and expenses 2,674 3,887 2,978
Operating loss (321) (101) (570)
Loss on early extinguishment of debt (142)
Interest expense, net (39) (55) (48)
Loss before income taxes (360) (156) (760)
Income taxes (70) (152)
Net loss (430) (156) (912)
Net (income) loss attributable to noncontrolling interests 1 (3) 1
Net loss attributable to Baker Hughes, $ (429) (159) (911)
       
Basic and diluted loss per share attributable to Baker Hughes, $ (1.00) (0.36) (2.08)
       
Weighted average shares outstanding, basic and diluted 430 439 438
       
Depreciation and amortization expense, $ 262 432 305
Capital expenditures, $ 70 178 70
     

1

  Beginning in 2016, all merger and related costs are presented in a separate line item in the consolidated condensed statement of income (loss). Prior-year merger and related costs were reclassified to conform to the current year presentation.
     
 

Consolidated Condensed Statements of Income (Loss)1

 
  Nine Months Ended September 30,
(In millions, except per share amounts) 2016 2015
Revenue, $ 7,431 12,348
Costs and expenses:    
Cost of revenue 7,829 11,301
Research and engineering 292 366
Marketing, general and administrative 632 749
Impairment and restructuring charges 1,590 747
Goodwill impairment 1,858
Merger and related costs 180 204
Merger termination fee (3,500)
Total costs and expenses 8,881 13,367
Operating loss (1,450) (1,019)
Loss on early extinguishment of debt (142)
Interest expense, net (142) (162)
Loss before income taxes (1,734) (1,181)
Income taxes (589) 242
Net loss (2,323) (939)
Net loss attributable to noncontrolling interests 2 3
Net loss attributable to Baker Hughes, $ (2,321) (936)
     
Basic and diluted loss per share attributable to Baker Hughes, $ (5.31) (2.13)
     
Weighted average shares outstanding, basic and diluted 437 438
     
Depreciation and amortization expense, $ 921 1,326
Capital expenditures, $ 226 751
     

1

  Beginning in 2016, all merger and related costs are presented in a separate line item in the consolidated condensed statement of income (loss). Prior-year merger and related costs were reclassified to conform to the current year presentation.

-----

Earlier: 

BAKER HUGHES NET LOSS $911 MLN 

HALLIBURTON & BAKER HUGHES TERMINATION 

BAKER HUGHES NET LOSS $981 MLN 

HALLIBURTON & BAKER HUGHES CONTEST 

BAKER HUGHES: NET LOSS $1.97 BLN 

HALLIBURTON & BAKER HUGHES PROBLEMS: $35 BLN

 

 

 

 

Tags: BAKER, HUGHES

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