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2016-04-28 19:40:00

BAKER HUGHES NET LOSS $981 MLN

BAKER HUGHES NET LOSS $981 MLN

Baker Hughes Announces First Quarter Results

  • Revenue of $2.7 billion for the quarter, down 21% sequentially and 42% year-over-year
  • Sequential and year-over-year decremental operating margins for the quarter were 28% and 13%, respectively
  • GAAP net loss per share of $2.22 for the quarter includes $1.14 per share of tax valuation allowances and $0.64 per share of adjusting items
  • Operating results include costs in excess of 500 bps, in excess of $0.25 per share, retained in compliance with the merger agreement

 

HOUSTON, April 27, 2016 /PRNewswire/ -- Baker Hughes Incorporated (NYSE: BHI) announced today results for the first quarter of 2016.

"During the quarter, the industry faced another precipitous decline in activity, exceeding even the most pessimistic predictions, as E&P companies further cut spending in an effort to protect cash flows," said Martin Craighead, Baker Hughes Chairman and Chief Executive Officer. "As a result of this steep decrease in customer spending, our revenue for the first quarter was down 21% sequentially. Compared to the prior year, revenue declined 42%, driven by lower activity as evident by the 41% global rig count drop, reduced pricing across most markets, and the strategic decision to continue limiting our exposure to unprofitable onshore pressure pumping business in North America.

"Despite the severity of these headwinds, decremental operating margins sequentially and year-over-year were contained to 28% and 13%, respectively. Although we have taken significant actions to manage our cost structure during the downturn, 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.

"In North America, revenue declined 28% compared to the fourth quarter of 2015, driven primarily by reduced U.S. onshore activity and the associated price erosion. Additionally, due to the unsustainable pricing in onshore pressure pumping, we continue to limit the pursuit of certain opportunities as we strive for cash-flow-positive operations in this business. In spite of the drop in revenue, decremental operating margins of 15% were achieved in the region as a result of cost-saving measures and lower depreciation expense from prior-year impairments. Internationally, revenue fell 19% sequentially for the quarter as activity declined significantly in important markets for us, such as Brazil, Southeast Asia, North Sea, West Africa, and Argentina. The reduction in revenue was exacerbated by unfavorable product mix and pricing, and resulted in a contraction of our international margins.

"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.

"In this environment, helping our customers maximize production while lowering overall costs is more critical than ever before. Our products and services put us in a remarkable position to lower the cost of well construction, optimize well production, and increase ultimate recovery as we continue to leverage opportunities to convert our capabilities into earnings."

2016 First Quarter Results

Revenue for the quarter was $2.7 billion, a decrease of $724 million, or 21% sequentially, and down $1.9 billion, or 42% compared to the first quarter of 2015.

Adjusted EBITDA (a non-GAAP measure) was $108 million for the quarter, a decrease of $268 million, or 71% sequentially, and down $350 million, or 76% compared to the first quarter of 2015.

On a GAAP basis, net loss attributable to Baker Hughes for the first quarter was $981 million, or $2.22 per diluted share. Included in our net income was tax valuation allowances of $502 million ($1.14 per diluted share), adjusting items of $280 million after-tax ($0.64 per diluted share) and merger retained costs in excess of $110 million after-tax ($0.25 per diluted share).

Adjusted net loss (a non-GAAP measure) for the quarter was $701 million, or $1.58 per diluted share. Adjusted net loss excludes impairment and restructuring charges of $145 million after-tax ($0.33 per diluted share), merger and related costs of $92 million after-tax ($0.21 per diluted share), and a loss on a firm purchase commitment of $43 million after-tax ($0.10 per diluted share). These adjustments total $280 million after-tax ($0.64 per diluted share).

Free cash flow (a non-GAAP measure) for the quarter was ($103) million. Excluding merger-related and restructuring payments of $296 million, free cash flow was $193 million for the quarter.

For the quarter, capital expenditures were $86 million, a decrease of $128 million, or 60% sequentially, and down $229 million, or 73% compared to the first quarter of 2015. The reduction in capital expenditures is attributable to lower activity levels and our continued focus on capital discipline. Depreciation and amortization expense for the quarter was $354 million, a decline of $62 million, or 15% sequentially, and down $106 million, or 23% compared to the same quarter last year. The decline in depreciation and amortization is primarily related to the prior-year impairment and restructuring actions.

Corporate costs were $32 million, compared to $29 million in the prior quarter and $49 million in the first quarter of 2015. The year-over-year reduction in corporate costs is mainly due to workforce reductions and lower spend.

Income tax expense for the quarter of $367 million includes $502 million of valuation allowances recorded primarily against U.S. and non-U.S. tax loss carryforwards and other deferred tax assets, given the uncertainty as to when, or if, in certain jurisdictions, we will generate sufficient future taxable income to utilize such carryforwards and other deferred tax assets in light of the prolonged downturn.

 

Consolidated Condensed Statements of Income (Loss)1

 
 

Three Months Ended

 

March 31,

December 31,

(In millions, except per share amounts)

2016

2015

2015

Revenue

$

2,670

$

4,594

$

3,394

Costs and expenses:

     

Cost of revenue

2,658

4,342

3,114

Research and engineering

102

138

100

Marketing, general and administrative

207

287

220

Impairment and restructuring charges

160

573

1,246

Merger and related costs

102

28

91

Total costs and expenses

3,229

5,368

4,771

Operating loss

(559)

(774)

(1,377)

Interest expense, net

(55)

(54)

(55)

Loss before income taxes

(614)

(828)

(1,432)

Income taxes

(367)

235

397

Net loss

(981)

(593)

(1,035)

Net loss attributable to noncontrolling interests

4

4

Net loss attributable to Baker Hughes

$

(981)

$

(589)

$

(1,031)

       

Basic and diluted loss per share attributable to Baker Hughes

$

(2.22)

$

(1.35)

$

(2.35)

       

Weighted average shares outstanding, basic and diluted

442

437

439

       

Depreciation and amortization expense

$

354

$

460

$

416

Capital expenditures

$

86

$

315

$

214

     

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 from cost of revenue; research and engineering costs; and marketing, general and administrative costs to conform to the current year presentation.

 

bakerhughes.com

-----

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Tags: BAKER, HUGHES

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