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Baker Hughes warns global rig count could fall 30 percent in 2016
January 28, 2016 / 1:17 PM / in 2 years

Baker Hughes warns global rig count could fall 30 percent in 2016

(Reuters) - Oilfield services provider Baker Hughes Inc BHI.N, which is being acquired by Halliburton Inc (HAL.N), said it expected the number of rigs active globally to decline by as much as 30 percent in 2016 if oil prices do not recover from current levels.

Baker Hughes shares rose as much as 6 percent in early trading on Thursday, in step with oil LCOc1, which inched toward $35 on possibility of major producers co-operating to cut output. [O/R]

The worldwide rig count more than halved in 2015, meaning 2016 will be the second straight year of reduced drilling activity.

“In our opinion, BHI’s management team has been the most bearish about the oil field service cycle, but has also been the most correct as the duration and severity of the downturn has continued to exceed the market’s initial expectations,” Barclays analysts wrote in a note.

A more than 70 percent slide in crude prices since June 2014, caused by a glut and weakening demand, has forced oil producers to mothball rigs and scale back spending.

Chief Executive Martin Craighead said “customers’ challenges of maximizing production, lowering their overall costs, and protecting cash flows were now more acute.”

Baker Hughes publishes the closely-watched North American rig count every week, and international rig count on a monthly basis.

The company’s deal with Halliburton is facing intense regulatory scrutiny due to concerns that the merger would lead to higher prices and less innovation.

Halliburton said on Monday it was yet to reach an agreement with U.S. and European regulators about the “adequacy” of proposed divestitures.

The two companies have so far disclosed plans to divest businesses with combined 2013 revenue of $5.2 billion.

    Halliburton, like bigger rival Schlumberger Ltd (SLB.N), reported a better-than-expected profit for fourth quarter, helped by deep cost cuts.

    Baker Hughes’ total costs and expenses fell 15 percent in the three months ended Dec. 31, but not enough to offset a nearly 50 percent drop in revenue.

    The net loss attributable to Baker Hughes was $1.03 billion, or $2.35 per share, compared with a profit of $663 million, or $1.52 per share, a year earlier.

    Excluding a $1.25 billion impairment charge, loss was 21 cents per share, much bigger than average analyst estimate of 10 cents per share, according to Thomson Reuters I/B/E/S.

    Revenue was $3.39 billion, below Wall Street expectations of $3.47 billion.

    Baker Hughes’ shares were up 3 percent at $42.07 in morning trade.

    Reporting by Swetha Gopinath in Bengaluru; Editing by Saumyadeb Chakrabarty, Sriraj Kalluvila and Shounak Dasgupta

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