Baker Hughes to cut staff by 7,000 as oil falls

OREANDA-NEWS. Baker Hughes will lay off 7,000 employees in the first quarter as the world's third-largest oilfield services provider seeks to cut costs as producers rein in budgets amid a 50pc drop in crude prices.

North America, which delivered record revenue for the company in the fourth quarter, may see a 15pc decline in rig count in the first quarter compared to the previous three months. But the fall in revenue may be steeper than that as drillers seek to cut rental and services costs to cope lower oil prices.

"You kind of have a double hit. You have the activity decline and the revenue," chief executive Martin Craighead said on an earnings call.

The North American shake boom drove demand for rigs, pressure pumps, drilling chemicals and geological surveys over the past few years. But that rapid expansion led to a surge in supply far higher than demand, in part resulting in the plunge in crude to near six-year lows since June. Oil companies are scrambling to rework their budgets and expansion plans in light of the sudden fall in the market. "The industry can't simply hope and wait for oil to climb back over \\$100/bl," Craighead said.

Baker Hughes will work out its capital expenditure and the overall business strategy for this year on a quarter by quarter basis as "customer budgets are being reset, activity levels are declining and currencies continue to fluctuate," chief finance officer Kimberly Ross said. It has set a capex of \\$400mn for the first quarter compared with \\$503mn in the previous quarter. Capex in 2014 fell 14pc from a year earlier to \\$1.8bn.

Outside of North America, Baker Hughes expects international rig count to slowly decline in several markets, with activity likely to remain strong across most of the Middle East.

For the fourth quarter, North American revenue surged as activity levels rose in Canada and West Texas, while most other onshore markets remained strong until the holiday period. North America helped segments including pressure pumping, artificial lift, upstream chemicals, completion systems and drill bits deliver strong growth. Latin America ended the year as the most profitable geographic segment as a result of record sales of artificial lift in the Andean region and other onshore markets and better terms on drilling services contract with Brazil.

Africa delivered strong growth in revenue and profit from a quarter earlier on high demand for wireline services and drilling services in Angola and Nigeria. Year-end product sales were high across other parts of Africa. Revenue in Russia was relatively flat as increased revenue from year-end product sales of completion systems was offset by the unfavorable devaluation of the Russian ruble.

The company's net income rose to \\$663mn in the fourth quarter from \\$248mn a year earlier and \\$375mn in the previous three months. Income for 2014 rose to \\$1.72bn from \\$1.09bn.