Baker Hughes to Lay Off 7,000 Employees in First-Quarter, Sets $400 Million Quarterly Capex for Year as Merger Nears

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Researched by Industrial Info Resources (Sugar Land, Texas)--Oilfield services company Baker Hughes Incorporated (NYSE:BHI) (Houston, Texas) said Tuesday it plans to lay off 7,000 employees amid falling rig counts. Looking forward, Martin Craighead, the chairman and chief executive officer of Baker Hughes, predicted tougher times ahead, noting the current bearish sentiment in the Oil & Gas Industry amid plunging oil prices.

Industrial Info is tracking 10 projects worth $3.17 billion that involve Baker Hughes.

The company said its fourth-quarter 2014 net income rose to $663 million from $248 million in the same quarter of 2013, as revenues rose to $6.35 billion from $5.86 billion.

"Late in the fourth quarter, we began to see the first evidence that customers were pulling back activity, as is reflected in the North American rig count," Craighead told investment analysts during the company's earnings conference call. "This is the beginning of a trend in the weeks and months ahead."

Kimberly Ross, the senior vice president and chief financial officer of Baker Hughes, said during the conference call that the North American onshore rig count is expected to fall 15% this quarter from the fourth quarter of 2014. As a result, she said, "we project decreased demand for our well construction line."

Most of the 7,000 layoffs will occur in the first quarter, Ross said, adding that the company expects to incur a severance charge of $160 million to $180 million as a result of the layoffs.

Halliburton (NYSE:HAL) (Houston) announced the $34 billion acquisition of Baker Hughes in November.For more information, see January 21, 2015, article - Halliburton Sees Another Year of Record Growth in 2014, Readies for Baker Hughes Acquisition.

Craighead said he expects to see the greatest impact of the North American downturn in the Bakken and Mississippi oil plays. The Gulf of Mexico will remain steady in terms of rig activity, he added.

For all of fiscal year 2014, Baker Hughes reported $1.72 billion in net income, up from $1.09 billion in fiscal year 2013. Revenue for the year was $24.6 billion, compared with $22.4 billion for 2013.

Baker Hughes reported capital expenditures of $1.79 billion for 2014, compared with $2.08 billion in 2013. The company said it expects to make $400 million in capital expenditures for first-quarter 2015, compared with $439 million in the same quarter of 2013, and $503 million in fourth-quarter 2014.

Industrial Info is tracking the $2.5 billion construction of the upstream pipeline system for the grassroot Gorgon offshore liquefied natural gas (LNG) project in Western Australia, where Baker Hughes is performing project pre-commissioning activities. The project includes 660 kilometers (km) of pipeline to move natural gas from the Gorgon gas fields to Barrow Island for processing and liquefaction. With an estimated value of $54 billion, the entire Gorgon project by Chevron Corporation (NYSE:CVX) (San Ramon, California) is scheduled for completion in the first quarter of this year.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.