Baker Hughes Narrows Loss, Prepares for Merger with GE

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Researched by Industrial Info Resources (Sugar Land, Texas)--Drilling services provider Baker Hughes Incorporated (NYSE:BHI) (Houston, Texas) reported a net loss of $417 million in fourth-quarter 2016, compared to a net loss of $1.03 billion in fourth-quarter 2015. The company pointed out that revenue had increased 2% sequentially from the third quarter of 2016, thanks in large part to an increase in activity North American drilling. Industrial Info is tracking $3.15 billion in projects involving Baker Hughes.

In an earnings conference call, Chief Executive Officer Martin Craighead discussed the challenges faced by the company in the previous quarter as well as the gains it had made. "It is clear that the market is in a healthier place as a number of significant industry changes have occurred over the past several months," said Craighead. "However, while there is reason to be optimistic, there remain a number of factors that could cause the expected recovery to occur more slowly and less smoothly than some anticipate."

Craighead called OPEC's curtailment of oil reduction a good start in leveraging oil prices, but said that the North American shale segment "remains a wildcard in all of this," noting that since details of OPEC's planned output reduction surfaced, rig counts have increased 33% in the U.S. "We begin 2017 with a much more optimistic industry outlook, but one that is not devoid of questions and many challenges," said Craighead. "As we look ahead, we are excited to build on this momentum, and we are confident that the company is well-positioned for success in any market scenario."

In a press release, Craighead said, "Looking ahead for the first half of 2017, we expect onshore revenue in North America to increase as our customers ramp up activity, with service pricing improving but limited by overcapacity. Internationally, we are forecasting activity declines and continued pricing pressure, with pockets of growth onshore. In offshore markets, particularly deepwater, activity declines are expected to be more severe."

The key event for Baker Hughes this year is the planned merger with GE Oil & Gas, a unit of General Electric Company (NYSE:GE) (Boston, Massachusetts).

Craighead said, "By combining with GE and Oil & Gas ... we will have a much broader, full-stream portfolio of productivity solutions that will provide the new company with more revenue diversity and resiliency throughout the industry cycles." For more details of the merger and GE's most recent earnings, see Januiary 23, 2017, article - GE Points to Baker Hughes Merger After Disappointing Earnings.

Among the Baker Hughes projects being tracked by Industrial Info is the $1.5 billion natural gas field subsea gathering system for Chevron Corporation's (NYSE:CVX) (San Ramon, California) Wheatstone liquefied natural gas project in Western Australia. The project involves drilling additional subsea wells and is in the commissioning phase, which is expected to be completed this quarter. The nine wells from two reservoirs have been completed. Baker Hughes is acting as a contractor on this project.

Within the U.S., one of the top Baker Hughes projects being tracked by Industrial Info is the drilling mud and fuels additives plant expansion in Pasadena, Texas, by Baker Hughes Petrolite Company (Pasadena). The plant is being constructed to house new production lines and process equipment to increase capacity of fuel additives for the automotive and refining industries. Construction is planned to kick off in late 2018 and will take about a year to complete.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five 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. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.