Merger problems pile on to loss for Baker Hughes

CEO says his oil field services company must keep some marginal units operating as its deal with Halliburton wavers

Oil field services company Baker Hughes posted a $981 million loss in the first quarter of 2016, widening significantly from the same period a year ago, the Houston company reported Wednesday.

Revenue for the quarter came in at $2.7 billion, down $1.9 billion, or 42 percent, from the previous quarter of 2015. The company’s net loss grew from $593 million in the first quarter of last year, up about 65 percent.

Baker Hughes attributed the declining profitability to low oil prices and expenses related to its still-pending merger with industry rival Halliburton.

The two companies agreed to a nearly $35 billion merger in November 2014, but the Justice Department has sued to block the deal. Many analysts now expect the merger to be scuttled.

Chief executive Martin Craighead blamed the wider loss in part on the merger agreement, which requires Baker Hughes to keep businesses the company would have otherwise shuttered as part of a cost-cutting push.

“We are retaining costs in our operating profit margins in compliance with the merger agreement,” he said in a statement. Baker Hughes said it was holding onto more than $110 million in after-tax costs as part of its deal with Halliburton.

The sharp decline in drilling that has followed the plunge in oil prices has battered the oil services industry.

Schlumberger last week reported that its first quarter profits fell by about half and it cut 8,000 jobs in the first three months of the year. Halliburton, which delayed its full earnings release on Friday, reported that its first quarter revenues fell 40 percent to $4.2 billion from $7.05 billion a year earlier, and it cut another 6,000 jobs.

Halliburton employs 55,000, down from its 2014 peak of more than 80,000 workers.

Baker Hughes has already cut more than 20,000 jobs or about one-third of its workforce since the oil downturn began nearly two years ago. The company said it can cut further if their merger falls through.

Baker Hughes didn’t provide an update on its combination with Halliburton. Halliburton has delayed its conference call and earnings release to May 3 — after the April 30 deadline for the merger.

Baker Hughes shares rose by $1.14, or 2.5 percent, to $46.94 in trading Wednesday.