Baker Hughes chief Martin Craighead warned on Wednesday that the North American rig count could fall by another 30 percent in the second quarter after his company posted a $981 million net loss.
The company’s first quarter revenue fell 42 percent year-over-year to $724 million while adjusted EBITDA fell to $108 million in the first quarter, down 76 percent from the prior year quarter .
“As a result of this steep decrease in customer spending, our revenue for the first quarter was down 21 percent sequentially,” Craighead said.
On a GAAP basis, net loss attributable to Baker Hughes for the first quarter was $981 million, or $2.22 per diluted share.
Adjusted net loss for the quarter was $701 million, or $1.58 per diluted share.
Analysts had expected the company to post a loss of $1.24 per share, CNBC said.
Craighead said his company does not expect rig activity to increase “meaningfully” in 2016.
“In the second quarter, we forecast the North America rig count to fall 30 percent compared to the first quarter average. For the second half of the year, we project the U.S. rig count will begin to stabilize, although we do not expect activity to meaningfully increase in 2016. Conversely, the international rig count is predicted to drop steadily through the end of the year as we see limited new projects in the pipeline,” Craighead said.
Adjusted net loss excludes impairment and restructuring charges of $145 million after-tax, after-tax merger and related costs of $92 million and a loss on a firm purchase commitment of $43 million after-tax.
Those adjustments total $280 million after-tax, or $0.64 per diluted share.
Free cash flow for the quarter fell to a loss of $103 million.
Excluding merger-related and restructuring payments of $296 million, free cash flow was $193 million for the first quarter.
Capital expenditures declined 73 percent year-over-year to $86 million in the first quarter.
“The reduction in capital expenditures is attributable to lower activity levels and our continued focus on capital discipline,” Baker Hughes said.
Corporate costs were $32 million, compared to $29 million in the prior quarter and $49 million in the first quarter of 2015.
The year-over-year reduction in corporate costs is mainly tied to workforce reductions and lower spending.
“Although we have taken significant actions to manage our cost structure during the downturn, we are retaining costs in our operating profit margins in compliance with the merger agreement. Additionally, the unique circumstances in which we are operating limit our ability to consider and action a broader range of measures required to align the company with the current and near-term market conditions,” Craighead said.
The U.S. Department of Justice filed a civil antitrust lawsuit earlier this month to block the proposed $35 billion merger between Halliburton and Baker Hughes.
The companies said they “intend to vigorously contest the U.S. Department of Justice’s effort” to block the merger.
Halliburton and Baker Hughes previously agreed to extend the time period to obtain regulatory approvals for the deal to no later than April 30, 2016, as permitted under the merger agreement.
If the judicial review extends beyond April 30, 2016, the companies may continue to seek relevant regulatory approvals or either of the parties may terminate the merger agreement.