Baker Hughes reports 20% lower revenue, expects continued rig count drop

HOUSTON – The downdraft in the rig count looks set to continue as “unfavorable market conditions” persist throughout the second quarter, Baker Hughes said Tuesday as the company unveiled its first quarter results. First quarter 2015 revenue was $4.6 billion, down 20% from the like period last year.

The collapse in crude oil prices—which are currently about half of their 2014 peak—prompted cutbacks across the upstream industry, with Baker Hughes reporting major cuts to both facilities and manpower in the first quarter.

And while commentators speculated in recent weeks that the downdraft in the rig count—seen by many as a barometer of the industry’s health—was nearing an end, Baker Hughes projects the North American count will drop 30% in the second quarter.

According to the latest data from Baker Hughes, the U.S. rig count has now fallen for 19 straight weeks. On Dec. 5, Baker reported 1,920 rigs turning to the right, but last Friday the company reported just 954 operational rigs.

Meanwhile, Canada, which normally sees peak activity in the first quarter, also experienced a pronounced drop in activity as operators brought their activities to an early halt, Baker Hughes said. The company reported 80 operational rigs on Friday.

According to Baker Hughes’ projections, the second quarter North American rig count—in aggregate—is expected to shed 350 rigs from the number reported at the close of the first quarter.

On March 27, the last full week of the first quarter, the company reported 1,048 operational rigs in the U.S. and 120 in Canada, representing a total of 1,168.

If the company’s projections are correct, the North American rig count still has more than 200 rigs to shed from Friday’s combined rig count of 1,034.

The decline in activity has forced service companies to cut costs with Schlumberger, Halliburton and Weatherford all reporting cost cutting measures.

According to Baker Hughes’ Chairman and CEO Martin Craighead, the Houston-based company “took necessary actions to reduce” its cost base and resize its footprint during the first quarter to mitigate the downturn in the market.

“These actions include the closure and consolidation of approximately 140 facilities worldwide along with the idling or impairment of excess assets and inventory. Correspondingly, we made the decision to increase our headcount reductions to a total of approximately 10,500 positions, or 17% of our workforce, which is 3,500 positions higher than what we previously announced,” Craighead said.

“As day rates for drilling rigs have fallen sharply, so has the demand for high technology products, which are engineered to reduce the time to drill and complete a well,” Craighead said.

According to the company’s estimates, up to 20% of the wells drilled recently “have been placed in inventory to be completed at a later date.”