THE DOMINO EFFECT OF FALLEN OIL PRICES: Baker Hughes laying off 7,000, may close facilities
Houston-based Baker Hughes said Tuesday it will lay off 7,000 employees despite record breaking revenues as it braces for more months of weak oil prices and a worsening activity slowdown.
The Houston-based services player expects most of the lay offs to come in the first quarter and will book a one time charge of between $160 million to $185 million for the headcount reductions.
The lay offs will affect about 11 percent of the company’s 62,000 employees.
Further details about the lay offs have not been disclosed.
The company is also conducting a review to determine if it can close any of its facilities.
“This is the industry, and it’s throwing us another one of these downturns, and we’re going to be good stewards of our business and do the right thing. But these are never decisions that are done mechanically,” Baker Hughes chairman and CEO Martin Craighead said.
The lay offs come on the heels of a record breaking fourth quarter for the company.
Baker Hughes booked a record high adjusted fourth quarter net income of $629 million, or $1.44 per share, up from $248 million last year and a record annual revenue of $24.6 billion.
While strong activity in North America pushed 2014 revenues to an all time high the industry wide drilling downturn began hitting the company over the holidays, Fuel Fix said.
The average U.S. rig count for the first quarter of 2015 is expected to drop 15 percent from the 2014 fourth quarter average.
“The further we look beyond the quarter, the greater the lack clarity….Additionally, we are seeing a growing inventory of wells drilled but not completed as some customers are electing to delay completion and defer production,” Baker Hughes CFO Kimberly Ross said.
In November, rival Houston-based Halliburton agreed to buy Baker Hughes for $34.6 billion.
The deal is expected to face scrutiny from anti-trust regulators.