Oilfield firm Baker Hughes Co on Wednesday reported a $10 billion first-quarter loss and revenue fell more than expected as an 80% plunge in oil prices crushed demand for services and equipment.
Shares were down 4.5% in early trading, and are down roughly 50% year-to-date.
Oil futures this week turned negative for the first time in history, with storage tanks rapidly filling as fuel demand collapsed during lockdowns to fight the spread of the novel coronavirus. Crashing oil prices have prompted shale companies to slash spending and halt drilling activity.
Baker Hughes warned investors last week it would take a $1.5 billion charge in the first quarter, and a $15 billion goodwill impairment charge as it reduced the long-term prospects for its oilfield and equipment unit.
The company anticipates spending in North America will contract a by at least 50% this year, echoing a prediction made by rival Halliburton Co this week.
Revenue of $5.43 billion for the quarter was down 3% from a year earlier and below analysts’ average estimate of $5.63 billion, according to Refinitv Eikon data.
Net loss attributable to Baker Hughes stood at $10.21 billion, compared with a profit of $32 million a year earlier.
“The outlook for oil and gas demand and supply appears equally uncertain,” Chief Executive Lorenzo Simonelli said in a statement.
Baker Hughes has cut its 2020 budget by over 20% from the prior year and is restructuring operations. It is accelerating the exit or shutdown of non-core product lines, including its North American full-service drilling and completions fluids business, Simonelli said.
Despite the share drop, Wall Street analysts said they were encouraged by Baker Hughes’ results, pointing to the company’s $152 million in free cash flow.
“We continue to believe that [Baker Hughes] will emerge on the other side of these troubling times as the energy technology/services play most worth owning for the long haul,” analyst from investment firm Tudor, Pickering Holt & Co wrote in a note.
Baker Hughes warned it has seen some business disruptions due to mobility issues stemming from coronavirus lockdowns. The company received an “essential business” designation from the Italian government and said all its plants in the country were operational but not at full capacity.
Rivals Schlumberger NV and Halliburton Co also took massive charges to quarterly earnings from writing down assets. This week, Halliburton said it was cutting spending by 50%, the largest reduction so far by a major oil firm.
On an adjusted basis, Baker Hughes reported profit of 11 cents a share, in line with market expectations.