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    Halliburton Reports $2.4bn Loss



US oilfield services giant Halliburton made a first-quarter loss of $2.42bn and must now pay a big break fee to Baker Hughes for abandoning a takeover of it.

by: William Powell

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Halliburton Reports $2.4bn Loss

Oilfield services giant Halliburton made a first-quarter 2016 net loss of $2.42bn, it said May 3, compared with a loss of $643mn in Q1 of 2015.

The announcement came a few days after the US giant ruled out its defensive acquisition of Baker Hughes, leaving the two companies facing a bleak outlook.

Halliburton's revenues from completion and production were down about a half at $2.3bn and revenues from drilling and evaluation were down by about a third, at $1.9bn.

Halliburton said the rig count declined to historic lows and low commodity prices created further widespread pricing pressure and activity reductions on a global basis. 

Halliburton also incurred $45mn, after-tax, of interest expense in the first quarter of 2016, associated with the $7.5bn of debt issued in late 2015.

It reported impairments of $2.8bn and losses related to the failed acquisition of Baker Hughes, a defensive merger which the US Department of Justice ruled out , of a further $538mn. But this will pale into insignificance compared with the $3.5bn break-fee that Halliburton must pay Baker Hughes on May 4.

The European Commission also opposed the merger, as its analysis revealed threats to competition on a "very large number of markets related to oilfield services provided to oil and gas exploration and production companies in the European Economic Area." It said May 2 that "a number of customers contacted us to raise issues with the proposed transaction." It opened an in-depth investigation into the merger in January 2016.

Halliburton CEO Dave Lesar said May 1: “While both companies expected the proposed merger to result in compelling benefits to shareholders, customers and other stakeholders, challenges in obtaining remaining regulatory approvals and general industry conditions that severely damaged deal economics led to the conclusion that termination is the best course of action."

His counterpart at Baker Hughes Martin Craighead said it was an "extremely complex, global transaction and, ultimately, a solution could not be found to satisfy the antitrust concerns of regulators, both in the US and abroad."

Ratings agency Moody's expects to conclude both the Baker Hughes and Halliburton rating reviews by early June following a reassessment of the companies' standalone financial and operating performance in light of the terminated merger, it said May 2. It also cited the very weak oilfield services operating environment, suggesting that the two companies' customers may now be able to secure even better deals.


William Powell