Baker Hughes tries to reassure investors as Halliburton deal fails

Mon May 2, 2016 9:14pm EDT
 
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By Amrutha Gayathri

(Reuters) - Baker Hughes Inc sought to reassure investors on Monday by announcing a $2.5 billion plan to buy back stock and pay down debt, using the breakup fee it will receive following the collapse of its long-stalled takeover by fellow oilfield services provider Halliburton Inc.

Now each company must map out a strategy to thrive on its own. Both had hoped the merger would help them weather the worst oil price crash in a generation, which has caused hundreds of thousands of layoffs across the industry.

Wall Street analysts said Halliburton should be in better shape than Baker Hughes but praised Baker Hughes' plan to cut annual costs by some $500 million in an oversupplied market while repurchasing shares.

"(This) equates to meaningful upside potential to earnings estimates in 2016 and 2017" for Baker Hughes, UBS analyst Angeline Sedita said in a note to clients.

Baker Hughes said proceeds from a $3.5 billion breakup fee from Halliburton would fund a $1.5 billion share buyback and the repayment of $1 billion of debt.

Shares of Halliburton rose 2.6 percent to $42.36 on Monday, while Baker Hughes fell 2.8 percent to $47.04.

Baker Hughes has faced employee turnover and cutbacks ever since Halliburton announced plans 18 months ago to buy it in a deal first valued at $35 billion.

Regulators in the United States and overseas frowned upon the transaction, calling it a threat to competition and innovation. That led both sides to scrap the agreement on Sunday.   Continued...

 
Idle oil equipment is seen in a Baker Hughes yard in Williston, North Dakota April 30, 2016. Picture taken April 30, 2016.  REUTERS/Andrew Cullen