UPDATE 3-Baker Hughes tries to reassure investors as Halliburton deal fails

Mon May 2, 2016 1:06pm EDT
 
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(Adds analysts comments, updates stock prices, Breakingviews link)

By Amrutha Gayathri

May 2 (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.   Continued...