Baker Hughes Inc. sought to reassure investors on Monday by announcing a $2.5bn 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 oilfield services provider Halliburton Inc.
Baker Hughes stated that proceeds from a $3.5bn breakup fee from Halliburton would fund its $1.5bn share buyback and repayment of $1bn of debt.
Baker Hughes also stated its plans to refinance it’s $2.5bn credit facility maturing in September 2016.
Separately, the company also announced a further 2,000 job cuts as part of its attempts to cut costs by $500m this year.
Oil giants Halliburton Co. and Baker Hughes Inc. terminated their $28bn merger deal amid regulatory pressures.
The companies had announced the deal in November 2014 to compete with no. 1 firm Schlumberger Ltd. The companies had set a deadline by end of April 2016, to either come up with an outcome or end the deal.
Baker Hughes would receive a termination fee of $3.5bn from Halliburton by 4 May 2016.
The U.S. Justice Department filed a lawsuit in early April to stop the merger, saying it threatened to eliminate head-to-head competition in 23 products and services used in oil exploration.
According to Baker Hughes Inc., the number of operational oil rigs in the United States declined to lows last observed in December 2009, a clear sign of the effect of plunging crude oil prices.
For the week ending 19 February 2016, operators shut 26 rigs, bringing the total count to 413. Total number of operational rigs during the same period in the U.S. was 514, comprising of 413 oil rigs and 101 gas exploration rigs.
There was some optimism in the market based on the meeting of OPEC members Saudi Arabia, Qatar and Venezuela and non-OPEC member Russia that planned to curtail production to January 2016 production levels. The supply cut would help prop-up crude oil prices to around $50 by June 2016.
Market analysts forecast the rig count to decline in the coming months and then rise in line with rising crude oil prices.
U.S. shale gas producers have hedged 2017 crude oil prices in the futures market at around $45 a barrel, anticipating a price recovery in prices.
Source: Reuters, Marinelink