Baker Hughes continues right-sizing successes in the face of Covid-19 unknowns

HOUSTON (Bloomberg) - Baker Hughes is making structural changes to account for continued oil demand disruption after the coronavirus crippled economic activity around the world and compounded an historic oil bust.

The world’s No. 2 oilfield services contractor said in a statement on Wednesday that worldwide economic contraction probably reached a nadir in the second quarter, but warned that the outlook remains “extremely limited.” Baker Hughes posted an adjusted per-share loss of 5 cents for the period, compared with an average estimate for a penny loss from analysts in a Bloomberg survey.

“Overall, we are executing on the framework we laid out on our first quarter earnings call. We are on track to hit our goals of structurally right-sizing our business and achieving the $700 million in annualized cost savings by year end. I am confident in the ability of our team to execute while keeping safety as our highest priority.  We remain committed to our strategy, maintaining our focus on higher-margin and differentiated portfolio offerings, and providing our customers with leading technologies to support the energy transition,” Chief Executive Officer Lorenzo Simonelli said in the statement.

Simonelli is shrinking headcount and exiting non-core product lines as global drilling is set to slump to the lowest level since the turn of the century.

“The second quarter of 2020 was challenging in several areas as our company navigated through the ongoing impacts of the COVID-19 pandemic and the sharp decline in activity levels due to lower oil and gas prices. Despite these headwinds, I was pleased with how our team executed with strong margin performance in TPS and DS, cost execution in OFS, solid order bookings in OFE and TPS, and another quarter of free cash flow generation,” Simonelli said.