(Adds analysts comments, updates stock prices, Breakingviews
link)
By Amrutha Gayathri
May 2 (Reuters) - Baker Hughes Inc BHI.N 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 (NYSE:HAL) Inc HAL.N .
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.
The U.S. Justice Department had filed a lawsuit last month
to stop the deal, saying it would leave only two dominant
oilfield services companies, the merged Halliburton-Baker Hughes
entity and global market leader Schlumberger Ltd SLB.N .
Baker Hughes, which is developing products that lower costs
and maximize production for oil and gas producers, also said on
Monday it planned to refinance a $2.5 billion credit facility,
which expires in September.
The company said an initial phase of cost-cutting should
result in $500 million of annualized savings by the end of 2016.
In a separate regulatory filing on Monday, Baker Hughes said
it had cut 2,000 more jobs in the first quarter, adding to
worldwide reductions of 18,000 last year. The company had about
43,000 employees as of Dec. 31. (http://1.usa.gov/23iDCjh)
Baker Hughes said on Wednesday that it recorded after-tax
"merger-retained" costs of $110 million in the first quarter,
leading to a bigger net loss for the period.
The Houston-based company also said then that it was
limiting its exposure to the unprofitable onshore pressure
pumping business in North America.
Halliburton, which will release its first-quarter results on
Tuesday, said on April 22 that revenue for the period slumped 40
percent.
Shares of Baker Hughes have fallen 25 percent since the
merger deal was announced in November 2014. Halliburton stock
declined more than 19 percent in that time.
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BREAKINGVIEWS-Halliburton-Baker blowup reverberates beyond oil
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