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Baker Hughes Slashes Capex, Books Huge $15 Billion Write-down

Baker Hughes expects to book a non-cash goodwill impairment charge of US$15 billion in Q1 and plans to slash capital expenditure (capex) by 20 percent this year in response to the crash in oil and gas prices and the COVID-19 pandemic, the oilfield services provider said on Monday.

Baker Hughes has adopted a plan to respond to the low oil prices and the reduced drilling activity of its customers, which will result in restructuring, impairment, and other charges of around US$1.8 billion, of which some US$1.5 billion will be recorded in the first quarter of 2020.   

The restructuring charges are designed to right-size the company’s operations for reduced activity levels and anticipated market conditions.

Baker Hughes also plans to cut its 2020 net capex by more than 20 percent compared to its actual net capital expenditures for 2019.

“[T]he uncertainty related to oil demand continues to have a significant impact on the investment and operating plans of our primary customers. Based on these events, Baker Hughes concluded that a triggering event occurred which required the Company to perform an interim quantitative impairment test as of March 31, 2020,” the company said in a statement.

Baker Hughes is the latest oilfield services provider to announce measures to protect cash flows and reduce spending as the U.S. shale patch, including supermajors Exxon and Chevron, has been rushing to cut budgets and exposure to the most prolific shale basin in the United States, the Permian. 

At the end of March, Schlumberger and Halliburton joined the ranks of oil companies on a spending-cutting spree amid the steep oil price drop.

Schlumberger said it would slash its spending by 30 percent less than it spent in 2019 and cut the number of active drilling rigs in North America, possibly to as low as it was in 2016.

Halliburton said in mid-March that it would furlough 3,500 employees for two months and laid off 350 workers in Oklahoma earlier this month.

By Tsvetana Paraskova for Oilprice.com

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