Baker Hughes Inc. said Monday that it is working to emerge from its failed merger with Halliburton Co. as a leaner, more focused oil-field services company, outlining plans to cut $500 million in costs while buying back $1.5 billion of shares and $1 billion of debt.
A day after announcing that its merger with Halliburton, once valued at nearly $35 billion, was being called off after regulators claimed it would hurt competition, Baker Hughes said it would use a $3.5 billion breakup fee it got from Halliburton to repair its balance sheet and restructure its business.
Baker Hughes has been tethered to Halliburton since the deal to combine the second- and third-largest oil-field services businesses (after Schlumberger Ltd.) was announced in November 2014. That has kept it from cutting costs and making other changes in response to the oil price rout that reduced demand for work drilling wells and pumping oil and natural gas. Now that it is on its own, Baker Hughes says it will focus on its strengths and simplify its business.
“Innovation is what we do best and what our customers need the most,” CEO Martin Craighead said.
The companies had been working for roughly a year and a half to get the complex deal completed and had been planning potentially to sell billions of dollars of assets to appease regulators. But the Justice Department sued to block the merger last month, arguing that the deal would eliminate head-to-head competition in markets for nearly two dozen products and services used for U.S. oil exploration and production.
Halliburton CEO David Lesar said Sunday that the company still believed the merger would have benefited customers and shareholders of both companies. But amid regulatory challenges and “general industry conditions that severely damaged deal economics,” calling it off was the best course, he said.
Shares of Baker Hughes fell 2 percent Monday in New York trading to $47.39. Halliburton shares rose 1.8 percent to $42.07.
Citing its cash war chest, many oil-field services experts have suggested Baker Hughes will be in a strong position to take advantage of a recovery as crude oil prices have started to tick back up toward $50 a barrel.
