HOUSTON – Baker Hughes has increased the number of layoffs at its company due to a decline in North American Drilling. A company official confirmed that the layoff affected 10,500 workers.
"During the first quarter we took necessary actions to reduce our cost base and resize our footprint to mitigate current market conditions. These actions include the closure and consolidation of approximately 140 facilities worldwide along with the idling or impairment of excess assets and inventory," said Baker Hughes Chairman and Chief Executive Officer Martin Craighead. "Correspondingly, we made the decision to increase our headcount reductions to a total of approximately 10,500 positions, or 17% of our workforce, which is 3,500 positions higher than what we previously announced. Combined, these actions are projected to reduce cost by more than $700 million on an annualized basis."
The announcement was made Tuesday as the results for the first quarter of 2015 were released.
The news comes one day after Halliburton said it has cut 9,000 cuts the last two quarters, and less than a week after Schlumberger said it will cut an additional 11,000 jobs.
Craighead said the first quarter results are a reflection of the extreme market forces faced by the industry since late December. Consistent with past downturns, many of the company's customers have curtailed or canceled projects. The reduction in activity can clearly be seen in the North America rig count, which has been cut in half, dropping by more than 1,000 rigs so far this year. Similarly, international activity has begun falling, including significant rig count declines in Colombia, Mexico, Continental Europe, and Australia,.
In addition to lower activity levels, officials said strained capital budgets have prompted customers to decrease their spending per well including a reduced appetite for premium services. As day rates for drilling rigs have fallen sharply, so has the demand for high technology products, which are engineered to reduce the time to drill and complete a well. In the United States, some customers are electing to defer completions altogether, and company officials estimate that as many as 20 percent of the recent wells being drilled have been placed in inventory to be completed at a later date.
"Looking out to the second quarter, we expect unfavorable market conditions to persist. North America and international rig counts are projected to continue declining across most onshore and shallow water markets, which would further intensify the oversupply of oilfield services. We will continue monitoring market conditions closely and will take actions as necessary to optimize efficiency, while retaining the capacity to flex up when market conditions improve," Craighead said. "Regarding the planned combination with Halliburton, I am pleased with the progress to date including a positive stockholder vote received in the first quarter. Notwithstanding the current market volatility and the pending merger, our management team and employees are working diligently to ensure we achieve our near term objectives, while maintaining focus on our strategic priorities. To that end, we remain committed to developing and deploying innovative technologies that enable our customers to lower the cost of well construction, optimize well production, and increase ultimate recovery."