Oilfield companies supplier Baker Hughes might be taking a $15 billion non-cash goodwill impairment cost in its first quarter 2020 in response to the numerous decline in oil and fuel costs and the COVID-19 pandemic.
In addition to taking important steps to scale back the unfold and an infection of the virus in addition to mitigate the influence of this pandemic to its enterprise operations, Baker Hughes stated on Monday it’s taking quite a few actions in response to the present market surroundings.
Under these actions, the corporate has accepted a plan that can lead to restructuring, impairment, and different expenses of roughly $1.eight billion, of which roughly $1.5 billion might be recorded within the first quarter of 2020.
Future money expenditures related to these expenses are estimated to be roughly $zero.5 billion with an anticipated payback inside one 12 months. These restructuring expenses are designed to right-size the corporate’s operations for anticipated exercise ranges and market circumstances.
The firm additionally accepted a plan to scale back 2020 web capital expenditures by over 20% versus 2019 web capital expenditures.
Baker Hughes expects that it’ll document a non-cash cost associated to the impairment of goodwill of roughly $15 billion within the first quarter of 2020.
According to its assertion, the corporate’s market capitalization declined considerably through the first quarter pushed by present macroeconomic and geopolitical circumstances together with the collapse of oil costs pushed by each surplus manufacturing and provide in addition to the lower in demand brought on by the COVID-19 pandemic.
In addition, the uncertainty associated to grease demand continues to have a major influence on the funding and working plans of Baker Hughes’ main prospects.
Based on these occasions, Baker Hughes concluded triggering occasion occurred which required the corporate to carry out an interim quantitative impairment check as of 31 March 2020.
Based upon the outcomes of the impairment check, the corporate concluded that the carrying worth of the Oilfield Services and Oilfield Equipment reporting models exceeded their estimated truthful worth, leading to a goodwill impairment cost. This impairment cost is not going to influence the corporate’s money circulate and the cost is topic to finalization.
Baker Hughes’ money and money equivalents totalled $three billion for the 12 months ended 31 December 2019, excluding belongings held on behalf of GE. The firm’s liquidity is additional supported by a revolving credit score facility of $three billion and entry to industrial paper and different uncommitted strains of credit score. At each 31 December 2019 and 31 March 2020, Baker Hughes had no borrowings excellent beneath the revolver, the industrial paper program, or uncommitted strains.
The publish Baker Hughes to take $15 billion goodwill impairment cost in 1Q appeared first on Offshore Energy.