Much like its peers, Baker Hughes (NYSE:BHI), the world’s third largest oilfield service producer, is highly dependent on commodity prices for its revenue growth. The steep drop in commodity prices over the last 22 months has resulted in a notable decline in the demand for exploration and drilling activity. As a result, the global oil and gas rig count fell sharply over the last few quarters. This severely impacted the company, resulting in a decline of more than 35% in its revenue and almost 60% in its EBITDA in 2015.
Based on a weak outlook for commodity prices in the near term, we expect crude oil prices to remain weak over the next couple of years, before gradually recovering to $70 per barrel by 2018. In this case, Baker Hughes’ revenue is likely to fall further in 2016 and then improve steadily in the following two years. These numbers are presented in the table below under the base case calculations. If, however, the commodity markets grow faster-than-expected and crude oil prices rebound to $100 per barrel by 2018, Baker Hughes’ revenue in 2018 will be 70% higher than estimated in our base case.
- Fed Rate Hike Causes Oil Prices To Hit Their Lowest Level For The Year
- Baker Hughes Exceeds 1Q’17 Earnings Expectations; Continues To Focus On Product Innovation
- Baker Hughes To Report A Subdued Recovery In 1Q’17 Compared To Its Peers
- Baker Hughes Is On The Path To Recovery, Despite Weak 4Q’16 Earnings
- Baker Hughes’ Fourth Quarter Earnings To Witness A Rise Driven By An Improvement In Oil Prices
- Baker Hughes’ 2016 In Review: Halliburton’s Loss Is GE’s Gain
Have more questions about Baker Hughes (NYSE:BHI)? See the links below:
- How Will Baker Hughes’ Revenue Move If Crude Oil Prices Average At $50 Per Barrel In 2018?
- What Is Baker Hughes’ Fundamental Value Based On Estimated 2016 Value?
- How Will Baker Hughes’ Revenue And EBITDA Grow Over The Next Five Years?
- How Has Baker Hughes’ Revenue And EBITDA Changed Over The Last Five Years?
- How Has Baker Hughes’ Revenue And EBITDA Composition Changed Over The Last Five Years?
- What Is Baker Hughes’ Revenue And EBITDA Breakdown?
- Baker Hughes 1Q’16 Earnings Continue To Slide As Commodity Prices Remain Depressed
- 2015 Earnings Review: A Tough Year For Baker Hughes Due To Weak Drilling Demand
- HAL-BHI Merger: Is No Action Better Than A Rejection?
1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email firstname.lastname@example.org
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Baker Hughes
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