How Will Baker Hughes’ Revenue Move If Crude Oil Prices Rebound To $100 Per Barrel By 2018?

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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.

BHI-Q&A-6

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Have more questions about Baker Hughes (NYSE:BHI)? See the links below:

Notes:

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 content@trefis.com

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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