Baker Hughes Inc sought to reassure investors on Monday by announcing a $2.5 billion plan to buy back stock and pay down debt, using the breakup fee it will receive following the collapse of its long-stalled takeover by fellow oilfield services provider Halliburton Inc.
Now each company must map out a strategy to thrive on its own. Both had hoped the merger would help them weather the worst oil price crash in a generation, which has caused hundreds of thousands of layoffs across the industry.
Wall Street analysts said Halliburton should be in better shape than Baker Hughes but praised Baker Hughes' plan to cut annual costs by some $500 million in an oversupplied market while repurchasing shares.
"(This) equates to meaningful upside potential to earnings estimates in 2016 and 2017" for Baker Hughes, UBS analyst Angeline Sedita said in a note to clients.
Baker Hughes said proceeds from a $3.5 billion breakup fee from Halliburton would fund a $1.5 billion share buyback and the repayment of $1 billion of debt.
Shares of Halliburton rose 2.6 percent to $42.36 on Monday, while Baker Hughes fell 2.8 percent to $47.04.
Baker Hughes has faced employee turnover and cutbacks ever since Halliburton announced plans 18 months ago to buy it in a deal first valued at $35 billion.
Regulators in the United States and overseas frowned upon the transaction, calling it a threat to competition and innovation. That led both sides to scrap the agreement on Sunday.
The U.S. Justice Department had filed a lawsuit last month to stop the deal, saying it would leave only two dominant oilfield services companies, the merged Halliburton-Baker Hughes entity and global market leader Schlumberger Ltd.
Baker Hughes, which is developing products that lower costs and maximise production for oil and gas producers, also said on Monday it planned to refinance a $2.5 billion credit facility, which expires in September.
The company said an initial phase of cost-cutting should result in $500 million of annualised savings by the end of 2016.
In a separate regulatory filing on Monday, Baker Hughes said it had cut 2,000 more jobs in the first quarter, adding to worldwide reductions of 18,000 last year. The company had about 43,000 employees as of Dec. 31.
Baker Hughes said on Wednesday that it recorded after-tax "merger-retained" costs of $110 million in the first quarter, leading to a bigger net loss for the period.
The Houston-based company also said then that it was limiting its exposure to the unprofitable onshore pressure pumping business in North America.
Halliburton, which will release its first-quarter results on Tuesday, said on April 22 that revenue for the period slumped 40 percent.
Shares of Baker Hughes have fallen 25 percent since the merger deal was announced in November 2014. Halliburton stock declined more than 19 percent in that time.
