EJ (![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png)
pay_the_piper) wrote2009-01-26 10:09 pm
pay_the_piper) wrote2009-01-26 10:09 pm
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Subject: Baker Hughes Response to the Declining Market
Last quarter I sent you an update about the global economy and how Baker Hughes was positioned as we entered 2009. Since then, economic conditions have continued to deteriorate across the world.
Although our company has performed well during the past few years and did so again in 2008, the ongoing global financial crisis has led to a widespread economic recession which significantly impacts Baker Hughes. As the world economy has stalled, demand for oil and natural gas has declined, and the energy industry has lowered its forecast for oil prices. Many customers have already revised their exploration and development spending plans downward, and we expect others to do the same. In the U.S. alone, the rig count is down 25% from its September 2008 high. This lower level of activity around the world is already having a significant negative impact on Baker Hughes and the entire oilfield service industry. Prices for several of our products and services have declined as customers demand discounts, and a stronger dollar has reduced margins in some international markets as a result of changes in exchange rates. While planning for 2009, all of our divisions are forecasting a decline in activity in the months to come.
At this point it is impossible to predict when the economy and our industry will recover, but it appears unlikely that market conditions will improve before the end of the year.
In the interim, our primary objective is to ensure that Baker Hughes emerges as a stronger company when activity increases. Our strong balance sheet gives us the flexibility to keep investing where necessary. We plan to continue initiatives that are critical to our long-term growth, but it has become essential for us to adjust our cost structure and spending levels to this new business environment.
Unfortunately, this means that we have to reduce our workforce. Based on current forecasts, approximately 1,500 positions will be eliminated at this time, about 850 of which are based in North America. We understand that these staff reductions will affect individuals who are our colleagues and friends, and we are committed to handling their situation in a sensitive, respectful and responsible manner.
As the year develops, we will monitor activity levels across the company to determine what further adjustments are necessary. In the meantime, in an effort to delay some cost inflation, we will postpone merit increases until at least July 1st.
In its long history, Baker Hughes has successfully managed many business cycles largely because our employees shared a common commitment to be an industry leader and have met the market challenges with ingenuity, hard work and dedication. I appreciate your support in carrying on this tradition.
Sincerely,
Chad C. Deaton
Chairman, President and CEO
For the most part, until they decide that people aren't on the chopping blocks anymore, I'm not sure what mood I'm going to be in. Mostly because this just adds to...things. Crappy things. This is not the time to need to be looking for a job.
Last quarter I sent you an update about the global economy and how Baker Hughes was positioned as we entered 2009. Since then, economic conditions have continued to deteriorate across the world.
Although our company has performed well during the past few years and did so again in 2008, the ongoing global financial crisis has led to a widespread economic recession which significantly impacts Baker Hughes. As the world economy has stalled, demand for oil and natural gas has declined, and the energy industry has lowered its forecast for oil prices. Many customers have already revised their exploration and development spending plans downward, and we expect others to do the same. In the U.S. alone, the rig count is down 25% from its September 2008 high. This lower level of activity around the world is already having a significant negative impact on Baker Hughes and the entire oilfield service industry. Prices for several of our products and services have declined as customers demand discounts, and a stronger dollar has reduced margins in some international markets as a result of changes in exchange rates. While planning for 2009, all of our divisions are forecasting a decline in activity in the months to come.
At this point it is impossible to predict when the economy and our industry will recover, but it appears unlikely that market conditions will improve before the end of the year.
In the interim, our primary objective is to ensure that Baker Hughes emerges as a stronger company when activity increases. Our strong balance sheet gives us the flexibility to keep investing where necessary. We plan to continue initiatives that are critical to our long-term growth, but it has become essential for us to adjust our cost structure and spending levels to this new business environment.
Unfortunately, this means that we have to reduce our workforce. Based on current forecasts, approximately 1,500 positions will be eliminated at this time, about 850 of which are based in North America. We understand that these staff reductions will affect individuals who are our colleagues and friends, and we are committed to handling their situation in a sensitive, respectful and responsible manner.
As the year develops, we will monitor activity levels across the company to determine what further adjustments are necessary. In the meantime, in an effort to delay some cost inflation, we will postpone merit increases until at least July 1st.
In its long history, Baker Hughes has successfully managed many business cycles largely because our employees shared a common commitment to be an industry leader and have met the market challenges with ingenuity, hard work and dedication. I appreciate your support in carrying on this tradition.
Sincerely,
Chad C. Deaton
Chairman, President and CEO
For the most part, until they decide that people aren't on the chopping blocks anymore, I'm not sure what mood I'm going to be in. Mostly because this just adds to...things. Crappy things. This is not the time to need to be looking for a job.