Baker Hughes loses $452 million in first quarter
Baker Hughes reported a loss in the first quarter after its investment in an artificial intelligence company plunged in the stock market.
The Houston oil-field services giant lost $452 million in the quarter ended March 31, compared with a $653 million profit in the fourth quarter of 2020 and a $10.2 billion loss in the same period a year earlier.
Much of Baker Hughes’ loss in the first quarter came after it wrote down the value of its investment in C3.ai, a leading artificial intelligence company, by $788 million. Founded by tech entrepreneur Tom Siebel, C3.ai’s stock value fell from $168 a share in February, a few months after its initial public offering, to $65 a share by the end of March.
“As we look ahead to the rest of 2021, we remain cautiously optimistic that the global economy and oil demand will recover from the impact of the global pandemic,” Baker Hughes CEO Lorenzo Simonelli said in a statement. “We expect spending and activity levels to gain momentum through the year as the macro environment improves, likely setting up the industry for stronger growth in 2022.”
Baker Hughes has been aggressively investing in new technologies in an effort to diversify its oil-field services business and reinvent itself as an energy technology company after recent oil busts and the global shift away from fossil fuels. The oil-field services sector has taken the brunt of the economic fallout from the global pandemic, losing more than 102,000 jobs, including 39,000 in Texas, according to Houston trade group Energy Workforce & Technology Council.
Investments in new technologies, however, come at a risk. Tech startups can be overvalued and their business model unproven, especially in growing fields such as artificial intelligence.
Baker Hughes partnered with C3.ai and Microsoft in 2019 to expand artificial intelligence technology into the energy industry, using it to predict when maintenance is needed on drilling equipment and boost productivity. At the time, the oil-field services company committed to purchase $450 million of services from C3.ai over a five year period.
Baker Hughes last year acquired Compact Carbon Capture, a Norwegian technology company that is developing equipment that can remove greenhouse gases from oil and gas operations. It also partnered with Wurth Industry North America to expand its 3D printing and manufacturing capabilities.
During the first quarter, the company deployed a real-time data visualization software for Saudi Aramco to use in its oil and gas drilling, as well as other software sales in the maritime industry and for the wood pulp and bioenergy industries. It also signed agreements to decarbonize natural gas and LNG production in Russia and develop technologies to lower the cost of carbon storage in Norway.
Baker Hughes, which slashed more than $700 million from its budget last year, plans to continue to streamline operations to reflect reduced investment in the energy sector. The company plans to close more than 100 facilities in 2021, Simonelli said.
First quarter revenue fell to $4.8 billion, down from revenues of $5.5 billion in the fourth quarter of 2020 and $5.3 billion in the same period a year earlier.
The moves follow a year in which the company lost $9.9 billion after drilling work dried up as demand for crude tumbled during the pandemic. The staggering loss followed profits of $128 million in 2019 and $195 million in 2018.
Baker Hughes stock rose by a penny to $19.51 in early Wednesday trading.
