Baker Hughes Company is a global leader in providing integrated oilfield products, services, and digital solutions. The company operates through two main business segments: Oilfield Services & Equipment (OFSE) and Industrial & Energy Technology (IET), offering a wide range of products and services for the energy industry . OFSE focuses on supporting oilfield operations throughout the lifecycle of a well, while IET provides technology solutions for mechanical-drive, compression, and power-generation applications . Baker Hughes is committed to advancing energy technology and delivering innovative solutions to meet the evolving needs of the industry .
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Oilfield Services & Equipment (OFSE) - Provides comprehensive products and services for onshore and offshore oilfield operations, covering exploration, appraisal, development, production, rejuvenation, and decommissioning .
- Well Construction - Offers tools and services for drilling and constructing wells.
- Completions, Intervention & Measurements - Delivers solutions for well completion, intervention, and measurement activities.
- Production Solutions - Focuses on enhancing production efficiency and recovery.
- Subsea & Surface Pressure Systems - Provides equipment and services for managing pressure in subsea and surface environments.
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Industrial & Energy Technology (IET) - Delivers technology solutions and services for mechanical-drive, compression, and power-generation applications across the energy industry, including oil and gas, LNG operations, and lower carbon solutions .
- Gas Technology Equipment - Supplies equipment for gas processing and handling.
- Gas Technology Services - Offers maintenance and support services for gas technology systems.
- Industrial Products - Provides a range of products for industrial applications.
- Industrial Solutions - Delivers integrated solutions for industrial processes.
- Climate Technology Solutions - Focuses on technologies aimed at reducing carbon emissions and enhancing sustainability.
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What went well
- **Baker Hughes expects revenue growth to outpace the 20% increase in installed base by 2030, driven by higher pricing, a 70% increase in LNG installed base, advanced service solutions, and upgrades.
- EBITDA margins have significantly improved, reaching 17.5%, the highest since the company was formed, with confidence in achieving 20% EBITDA margin targets by 2026 in IET, driven by self-help measures and efficiencies.
- Despite headwinds like the LNG moratorium, year-to-date orders are at $9.2 billion, with only $700 million from LNG equipment orders, demonstrating strong portfolio diversity; similar robust orders are expected in 2025.
What went wrong
- Dependency on higher pricing and inflation for revenue growth may pose risks if market conditions change .
- Potential flattening of IET order levels in 2025 compared to 2024, as indicated by questions about book-to-bill ratios, suggesting possible slowdown in growth .
- Customers have been deemphasizing upgrades and running their equipment without investing in upgrades, which may negatively impact the company's expected revenue from upgrades .
Q&A Summary
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IET Margin Improvement
Q: How confident are you in achieving 20% IET margins by 2026?
A: We are very confident in reaching the 20% EBITDA target for IET by 2026, given our accelerated margin improvement. EBITDA margins have increased to 17.9%, up 2.9 percentage points year-over-year, driven by cost efficiencies, productivity gains, and supply chain improvements. This progress is due to strong execution across segments and over 100 ongoing kaizen projects driving further improvements. Importantly, this margin journey is not solely reliant on external markets but is propelled by internal self-help initiatives. -
IET Orders Guidance
Q: Do you feel comfortable with the $12.5 billion IET order target for this year, and what about 2025?
A: Yes, we are confident in achieving the $12 billion to $12.5 billion IET orders this year, despite lighter LNG orders and the LNG moratorium. Year-to-date orders are $9.2 billion, with only $700 million in LNG equipment orders, showing the strength of our diversified portfolio. For 2025, we expect orders to be similar to 2024, with growth across most segments. We anticipate an increase in LNG FIDs next year, assuming a positive resolution of the U.S. LNG moratorium, and continued strength in international LNG projects. -
Revenue Growth vs. Installed Base
Q: Will revenue growth continue to outpace the installed base growth in Gas Tech Services?
A: Yes, we expect revenue growth to outpace the 20% increase in our installed base by 2030. Key drivers include higher pricing due to indexed contractual agreements and market conditions, a higher mix of LNG with a 70% increase in LNG installed base expected by 2030, advanced service solutions leveraging digital capabilities, and upgrades focused on emissions and efficiencies. These factors give us confidence in exceeding installed base growth rates. -
Q3 IET Revenue Timing
Q: Why was IET revenue below expectations in Q3, and what drives the rebound in Q4?
A: The Q3 shortfall was due to timing delays in Gas Tech Equipment deliveries caused by supplier and vessel delays, amounting to just over $200 million. This revenue will shift into future quarters, with some occurring in Q4 and some in Q1. Despite this, we remain confident in our guidance, with IET revenues up 30% this year and margins improving. The underlying business remains strong, and these are normal timing differences in long-cycle projects. -
Backlog Conversion
Q: How should we think about IET backlog conversion in 2025?
A: We expect the cycle time of projects to remain consistent, with the RPO (Remaining Performance Obligations) continuing at record levels and converting at the same pace. We see robust activity levels into 2025, similar to 2024, with positive momentum and potential resolution of the LNG moratorium enhancing prospects.
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Your margin targets for the Industrial and Energy Technology (IET) segment are ambitious; can you elaborate on the specific drivers that will sustain margin improvement beyond 2026, especially considering potential market headwinds?
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The growth in Gas Technology Services (GTS) revenue has historically outpaced the installed base growth; what are the key risks that could prevent this trend from continuing, particularly in terms of pricing and upgrade opportunities?
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With the expectation of flat global upstream spending next year and activity uncertainties in regions like Saudi Arabia and North America, how will this impact your mature asset solutions, and what strategies are in place to drive growth in this environment?
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As you continue to secure large orders in Gas Technology Equipment and New Energy, how are you addressing potential supply chain constraints, such as those affecting aeroderivative technology, that could impact backlog conversion and revenue recognition?
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Given your significant investments in digital solutions like Leucipa and CarbonEdge, how do you plan to effectively monetize these technologies, and what challenges do you foresee in scaling their adoption across your global customer base?
Q3 2024 Earnings Call
- Issued Period: Q3 2024
- Guided Period: FY 2024
- Guidance:
- Full Year Guidance:
- Total Company EBITDA: Midpoint unchanged, orders expected to approach the midpoint of $11.5 billion to $13.5 billion .
- IET EBITDA: Increased to $2 billion at the midpoint .
- OFSE EBITDA: Midpoint of $2.87 billion .
- Fourth Quarter Guidance:
- Total EBITDA: Approximately $1.26 billion at the midpoint .
- IET EBITDA: $590 million at the midpoint .
- OFSE EBITDA: $750 million at the midpoint .
- Free Cash Flow: Targeting a conversion of 45% to 50% .
- Full Year Guidance:
Q2 2024 Earnings Call
- Issued Period: Q2 2024
- Guided Period: Q3 2024 and FY 2024
- Guidance:
- EBITDA Guidance:
- Full year EBITDA of $4.525 billion at the midpoint .
- IET Guidance:
- Full year IET EBITDA of $1.965 billion at the midpoint .
- Q3 IET EBITDA of $525 million at the midpoint .
- Full year IET orders between $11.5 billion to $13.5 billion .
- OFSE Guidance:
- Full year OFSE EBITDA midpoint of $2.9 billion .
- Q3 OFSE EBITDA of $760 million at the midpoint .
- New Energy Orders: Towards the high end of $800 million to $1 billion .
- Free Cash Flow Conversion: Targeting 45% to 50% .
- EBITDA Guidance:
Q1 2024 Earnings Call
- Issued Period: Q1 2024
- Guided Period: Q2 2024 and FY 2024
- Guidance:
- Full Year 2024 Guidance:
- Revenue: Between $26.5 billion and $28.5 billion .
- EBITDA: Between $4.1 billion and $4.5 billion .
- New Energy Orders: Between $800 million and $1 billion .
- Segment Guidance:
- OFSE:
- Full Year Revenue: $15.75 billion to $16.75 billion .
- Full Year EBITDA: $2.8 billion to $3.0 billion .
- Q2 Revenue: $3.8 billion to $4.0 billion .
- Q2 EBITDA: $660 million to $710 million .
- IET:
- Full Year Orders: $11.5 billion to $13.5 billion .
- Q2 Revenue: $2.8 billion to $3.05 billion .
- Q2 EBITDA: $425 million to $475 million .
- OFSE:
- Second Quarter 2024 Guidance:
- Total Revenue: $6.6 billion to $7.05 billion .
- Total EBITDA: $1 billion to $1.1 billion .
- Dividend and Shareholder Returns: Return 60% to 80% of free cash flow .
- Full Year 2024 Guidance:
Q4 2023 Earnings Call
- Issued Period: Q4 2023
- Guided Period: Q1 2024 and FY 2024
- Guidance:
- First Quarter 2024 Guidance:
- Total Company Revenue: $6.1 billion to $6.6 billion .
- Total Company EBITDA: $880 million to $960 million .
- IET Revenue: $2.4 billion to $2.65 billion .
- IET EBITDA: $340 million to $380 million .
- OFSE Revenue: $3.7 billion to $3.95 billion .
- OFSE EBITDA: $630 million to $670 million .
- Full Year 2024 Guidance:
- Total Company Revenue: $26.5 billion to $28.5 billion .
- Total Company EBITDA: $4.1 billion to $4.5 billion .
- New Energy Orders: $800 million to $1 billion .
- IET Orders: $11.5 billion to $13.5 billion .
- IET Revenue: $10.75 billion to $11.75 billion .
- IET EBITDA: $1.65 billion to $1.85 billion .
- OFSE Revenue: $15.75 billion to $16.75 billion .
- OFSE EBITDA: $2.8 billion to $3 billion .
- Free Cash Flow Conversion: 45% to 50% .
- EBITDA Margin Target: 20% for OFSE by 2025 and for IET by 2026 .
- First Quarter 2024 Guidance:
Competitors mentioned in the company's latest 10K filing.
- Siemens Energy - Competitor for Gas Technology Equipment product line .
- Solar (a Caterpillar company) - Competitor for Gas Technology Equipment product line .
- MAN Energy Solutions - Competitor for Gas Technology Equipment product line .
- Masaood John Brown - Competitor for Gas Technology Services product line .
- EthosEnergy - Competitor for Gas Technology Services product line .
- Sulzer - Competitor for Gas Technology Services product line .
- Emerson - Competitor for Industrial Products and Industrial Solutions product lines .
- Flowserve - Competitor for Industrial Products product line .
- Metso Outotec - Competitor for Industrial Products product line .
- Honeywell Process Solutions - Competitor for Industrial Solutions product line .
- ABB - Competitor for Industrial Solutions product line .
- Aker Carbon Capture - Competitor for CCUS applications in Climate Technology Solutions .
- Svante - Competitor for CCUS applications in Climate Technology Solutions .
- SLB - Competitor for CCUS applications in Climate Technology Solutions and for Well Construction; Completions, Intervention, & Measurements; Production Solutions; Subsea & Surface Pressure Systems in OFSE .
- Howden (a Chart Industries company) - Competitor for hydrogen applications in Climate Technology Solutions .
- Burckhardt - Competitor for hydrogen applications in Climate Technology Solutions .
- Halliburton - Competitor for Well Construction; Completions, Intervention, & Measurements; Production Solutions; Subsea & Surface Pressure Systems in OFSE .
- ChampionX - Competitor for Production Solutions in OFSE .
- TechnipFMC - Competitor for Subsea & Surface Pressure Systems in OFSE .
- Aker Solutions - Competitor for Subsea & Surface Pressure Systems in OFSE .
- NOV - Competitor for Subsea & Surface Pressure Systems in OFSE .
Recent developments and announcements about BKR.
Financial Reporting
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Dismissal of Deloitte & Touche LLP: The Audit Committee decided to dismiss Deloitte as the independent registered public accounting firm for BHGE after the filing of the Quarterly Report for the quarter ended June 30, 2017. Deloitte's report for the fiscal year ended December 31, 2016, did not contain any adverse opinions or disagreements with BHGE .
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Dismissal of KPMG S.p.A.: KPMG S.p.A. was dismissed as the independent registered public accounting firm for GE Oil & Gas (GE O&G) after the same quarterly report filing. There were no disagreements or adverse opinions in KPMG's reports for the fiscal years 2015 and 2016 .
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Engagement of KPMG LLP: BHGE engaged KPMG LLP as its new independent registered public accounting firm for the fiscal year ending December 31, 2017, effective after the quarterly report filing .
Auditor Changes
Baker Hughes, a GE Company (BHGE) Auditor Change
On July 3, 2017, Baker Hughes, a GE company (BHGE) announced changes to its auditing arrangements: