Baker Hughes Company (Nasdaq: BKR) (Baker Hughes or the Company)
announced results today for the second quarter of 2023.
"We were pleased with our second quarter results and remain
optimistic on the outlook for 2023. We maintained our strong order
momentum in Industrial & Energy Technology (IET) and Oilfield
Services & Equipment (OFSE), specifically within Subsea &
Surface Pressure Systems (SSPS). We also delivered solid operating
results at the higher end of our guidance in both business
segments, booked almost $150 million of New Energy orders and
generated approximately $620 million of free cash flow," said
Lorenzo Simonelli, Baker Hughes chairman and chief executive
officer.
"Growing economic uncertainty continues to drive commodity price
volatility globally. However, despite lower oil prices over the
first half of the year, we maintain a constructive outlook for
global upstream spending in 2023. Market softness in North America
is expected to be more than offset by strength in international and
offshore markets."
"Outside of the upstream markets, we remain confident on the LNG
outlook, with solid demand growth this year led by Europe and Asia.
Based on the continued development of the LNG project pipeline, we
still expect the market to exceed 65 million tons per annum (MTPA)
of FIDs this year and should see a similar level of activity in
2024. We continue to see the potential for this LNG cycle to extend
for several years with a pipeline of new international
opportunities expanding project visibility out to 2026 and
beyond."
"Overall, I am extremely excited about the multitude of new
opportunities developing for solutions that leverage our unique
portfolio. Combining these growth opportunities with our business
transformation objectives provides attractive upside for our
margins and returns going forward, and I want to thank our
shareholders, our customers, and our employees for their continued
support," concluded Simonelli.
|
Three Months Ended |
|
Variance |
(in millions except per share amounts) |
June 30, 2023 |
March 31, 2023 |
June 30, 2022 |
|
Sequential |
Year-over-year |
Orders |
$ |
7,474 |
|
$ |
7,632 |
|
$ |
5,860 |
|
|
(2 |
%) |
28 |
% |
Revenue |
|
6,315 |
|
|
5,716 |
|
|
5,047 |
|
|
10 |
% |
25 |
% |
Net income (loss) attributable to Baker Hughes |
|
410 |
|
|
576 |
|
|
(839 |
) |
|
(29 |
%) |
F |
|
Adjusted net income (non-GAAP) attributable to Baker Hughes |
|
395 |
|
|
289 |
|
|
114 |
|
|
37 |
% |
F |
|
Operating income (loss) |
|
514 |
|
|
438 |
|
|
(25 |
) |
|
17 |
% |
F |
|
Adjusted operating income (non-GAAP) |
|
631 |
|
|
512 |
|
|
376 |
|
|
23 |
% |
68 |
% |
Adjusted EBITDA (non-GAAP) |
|
907 |
|
|
782 |
|
|
651 |
|
|
16 |
% |
39 |
% |
Diluted earnings per share (EPS) |
|
0.40 |
|
|
0.57 |
|
|
(0.84 |
) |
|
(29 |
%) |
F |
|
Adjusted diluted EPS (non-GAAP) |
|
0.39 |
|
|
0.28 |
|
|
0.11 |
|
|
37 |
% |
F |
|
Cash flow from operating activities |
|
858 |
|
|
461 |
|
|
321 |
|
|
86 |
% |
F |
|
Free cash flow (non-GAAP) |
|
623 |
|
|
197 |
|
|
147 |
|
|
F |
|
F |
|
"F" is used in most instances when variance is
above 100%. Additionally, "U" is used in most instances when
variance is below (100)%. Please see reconciliations in the section
entitled "Reconciliation of GAAP to non-GAAP Financial
Measures."
Quarter HighlightsSupporting Our
Customers
The OFSE business segment strengthened Baker Hughes' presence in
West Africa and delivered on its commitment to support its
customers' net-zero emissions goals with a major award from Eni and
its partner Petroci for the Baleine Phase 2 Project in Ivory Coast.
This award will deliver eight deep water trees, three Aptara™
manifolds, the relevant subsea production control system, and
flexible risers and jumpers.
Building on the July 2022 acquisition of AccessESP and the
growing market for rigless deployed electrical submersible pumps
(ESP), OFSE secured two new contracts with key customers in the
Middle East, highlighting the opportunity for large-scale
implementation of rigless deployed ESPs in the region.
A successful track record with a Middle East operator earned
Baker Hughes a win for work in the largest gas discovery in the
Black Sea. Baker Hughes will provide lower completions equipment
and upper completions with intelligent design, as well as project
management and ongoing operational support. The project is expected
to have a transformative impact on the Turkish economy, driving job
creation, technological advancements and energy security for the
nation.
The IET business segment enjoyed another strong quarter in Gas
Technology as momentum for LNG and New Energy continues to build.
IET received a significant LNG order from Bechtel to supply three
Main Refrigerant Compressors (MRCs) for NextDecade's Rio Grande LNG
project in the Port of Brownsville, Texas. In total, Baker Hughes
will supply six Frame 7 gas turbines paired with 18 centrifugal
compressors across Rio Grande's first three LNG trains in a
parallel configuration arrangement, providing more operational
flexibility for a nameplate capacity of 17.6 (MTPA).
IET demonstrated further leadership in the floating production
storage and offloading (FPSO) market, securing an order from MODEC
for a combined cycle power generation solution to help reduce the
overall FPSO carbon emissions for Equinor’s BM-C-33 project
offshore Brazil.
In Algeria, IET’s Gas Technology Equipment product line secured
an important order from Tecnimont, part of MAIRE Group, to supply
five of its innovative and flexible NovaLT™16 gas turbines as part
of one power generation unit and three compressor trains for a new
Liquefied Petroleum Gas (LPG) extraction plant inside an existing
oil and gas treatment complex. When operational, the LPG plant will
process 10 million standard cubic meters per day of associated gas,
helping to stabilize and increase the country’s gas production.
During the second quarter, IET signed a long-term
Multi-Maintenance Program contract to provide maintenance planning,
project management, and resident engineering on site for the
customer’s current fleet of steam turbines and centrifugal
compressors. This contract demonstrates the full range of
capabilities and complementary services of our IET Digital and Gas
Tech Services portfolio, providing a blueprint for expanding our
digital platform with new and existing customers.
IET's Condition Monitoring product line saw continued quarterly
momentum, securing a Bently Nevada agreement to deliver asset
protection and monitoring hardware, software and services for a
floating LNG project offshore Malaysia. The scope includes Orbit 60
condition monitoring system, Ranger Pro wireless monitoring
systems, System 1 software, and cyber security enhancements, as
well as end-to-end project management support and services.
Condition Monitoring also saw increased customer interest in the
petrochemical and refining markets. Bently Nevada was selected as
the single asset monitoring and protection provider for two of the
largest new petrochemical developments in the Middle East and North
America, supporting increased capacity to meet growing demand.
Bently Nevada also secured a multimillion-dollar contract in the
Middle East to upgrade the customer's entire System 1 software base
across six refineries; and a five-year Software-as-a-Service
contract in North America from a global facilities maintenance
provider to deliver data-driven asset strategy optimization on up
to 4 million assets.
Executing on Priorities and Leading with
Innovation
The second quarter saw continued momentum in New Energy for
Baker Hughes, leveraging its Climate Technology Solutions portfolio
within IET and new energy offerings within OFSE.
Baker Hughes received multiple orders by Air Products to support
its Louisiana Clean Energy Complex, adding another milestone in the
two companies' partnership inaugurated in 2021. Orders include
electric driven centrifugal pumps for an acid gas removal (AGR)
unit, hydraulic power recovery turbines, vertical centrifugal pumps
for ammonia loading, electrical motor driven CO2 compression
trains, and a geologic and reservoir modelling study to be
delivered by OFSE. For the same project, IET was awarded an order
for syngas and ammonia compressors at the end of 2022.
IET also received an award for hydrogen compression equipment
for Air Products' New York Green Hydrogen Facility being developed
in New York state.
IET also saw increased traction in the growing blue ammonia
space. IET secured a number of orders globally, including an order
from Tecnimont to supply syngas and ammonia compressor trains,
spare parts and installation services for a world-scale blue
ammonia facility in the Middle East. IET also secured a separate
order for centrifugal pump trains for acid gas removal for another
blue ammonia project, also in the Middle East.
IET's Precision Sensing & Instrumentation (PSI) product line
reported a significant increase for the first half of the year in
demand for its Panametrics technology specializing in hydrogen
measurement applications. Drawing on more than 60 years of hydrogen
experience, PSI secured a contract with Plug Power, a world leading
manufacturer of hydrogen fuel cells and electrolyzer solutions.
Panametrics' XMTC and oxy.IQ measurement technologies will be used
on Plug Power's electrolyzer skids at its plants across the globe
to help optimize safety performance, ensuring membrane integrity
and preventing buildup of explosive gas mixtures.
Elsewhere in New Energy, IET's Pumps, Valves & Gears (PVG)
product line secured an order to supply Masoneilan control and
Consolidated safety relief valves for use in various applications
in a large North American carbon capture project. PVG's valves
technology will enable the facility's latest expansion to capture
an additional 1.2 million metric tons of CO2.
Continuing the digital transformation of the industry, OFSE
launched SONUS™, an acoustic-set liner hanger system built on Baker
Hughes’ XACT™ downhole acoustic telemetry platform. The system
significantly cuts down the time for liner installation and
improves reliability by giving operators real-time feedback and
control. The technology further cements Baker Hughes' completion
and well intervention leadership.
Consolidated Revenue and Operating Income by Reporting
Segment
(in
millions) |
Three Months Ended |
|
Variance |
|
June 30, 2023 |
March 31, 2023 |
June 30, 2022 |
|
Sequential |
Year-over-year |
Oilfield Services & Equipment |
$ |
3,877 |
|
$ |
3,577 |
|
$ |
3,230 |
|
|
8 |
% |
20 |
% |
Industrial & Energy Technology |
|
2,438 |
|
|
2,138 |
|
|
1,816 |
|
|
14 |
% |
34 |
% |
Total segment revenue |
|
6,315 |
|
|
5,716 |
|
|
5,047 |
|
|
10 |
% |
25 |
% |
Oilfield Services & Equipment |
|
417 |
|
|
371 |
|
|
249 |
|
|
12 |
% |
68 |
% |
Industrial & Energy Technology |
|
311 |
|
|
241 |
|
|
236 |
|
|
29 |
% |
32 |
% |
Total segment operating income |
|
728 |
|
|
612 |
|
|
485 |
|
|
19 |
% |
50 |
% |
Corporate |
|
(97 |
) |
|
(100 |
) |
|
(108 |
) |
|
3 |
% |
10 |
% |
Inventory impairment |
|
(15 |
) |
|
(18 |
) |
|
(31 |
) |
|
16 |
% |
51 |
% |
Restructuring, impairment & other |
|
(102 |
) |
|
(56 |
) |
|
(371 |
) |
|
(81 |
%) |
72 |
% |
Operating income (loss) |
|
514 |
|
|
438 |
|
|
(25 |
) |
|
17 |
% |
F |
|
Adjusted operating income* |
|
631 |
|
|
512 |
|
|
376 |
|
|
23 |
% |
68 |
% |
Depreciation & amortization |
|
276 |
|
|
269 |
|
|
275 |
|
|
2 |
% |
1 |
% |
Adjusted EBITDA* |
$ |
907 |
|
$ |
782 |
|
$ |
651 |
|
|
16 |
% |
39 |
% |
*Non-GAAP measure. See reconciliations in the
section titled "Reconciliation of GAAP to non-GAAP Financial
Measures" later in this document.
"F" is used in most instances when variance is
above 100%. Additionally, "U" is used in most instances when
variance is below (100)%.
Revenue for the quarter was $6,315 million, an increase of 10%,
sequentially. The increase in revenue was driven by higher volume
in IET and OFSE. Compared to the same quarter last year, revenue
increased 25%, driven by higher volume in both segments.
The Company's total book-to-bill ratio in the quarter was 1.2;
the IET book-to-bill ratio in the quarter was 1.3.
Operating income on a GAAP basis for the second quarter of 2023
was $514 million. Operating income increased $76 million
sequentially and increased $539 million year-over-year. Total
segment operating income was $728 million for the second quarter of
2023, up 19% sequentially and up 50% year-over-year.
Adjusted operating income (a non-GAAP measure) for the second
quarter of 2023 was $631 million, which excludes adjustments
totaling $117 million before tax. A complete list of the adjusting
items and associated reconciliation from GAAP has been provided in
Table 1a in the section titled "Reconciliation of GAAP to non-GAAP
Financial Measures." Adjusted operating income for the second
quarter of 2023 was up 23% sequentially and up 68%
year-over-year.
Depreciation and amortization for the second quarter of 2023 was
$276 million.
Adjusted EBITDA (a non-GAAP measure) for the second quarter of
2023 was $907 million, which excludes adjustments totaling $117
million before tax. See Table 1b in the section titled
"Reconciliation of GAAP to non-GAAP Financial Measures." Adjusted
EBITDA for the second quarter was up 16% sequentially and up 39%
year-over-year.
The sequential increase in adjusted operating income and
adjusted EBITDA was driven by higher volume in both segments and
price in OFSE, partially offset by negative mix. The year-over-year
increase in adjusted operating income and adjusted EBITDA was
driven by volume and pricing in both segments and structural cost
out initiatives, partially offset by cost inflation in both
segments, higher equipment mix and higher R&D spend.
Corporate costs were $97 million in the second quarter of 2023,
down 3% sequentially and down 10% year-over-year.
Other Financial Items
Remaining Performance Obligations (RPO) in the second quarter
ended at $31 billion, an increase of $1.3 billion from the first
quarter of 2023. OFSE RPO was $3.5 billion, up 11% sequentially,
while IET RPO was $27.5 billion, up 4% sequentially. Within IET
RPO, Gas Technology - Equipment RPO was $11.4 billion and Gas
Technology - Services RPO was $13.9 billion.
Income tax expense in the second quarter of 2023 was $200
million.
Other non-operating income in the second quarter of 2023 was
$158 million. Included in other non-operating income were net
mark-to-market gains in fair value for certain equity investments
of $148 million.
GAAP diluted earnings per share was $0.40. Adjusted diluted
earnings per share was $0.39. Excluded from adjusted diluted
earnings per share were all items listed in Table 1a as well as the
"other adjustments (non-operating)" found in Table 1c in the
section entitled "Reconciliation of GAAP to non-GAAP Financial
Measures."
Cash flow from operating activities was $858 million for the
second quarter of 2023. Free cash flow (a non-GAAP measure) for the
quarter was $623 million. A reconciliation from GAAP has been
provided in Table 1d in the section entitled "Reconciliation of
GAAP to non-GAAP Financial Measures."
Capital expenditures, net of proceeds from disposal of assets,
were $235 million for the second quarter of 2023. OFSE capital
expenditures in the quarter were $187 million, and IET capital
expenditures were $42 million.
Results by Reporting Segment
The following segment discussions and variance
explanations are intended to reflect management's view of the
relevant comparisons of financial results on a sequential or
year-over-year basis, depending on the business dynamics of the
reporting segments.
Oilfield Services & Equipment
(in
millions) |
Three Months Ended |
|
Variance |
Segment results |
June 30, 2023 |
March 31, 2023 |
June 30, 2022 |
|
Sequential |
Year-over-year |
Orders |
$ |
4,192 |
|
$ |
4,100 |
|
$ |
3,392 |
|
|
2 |
% |
24 |
% |
Revenue |
$ |
3,877 |
|
$ |
3,577 |
|
$ |
3,230 |
|
|
8 |
% |
20 |
% |
Operating income |
$ |
417 |
|
$ |
371 |
|
$ |
249 |
|
|
12 |
% |
68 |
% |
Operating income margin |
|
10.8 |
% |
|
10.4 |
% |
|
7.7 |
% |
|
0.4pts |
3.1pts |
Depreciation & amortization |
$ |
219 |
|
$ |
208 |
|
$ |
221 |
|
|
5 |
% |
(1 |
%) |
EBITDA* |
$ |
636 |
|
$ |
579 |
|
$ |
470 |
|
|
10 |
% |
35 |
% |
EBITDA margin* |
|
16.4 |
% |
|
16.2 |
% |
|
14.5 |
% |
|
0.2pts |
1.9pts |
(in
millions) |
Three Months Ended |
|
Variance |
Revenue by Product Line |
June 30, 2023 |
March 31, 2023 |
June 30, 2022 |
|
Sequential |
Year-over-year |
Well Construction |
$ |
1,076 |
$ |
1,061 |
$ |
936 |
|
1 |
% |
15 |
% |
Completions, Intervention & Measurements |
|
1,090 |
|
909 |
|
886 |
|
20 |
% |
23 |
% |
Production Solutions |
|
959 |
|
938 |
|
866 |
|
2 |
% |
11 |
% |
Subsea & Surface Pressure Systems |
|
752 |
|
670 |
|
541 |
|
12 |
% |
39 |
% |
Total Revenue |
$ |
3,877 |
$ |
3,577 |
$ |
3,230 |
|
8 |
% |
20 |
% |
(in
millions) |
Three Months Ended |
|
Variance |
Revenue by Geographic Region |
June 30, 2023 |
March 31, 2023 |
June 30, 2022 |
|
Sequential |
Year-over-year |
North America |
$ |
1,042 |
$ |
992 |
$ |
925 |
|
5 |
% |
13 |
% |
Latin America |
|
698 |
|
661 |
|
509 |
|
6 |
% |
37 |
% |
Europe/CIS/Sub-Saharan Africa |
|
672 |
|
581 |
|
660 |
|
16 |
% |
2 |
% |
Middle East/Asia |
|
1,465 |
|
1,345 |
|
1,136 |
|
9 |
% |
29 |
% |
Total Revenue |
$ |
3,877 |
$ |
3,577 |
$ |
3,230 |
|
8 |
% |
20 |
% |
|
|
|
|
|
|
|
North America |
$ |
1,042 |
$ |
992 |
$ |
925 |
|
5 |
% |
13 |
% |
International |
|
2,835 |
|
2,586 |
|
2,305 |
|
10 |
% |
23 |
% |
*Non-GAAP measure - EBITDA is defined as operating income
excluding depreciation and amortization. EBITDA margin is defined
as EBITDA divided by revenue.
OFSE orders of $4,192 million for the second quarter increased
by $92 million sequentially. SSPS orders were $1,070 million, down
10% sequentially, and up 48% year-over-year.
OFSE revenue of $3,877 million for the second quarter was up 8%
sequentially.
North America revenue was $1,042 million, up 5% sequentially.
International revenue was $2,835 million, an increase of 10%
sequentially, driven by volume growth in all regions.
Segment operating income before tax for the second quarter was
$417 million, an increase of $46 million, or 12% sequentially.
Segment EBITDA for the second quarter was $636 million, an
increase of $57 million, or 10% sequentially. The sequential
increase in segment operating income and EBITDA were primarily
driven by higher volume.
Industrial & Energy Technology
(in
millions) |
Three Months Ended |
|
Variance |
Segment results |
June 30, 2023 |
March 31, 2023 |
June 30, 2022 |
|
Sequential |
Year-over-year |
Orders |
$ |
3,282 |
|
$ |
3,533 |
|
$ |
2,467 |
|
|
(7 |
%) |
33 |
% |
Revenue |
$ |
2,438 |
|
$ |
2,138 |
|
$ |
1,816 |
|
|
14 |
% |
34 |
% |
Operating income |
$ |
311 |
|
$ |
241 |
|
$ |
236 |
|
|
29 |
% |
32 |
% |
Operating income margin |
|
12.8 |
% |
|
11.3 |
% |
|
13.0 |
% |
|
1.5pts |
-0.2pts |
Depreciation & amortization |
$ |
52 |
|
$ |
56 |
|
$ |
49 |
|
|
(7 |
%) |
6 |
% |
EBITDA* |
$ |
363 |
|
$ |
297 |
|
$ |
285 |
|
|
22 |
% |
28 |
% |
EBITDA margin* |
|
14.9 |
% |
|
13.9 |
% |
|
15.7 |
% |
|
1pts |
-0.8pts |
(in
millions) |
Three Months Ended |
|
Variance |
Orders by Product Line |
June 30, 2023 |
March 31, 2023 |
June 30, 2022 |
|
Sequential |
Year-over-year |
Gas Technology - Equipment |
$ |
1,611 |
$ |
1,891 |
$ |
864 |
|
(15 |
%) |
87 |
% |
Gas Technology - Services |
|
790 |
|
702 |
|
788 |
|
13 |
% |
— |
% |
Total Gas Technology |
|
2,402 |
|
2,593 |
|
1,651 |
|
(7 |
%) |
45 |
% |
Total Industrial Technology |
|
880 |
|
940 |
|
816 |
|
(6 |
%) |
8 |
% |
Total Orders |
$ |
3,282 |
$ |
3,533 |
$ |
2,467 |
|
(7 |
%) |
33 |
% |
(in
millions) |
Three Months Ended |
|
Variance |
Revenue by Product Line |
June 30, 2023 |
March 31, 2023 |
June 30, 2022 |
|
Sequential |
Year-over-year |
Gas Technology - Equipment |
$ |
999 |
$ |
827 |
$ |
556 |
|
21 |
% |
80 |
% |
Gas Technology - Services |
|
658 |
|
591 |
|
542 |
|
11 |
% |
21 |
% |
Total Gas Technology |
|
1,658 |
|
1,418 |
|
1,098 |
|
17 |
% |
51 |
% |
Condition Monitoring |
|
154 |
|
140 |
|
133 |
|
10 |
% |
16 |
% |
Inspection |
|
318 |
|
254 |
|
257 |
|
25 |
% |
24 |
% |
Pumps, Valves & Gears |
|
217 |
|
201 |
|
194 |
|
8 |
% |
12 |
% |
PSI & Controls |
|
92 |
|
125 |
|
135 |
|
(27 |
%) |
(32 |
%) |
Total Industrial Technology |
|
780 |
|
721 |
|
718 |
|
8 |
% |
9 |
% |
Total Revenue |
$ |
2,438 |
$ |
2,138 |
$ |
1,816 |
|
14 |
% |
34 |
% |
*Non-GAAP measure - EBITDA is defined as operating income
excluding depreciation and amortization. EBITDA margin is defined
as EBITDA divided by revenue.
IET orders of $3,282 million for the second quarter increased by
$814 million, or 33% year-over-year. The increase was driven by Gas
Technology - Equipment orders which were up 87% and Industrial
Technology orders which were up 8%.
IET revenue of $2,438 million for the quarter increased $621
million, or 34%, year-over-year. The increase was driven by Gas
Technology - Equipment, up 80% year-over-year, Gas Technology -
Services, up 21% and Industrial Technology, up 9%.
Segment operating income before tax for the quarter was $311
million, up 32% year-over-year.
Segment EBITDA for the quarter was $363 million. Segment EBITDA
for the second quarter was up $78 million, or 28% year-over-year.
The year-over-year increase in segment operating income and EBITDA
were primarily driven by higher volume and pricing partially offset
by unfavorable mix as a result of higher Gas Technology - Equipment
growth, cost inflation and higher R&D spend.
Reconciliation of GAAP to non-GAAP
Financial Measures
Management provides non-GAAP financial measures because it
believes such measures are widely accepted financial indicators
used by investors and analysts to analyze and compare companies on
the basis of operating performance (including adjusted operating
income; EBITDA; EBITDA margin; adjusted EBITDA; adjusted net income
attributable to Baker Hughes; and adjusted diluted earnings per
share) and liquidity (free cash flow) and that these measures may
be used by investors to make informed investment decisions.
Management believes that the exclusion of certain identified items
from several key operating performance measures enables us to
evaluate our operations more effectively, to identify underlying
trends in the business, and to establish operational goals for
certain management compensation purposes. Management also believes
that free cash flow is an important supplemental measure of our
cash performance but should not be considered as a measure of
residual cash flow available for discretionary purposes, or as an
alternative to cash flow from operating activities presented in
accordance with GAAP.
Table 1a. Reconciliation of GAAP and Adjusted Operating
Income
|
Three Months Ended |
(in millions) |
June 30, 2023 |
March 31, 2023 |
June 30, 2022 |
Operating income (loss) (GAAP) |
$ |
514 |
$ |
438 |
$ |
(25 |
) |
Restructuring, impairment & other |
|
102 |
|
56 |
|
371 |
|
Inventory impairment |
|
15 |
|
18 |
|
31 |
|
Total operating income adjustments |
|
117 |
|
74 |
|
402 |
|
Adjusted operating income (non-GAAP) |
$ |
631 |
$ |
512 |
$ |
376 |
|
Table 1a reconciles operating income (loss), which is the
directly comparable financial result determined in accordance with
Generally Accepted Accounting Principles (GAAP), to adjusted
operating income (a non-GAAP financial measure). Adjusted operating
income excludes the impact of certain identified items.
Table 1b. Reconciliation of Net Income (Loss)
Attributable to Baker Hughes to EBITDA and Adjusted
EBITDA
|
Three Months Ended |
(in millions) |
June 30, 2023 |
March 31, 2023 |
June 30, 2022 |
Net income (loss) attributable to Baker Hughes (GAAP) |
$ |
410 |
|
$ |
576 |
|
$ |
(839 |
) |
Net
income attributable to noncontrolling interests |
|
4 |
|
|
5 |
|
|
2 |
|
Provision for income taxes |
|
200 |
|
|
179 |
|
|
182 |
|
Interest expense, net |
|
58 |
|
|
64 |
|
|
60 |
|
Other non-operating (income) loss, net |
|
(158 |
) |
|
(386 |
) |
|
570 |
|
Operating income (loss) |
|
514 |
|
|
438 |
|
|
(25 |
) |
|
|
|
|
Depreciation & amortization |
|
276 |
|
|
269 |
|
|
275 |
|
EBITDA (non-GAAP) |
|
790 |
|
|
708 |
|
|
250 |
|
Total operating income adjustments (1) |
|
117 |
|
|
74 |
|
|
402 |
|
Adjusted EBITDA (non-GAAP) |
$ |
907 |
|
$ |
782 |
|
$ |
651 |
|
(1) See Table 1a for the identified adjustments to
operating income.
Table 1b reconciles net income (loss) attributable to Baker
Hughes, which is the directly comparable financial result
determined in accordance with GAAP, to EBITDA (a non-GAAP financial
measure). Adjusted EBITDA (a non-GAAP financial measure) excludes
the impact of certain identified items.
Table 1c. Reconciliation of Net Income (Loss)
Attributable to Baker Hughes to Adjusted Net Income Attributable to
Baker Hughes
|
Three Months Ended |
(in millions, except per share amounts) |
June 30, 2023 |
March 31, 2023 |
June 30, 2022 |
Net income (loss) attributable to Baker Hughes (GAAP) |
$ |
410 |
|
$ |
576 |
|
$ |
(839 |
) |
Total operating income adjustments (1) |
|
117 |
|
|
74 |
|
|
402 |
|
Other adjustments (non-operating) (2) |
|
(156 |
) |
|
(392 |
) |
|
580 |
|
Tax on total adjustments |
|
24 |
|
|
32 |
|
|
(22 |
) |
Total adjustments, net of income tax |
|
(15 |
) |
|
(287 |
) |
|
959 |
|
Less: adjustments attributable to noncontrolling interests |
|
— |
|
|
— |
|
|
7 |
|
Adjustments attributable to Baker Hughes |
|
(15 |
) |
|
(287 |
) |
|
953 |
|
Adjusted net income attributable to Baker Hughes (non-GAAP) |
$ |
395 |
|
$ |
289 |
|
$ |
114 |
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
Weighted-average shares of Class A common stock outstanding
diluted |
|
1,015 |
|
|
1,018 |
|
|
1,010 |
|
Adjusted earnings per share - diluted (non-GAAP) |
$ |
0.39 |
|
$ |
0.28 |
|
$ |
0.11 |
|
(1) See Table 1a for the identified adjustments to
operating income.
(2) 2Q'23 and 1Q'23 primarily due to net gains from the
change in fair value for certain equity investments. 2Q'22 includes
losses related to the OFSE business in Russia which was classified
as held for sale and losses from the net change in fair value for
certain equity investments.
Table 1c reconciles net income (loss) attributable to Baker
Hughes, which is the directly comparable financial result
determined in accordance with GAAP, to adjusted net income
attributable to Baker Hughes (a non-GAAP financial measure).
Adjusted net income attributable to Baker Hughes excludes the
impact of certain identified items.
Table 1d. Reconciliation of Cash Flow From Operating
Activities to Free Cash Flow
|
Three Months Ended |
(in millions) |
June 30, 2023 |
March 31, 2023 |
June 30, 2022 |
Cash flow from operating activities (GAAP) |
$ |
858 |
|
$ |
461 |
|
$ |
321 |
|
Add: cash
used in capital expenditures, net of proceeds from disposal of
assets |
|
(235 |
) |
|
(264 |
) |
|
(174 |
) |
Free cash flow (non-GAAP) |
$ |
623 |
|
$ |
197 |
|
$ |
147 |
|
Table 1d reconciles net cash flows from operating activities,
which is the directly comparable financial result determined in
accordance with GAAP, to free cash flow (a non-GAAP financial
measure). Free cash flow is defined as net cash flows from
operating activities less expenditures for capital assets plus
proceeds from disposal of assets.
Financial Tables (GAAP) |
Condensed Consolidated Statements of Income
(Loss) |
(Unaudited) |
|
|
Three Months Ended June 30, |
Six Months Ended June 30, |
(In millions, except per share amounts) |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Revenue |
$ |
6,315 |
|
$ |
5,047 |
|
$ |
12,030 |
|
$ |
9,882 |
|
Costs and expenses: |
|
|
|
|
Cost of revenue |
|
5,004 |
|
|
4,077 |
|
|
9,569 |
|
|
7,943 |
|
Selling, general and administrative |
|
695 |
|
|
624 |
|
|
1,351 |
|
|
1,245 |
|
Restructuring, impairment and other |
|
102 |
|
|
371 |
|
|
158 |
|
|
441 |
|
Total costs and expenses |
|
5,801 |
|
|
5,072 |
|
|
11,078 |
|
|
9,629 |
|
Operating income (loss) |
|
514 |
|
|
(25 |
) |
|
952 |
|
|
253 |
|
Other non-operating income (loss), net |
|
158 |
|
|
(570 |
) |
|
544 |
|
|
(597 |
) |
Interest expense, net |
|
(58 |
) |
|
(60 |
) |
|
(122 |
) |
|
(124 |
) |
Income (loss) before income taxes |
|
614 |
|
|
(655 |
) |
|
1,374 |
|
|
(468 |
) |
Provision for income taxes |
|
(200 |
) |
|
(182 |
) |
|
(379 |
) |
|
(289 |
) |
Net income (loss) |
|
414 |
|
|
(837 |
) |
|
995 |
|
|
(757 |
) |
Less: Net income attributable to noncontrolling interests |
|
4 |
|
|
2 |
|
|
10 |
|
|
10 |
|
Net income (loss) attributable to Baker Hughes Company |
$ |
410 |
|
$ |
(839 |
) |
$ |
985 |
|
$ |
(767 |
) |
|
|
|
|
|
Per
share amounts: |
|
|
|
Basic income (loss) per Class A common stock |
$ |
0.41 |
|
$ |
(0.84 |
) |
$ |
0.98 |
|
$ |
(0.79 |
) |
Diluted income (loss) per Class A common stock |
$ |
0.40 |
|
$ |
(0.84 |
) |
$ |
0.97 |
|
$ |
(0.79 |
) |
|
|
|
|
|
Weighted average shares: |
|
|
|
|
Class A basic |
|
1,010 |
|
|
1,001 |
|
|
1,010 |
|
|
970 |
|
Class A diluted |
|
1,015 |
|
|
1,001 |
|
|
1,016 |
|
|
970 |
|
|
|
|
|
|
Cash dividend per Class A common stock |
$ |
0.19 |
|
$ |
0.18 |
|
$ |
0.38 |
|
$ |
0.36 |
|
|
|
|
|
|
Condensed Consolidated Statements of Financial
Position |
(Unaudited) |
(In millions) |
June 30, 2023 |
December 31, 2022 |
ASSETS |
Current Assets: |
|
|
Cash and cash equivalents |
$ |
2,805 |
$ |
2,488 |
Current receivables, net |
|
6,418 |
|
5,958 |
Inventories, net |
|
4,957 |
|
4,587 |
All other current assets |
|
1,626 |
|
1,559 |
Total current assets |
|
15,806 |
|
14,592 |
Property, plant and equipment, less accumulated depreciation |
|
4,723 |
|
4,538 |
Goodwill |
|
6,074 |
|
5,930 |
Other intangible assets, net |
|
4,124 |
|
4,180 |
Contract and other deferred assets |
|
1,776 |
|
1,503 |
All other assets |
|
3,590 |
|
3,438 |
Total assets |
$ |
36,093 |
$ |
34,181 |
LIABILITIES AND EQUITY |
Current Liabilities: |
|
|
Accounts payable |
$ |
4,154 |
$ |
4,298 |
Short-term and current portion of long-term debt |
|
797 |
|
677 |
Progress collections and deferred income |
|
5,101 |
|
3,822 |
All other current liabilities |
|
2,259 |
|
2,278 |
Total current liabilities |
|
12,311 |
|
11,075 |
Long-term debt |
|
5,847 |
|
5,980 |
Liabilities for pensions and other postretirement benefits |
|
968 |
|
960 |
All
other liabilities |
|
1,705 |
|
1,641 |
Equity |
|
15,262 |
|
14,525 |
Total liabilities and equity |
$ |
36,093 |
$ |
34,181 |
|
|
|
Outstanding Baker Hughes Company shares: |
|
|
Class A common stock |
|
1,009 |
|
1,006 |
Condensed Consolidated Statements of Cash
Flows |
(Unaudited) |
|
|
Three MonthsEndedJune
30, |
Six Months EndedJune 30, |
(In millions) |
|
2023 |
|
|
2023 |
|
|
2022 |
|
Cash flows from operating activities: |
|
|
|
Net
income (loss) |
$ |
414 |
|
$ |
995 |
|
$ |
(757 |
) |
Adjustments to reconcile net income (loss) to net cash flows from
operating activities: |
|
|
|
Depreciation and amortization |
|
276 |
|
|
545 |
|
|
551 |
|
(Gain) loss on equity securities |
|
(148 |
) |
|
(540 |
) |
|
112 |
|
Provision (benefit) for deferred income taxes |
|
52 |
|
|
110 |
|
|
(23 |
) |
Stock-based compensation cost |
|
49 |
|
|
98 |
|
|
102 |
|
Loss on assets held for sale |
|
— |
|
|
— |
|
|
426 |
|
Other asset impairments |
|
15 |
|
|
33 |
|
|
31 |
|
Working capital |
|
239 |
|
|
176 |
|
|
(81 |
) |
Other operating items, net |
|
(39 |
) |
|
(97 |
) |
|
32 |
|
Net cash flows from operating activities |
|
858 |
|
|
1,320 |
|
|
393 |
|
Cash flows from investing activities: |
|
|
|
Expenditures for capital assets |
|
(276 |
) |
|
(587 |
) |
|
(494 |
) |
Proceeds from disposal of assets |
|
41 |
|
|
87 |
|
|
143 |
|
Proceeds from business dispositions |
|
293 |
|
|
293 |
|
|
— |
|
Net cash paid for acquisitions |
|
(282 |
) |
|
(282 |
) |
|
(86 |
) |
Other investing items, net |
|
40 |
|
|
75 |
|
|
7 |
|
Net cash flows used in investing activities |
|
(184 |
) |
|
(414 |
) |
|
(430 |
) |
Cash flows from financing activities: |
|
|
|
Dividends paid |
|
(192 |
) |
|
(384 |
) |
|
(354 |
) |
Repurchase of Class A common stock |
|
(99 |
) |
|
(99 |
) |
|
(462 |
) |
Other financing items, net |
|
(9 |
) |
|
(67 |
) |
|
(52 |
) |
Net cash flows used in financing activities |
|
(300 |
) |
|
(550 |
) |
|
(868 |
) |
Effect of currency exchange rate changes on cash and cash
equivalents |
|
16 |
|
|
(39 |
) |
|
(20 |
) |
Increase (decrease) in cash and cash equivalents |
|
390 |
|
|
317 |
|
|
(925 |
) |
Cash and cash equivalents, beginning of period |
|
2,415 |
|
|
2,488 |
|
|
3,853 |
|
Cash and cash equivalents, end of period |
$ |
2,805 |
|
$ |
2,805 |
|
$ |
2,928 |
|
Supplemental cash flows disclosures: |
|
|
|
Income taxes paid, net of refunds |
$ |
160 |
|
$ |
323 |
|
$ |
282 |
|
Interest paid |
$ |
107 |
|
$ |
157 |
|
$ |
140 |
|
Supplemental Financial Information
Supplemental financial information can be found on the Company's
website at: investors.bakerhughes.com in the Financial Information
section under Quarterly Results.
Conference Call and Webcast
The Company has scheduled an investor conference call to discuss
management's outlook and the results reported in today's earnings
announcement. The call will begin at 8:30 a.m. Eastern time,
7:30 a.m. Central time on Wednesday, July 19, 2023, the
content of which is not part of this earnings release. The
conference call will be broadcast live via a webcast and can be
accessed by visiting the Events and Presentations page on the
Company's website at: investors.bakerhughes.com. An archived
version of the webcast will be available on the website for one
month following the webcast.
Forward-Looking Statements
This news release (and oral statements made regarding the
subjects of this release) may contain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, (each a "forward-looking statement"). Forward-looking
statements concern future circumstances and results and other
statements that are not historical facts and are sometimes
identified by the words "may," "will," "should," "potential,"
"intend," "expect," "would," "seek," "anticipate," "estimate,"
"overestimate," "underestimate," "believe," "could," "project,"
"predict," "continue," "target", "goal" or other similar words or
expressions . There are many risks and uncertainties that could
cause actual results to differ materially from our forward-looking
statements. These forward-looking statements are also affected by
the risk factors described in the Company's annual report on Form
10-K for the annual period ended December 31, 2022 and those set
forth from time to time in other filings with the Securities and
Exchange Commission (SEC). The documents are available through the
Company's website at: www.investors.bakerhughes.com or through the
SEC's Electronic Data Gathering and Analysis Retrieval (EDGAR)
system at: www.sec.gov. We undertake no obligation to publicly
update or revise any forward-looking statement. Readers are
cautioned not to place undue reliance on any of these
forward-looking statements.
Our expectations regarding our business outlook and business
plans; the business plans of our customers; oil and natural gas
market conditions; cost and availability of resources; economic,
legal and regulatory conditions, and other matters are only our
forecasts regarding these matters.
These forward-looking statements, including forecasts, may be
substantially different from actual results, which are affected by
many risks, along with the following risk factors and the timing of
any of these risk factors:
COVID-19 - The continued spread of the COVID-19 virus and
related uncertainties.
Economic and political conditions - the impact of worldwide
economic conditions and rising inflation; the effect that declines
in credit availability may have on worldwide economic growth and
demand for hydrocarbons; foreign currency exchange fluctuations and
changes in the capital markets in locations where we operate; and
the impact of government disruptions and sanctions.
Orders and RPO - our ability to execute on orders and RPO in
accordance with agreed specifications, terms and conditions and
convert those orders and RPO to revenue and cash.
Oil and gas market conditions - the level of petroleum industry
exploration, development and production expenditures; the price of,
volatility in pricing of, and the demand for crude oil and natural
gas; drilling activity; drilling permits for and regulation of the
shelf and the deepwater drilling; excess productive capacity; crude
and product inventories; liquefied natural gas supply and demand;
seasonal and other adverse weather conditions that affect the
demand for energy; severe weather conditions, such as tornadoes and
hurricanes, that affect exploration and production activities;
Organization of Petroleum Exporting Countries (OPEC) policy and the
adherence by OPEC nations to their OPEC production quotas.
Terrorism and geopolitical risks - war, military action,
terrorist activities or extended periods of international conflict,
particularly involving any petroleum-producing or consuming
regions, including Russia and Ukraine; labor disruptions, civil
unrest or security conditions where we operate; potentially
burdensome taxation, expropriation of assets by governmental
action; cybersecurity risks and cyber incidents or attacks;
epidemic outbreaks.
About Baker Hughes:
Baker Hughes (Nasdaq: BKR) is an energy technology company that
provides solutions for energy and industrial customers worldwide.
Built on a century of experience and conducting business in over
120 countries, our innovative technologies and services are taking
energy forward - making it safer, cleaner and more efficient for
people and the planet. Visit us at bakerhughes.com
For more information, please contact:
Investor Relations
Jud Bailey +1 281-809-9088investor.relations@bakerhughes.com
Chase Mulvehill +1
281-809-9088investor.relations@bakerhughes.com
Media Relations
Thomas Millas+1 713-879-2862thomas.millas@bakerhughes.com
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