Baker Hughes(BKR) - 2025 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION This part provides the unaudited condensed consolidated financial statements and management's discussion and analysis of the company's financial condition and results of operations Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements of Baker Hughes Company, including statements of income (loss), comprehensive income (loss), financial position, changes in equity, and cash flows, along with detailed notes explaining significant accounting policies, financial instruments, segment information, and recent business activities Condensed Consolidated Statements of Income (Loss) For Q2 2025, total revenue decreased by $229 million YoY to $6,910 million, while net income attributable to Baker Hughes Company increased by $122 million YoY to $701 million. For the six months ended June 30, 2025, total revenue decreased by $220 million YoY to $13,337 million, and net income attributable to Baker Hughes Company increased by $69 million YoY to $1,103 million. Basic and diluted EPS also increased for both periods Three Months Ended June 30, 2025 vs. 2024: | Metric | 2025 (Millions) | 2024 (Millions) | Change (Millions) | % Change | | :--------------------------------- | :-------------- | :-------------- | :---------------- | :------- | | Total Revenue | $6,910 | $7,139 | $(229) | (3.2)% | | Net Income Attributable to BKR | $701 | $579 | $122 | 21.1% | | Basic EPS | $0.71 | $0.58 | $0.13 | 22.4% | | Diluted EPS | $0.71 | $0.58 | $0.13 | 22.4% | | Cash Dividend per Class A Common Stock | $0.23 | $0.21 | $0.02 | 9.5% | Six Months Ended June 30, 2025 vs. 2024: | Metric | 2025 (Millions) | 2024 (Millions) | Change (Millions) | % Change | | :--------------------------------- | :-------------- | :-------------- | :---------------- | :------- | | Total Revenue | $13,337 | $13,557 | $(220) | (1.6)% | | Net Income Attributable to BKR | $1,103 | $1,034 | $69 | 6.7% | | Basic EPS | $1.11 | $1.04 | $0.07 | 6.7% | | Diluted EPS | $1.11 | $1.03 | $0.08 | 7.8% | | Cash Dividend per Class A Common Stock | $0.46 | $0.42 | $0.04 | 9.5% | Condensed Consolidated Statements of Comprehensive Income (Loss) For Q2 2025, comprehensive income attributable to Baker Hughes Company significantly increased to $1,018 million from $453 million in Q2 2024, primarily driven by positive foreign currency translation adjustments. For the six months ended June 30, 2025, comprehensive income attributable to Baker Hughes Company rose to $1,611 million from $849 million in the prior year period Comprehensive Income Attributable to Baker Hughes Company: | Period | 2025 (Millions) | 2024 (Millions) | Change (Millions) | % Change | | :--------------------------------- | :-------------- | :-------------- | :---------------- | :------- | | Three Months Ended June 30 | $1,018 | $453 | $565 | 124.7% | | Six Months Ended June 30 | $1,611 | $849 | $762 | 89.8% | Foreign Currency Translation Adjustments: | Period | 2025 (Millions) | 2024 (Millions) | | :--------------------------------- | :-------------- | :-------------- | | Three Months Ended June 30 | $325 | $(128) | | Six Months Ended June 30 | $513 | $(192) | Condensed Consolidated Statements of Financial Position As of June 30, 2025, total assets increased to $38,740 million from $38,363 million at December 31, 2024. Total equity also increased to $17,868 million from $17,055 million over the same period, driven by retained earnings and accumulated other comprehensive income Key Financial Position Metrics (June 30, 2025 vs. December 31, 2024): | Metric | June 30, 2025 (Millions) | December 31, 2024 (Millions) | Change (Millions) | % Change | | :--------------------------------- | :----------------------- | :--------------------------- | :---------------- | :------- | | Total Assets | $38,740 | $38,363 | $377 | 1.0% | | Total Liabilities | $20,869 | $21,328 | $(459) | (2.2)% | | Total Equity | $17,868 | $17,055 | $813 | 4.8% | | Cash and Cash Equivalents | $3,087 | $3,364 | $(277) | (8.2)% | | Total Current Assets | $17,618 | $17,211 | $407 | 2.4% | | Total Current Liabilities | $12,515 | $12,991 | $(476) | (3.7)% | Condensed Consolidated Statements of Changes in Equity For the six months ended June 30, 2025, Baker Hughes Company's total equity increased by $813 million to $17,868 million, primarily due to net income of $1,103 million and other comprehensive income of $508 million, partially offset by dividends and share repurchases Changes in Equity (Six Months Ended June 30, 2025): | Item | Amount (Millions) | | :--------------------------------- | :-------------- | | Balance at December 31, 2024 | $17,055 | | Net income | $1,103 | | Other comprehensive income | $508 | | Dividends on Class A common stock | $(456) | | Repurchase and cancellation of Class A common stock | $(384) | | Stock-based compensation cost | $102 | | Balance at June 30, 2025 | $17,868 | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash flows provided by operating activities increased to $1,219 million from $1,132 million in the prior year period. Cash flows used in investing activities increased to $596 million, and cash flows used in financing activities increased to $945 million, leading to an overall decrease in cash and cash equivalents Cash Flow Summary (Six Months Ended June 30, 2025 vs. 2024): | Activity | 2025 (Millions) | 2024 (Millions) | Change (Millions) | | :--------------------------------- | :-------------- | :-------------- | :---------------- | | Net cash flows provided by operating activities | $1,219 | $1,132 | $87 | | Net cash flows used in investing activities | $(596) | $(530) | $(66) | | Net cash flows used in financing activities | $(945) | $(929) | $(16) | | Decrease in cash and cash equivalents | $(277) | $(362) | $85 | | Cash and cash equivalents, end of period | $3,087 | $2,284 | $803 | - Operating cash flow drivers for the six months ended June 30, 2025, included net income of $1,120 million, depreciation and amortization of $579 million, and a $532 million cash inflow from current receivables, partially offset by cash outflows from inventories and accounts payable[24] Notes to Unaudited Condensed Consolidated Financial Statements These notes provide detailed explanations and breakdowns of the company's financial statements, covering accounting policies, specific asset and liability categories, debt, equity, revenue recognition, segment performance, and recent business transactions like acquisitions and divestitures NOTE 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Baker Hughes is an energy technology company with a diversified portfolio across the energy and industrial value chain. The financial statements are unaudited and prepared in accordance with U.S. GAAP. A presentation change in Q1 2025 now reports R&D and other (income) expense separately, and segments are evaluated using segment EBITDA - Baker Hughes Company is an energy technology company with a diversified portfolio of technologies and services spanning the energy and industrial value chain[26] - In the first quarter of 2025, the company changed its income statement presentation, reporting research and development costs and other (income) expense, net as separate line items, and removed operating and non-operating income (loss) lines[30] - Supply chain finance program liabilities recorded in 'Accounts payable' were $384 million as of June 30, 2025, down from $411 million at December 31, 2024[32] NOTE 2. CURRENT RECEIVABLES Net current receivables decreased to $6,511 million as of June 30, 2025, from $7,122 million at December 31, 2024, primarily due to a decrease in customer receivables. The allowance for credit losses increased slightly Current Receivables (June 30, 2025 vs. December 31, 2024): | Metric | June 30, 2025 (Millions) | December 31, 2024 (Millions) | Change (Millions) | % Change | | :--------------------------------- | :----------------------- | :--------------------------- | :---------------- | :------- | | Customer receivables | $5,434 | $5,945 | $(511) | (8.6)% | | Total current receivables, net | $6,511 | $7,122 | $(611) | (8.6)% | | Allowance for credit losses | $(253) | $(232) | $(21) | 9.1% | - As of June 30, 2025, 17% of the company's gross customer receivables were from customers in the U.S., compared to 16% at December 31, 2024[38] NOTE 3. INVENTORIES Net inventories increased to $5,105 million as of June 30, 2025, from $4,954 million at December 31, 2024, driven by an increase in work in process and raw materials Inventories (June 30, 2025 vs. December 31, 2024): | Metric | June 30, 2025 (Millions) | December 31, 2024 (Millions) | Change (Millions) | % Change | | :--------------------------------- | :----------------------- | :--------------------------- | :---------------- | :------- | | Finished goods | $2,462 | $2,494 | $(32) | (1.3)% | | Work in process and raw materials | $2,643 | $2,460 | $183 | 7.4% | | Total inventories, net | $5,105 | $4,954 | $151 | 3.0% | NOTE 4. OTHER INTANGIBLE ASSETS Net intangible assets slightly decreased to $3,919 million as of June 30, 2025, from $3,951 million at December 31, 2024. Finite-lived intangible assets decreased, while indefinite-lived intangible assets saw a minor increase. Amortization expense remained consistent year-over-year Intangible Assets (June 30, 2025 vs. December 31, 2024): | Metric | June 30, 2025 (Millions) | December 31, 2024 (Millions) | Change (Millions) | % Change | | :--------------------------------- | :----------------------- | :--------------------------- | :---------------- | :------- | | Finite-lived intangible assets, net | $1,712 | $1,749 | $(37) | (2.1)% | | Indefinite-lived intangible assets, net | $2,207 | $2,202 | $5 | 0.2% | | Total intangible assets, net | $3,919 | $3,951 | $(32) | (0.8)% | - Amortization expense for the three months ended June 30, 2025, was $68 million (up from $66 million in 2024), and for the six months, it was $134 million (up from $133 million in 2024)[41] NOTE 5. CONTRACT AND OTHER DEFERRED ASSETS Contract and other deferred assets increased to $1,841 million as of June 30, 2025, from $1,730 million at December 31, 2024, primarily due to an increase in long-term equipment contracts and certain other service agreements Contract and Other Deferred Assets (June 30, 2025 vs. December 31, 2024): | Metric | June 30, 2025 (Millions) | December 31, 2024 (Millions) | Change (Millions) | % Change | | :--------------------------------- | :----------------------- | :--------------------------- | :---------------- | :------- | | Long-term product service agreements | $350 | $346 | $4 | 1.2% | | Long-term equipment contracts and certain other service agreements | $1,344 | $1,247 | $97 | 7.8% | | Contract and other deferred assets | $1,841 | $1,730 | $111 | 6.4% | NOTE 6. PROGRESS COLLECTIONS AND DEFERRED INCOME Contract liabilities, including progress collections and deferred income, slightly increased to $5,680 million as of June 30, 2025, from $5,672 million at December 31, 2024. Revenue recognized from contract liabilities at the beginning of the period was $1,373 million for Q2 2025 and $2,919 million for the first six months of 2025 Contract Liabilities (June 30, 2025 vs. December 31, 2024): | Metric | June 30, 2025 (Millions) | December 31, 2024 (Millions) | Change (Millions) | % Change | | :--------------------------------- | :----------------------- | :--------------------------- | :---------------- | :------- | | Progress collections | $5,549 | $5,550 | $(1) | (0.0)% | | Deferred income | $131 | $122 | $9 | 7.4% | | Total contract liabilities | $5,680 | $5,672 | $8 | 0.1% | - Revenue recognized from contract liabilities at the beginning of the period was $1,373 million for the three months ended June 30, 2025 (vs. $1,392 million in 2024) and $2,919 million for the six months ended June 30, 2025 (vs. $2,868 million in 2024)[46] NOTE 7. LEASES Total operating lease expense decreased to $201 million for Q2 2025 from $223 million in Q2 2024, and to $406 million for the first six months of 2025 from $461 million in the prior year period. The weighted-average remaining lease term increased to approximately eight years Total Operating Lease Expense: | Period | 2025 (Millions) | 2024 (Millions) | Change (Millions) | % Change | | :--------------------------------- | :-------------- | :-------------- | :---------------- | :------- | | Three Months Ended June 30 | $201 | $223 | $(22) | (9.9)% | | Six Months Ended June 30 | $406 | $461 | $(55) | (12.0)% | - The weighted-average remaining lease term as of June 30, 2025, was approximately eight years, up from seven years at December 31, 2024[49] - The weighted-average discount rate for operating lease liability as of June 30, 2025, was 4.5%, up from 4.3% at December 31, 2024[49] NOTE 8. DEBT Total debt increased slightly to $6,034 million as of June 30, 2025, from $6,023 million at December 31, 2024. The company has a $3.0 billion unsecured revolving credit facility with no borrowings outstanding and is in compliance with all debt covenants Total Debt (June 30, 2025 vs. December 31, 2024): | Metric | June 30, 2025 (Millions) | December 31, 2024 (Millions) | Change (Millions) | % Change | | :--------------------------------- | :----------------------- | :--------------------------- | :---------------- | :------- | | Short-term debt | $66 | $53 | $13 | 24.5% | | Long-term debt | $5,968 | $5,970 | $(2) | (0.0)% | | Total debt | $6,034 | $6,023 | $11 | 0.2% | - The estimated fair value of total debt at June 30, 2025, was $5,629 million, up from $5,409 million at December 31, 2024[52] - The company has a $3.0 billion committed unsecured revolving credit facility maturing in November 2028, with no borrowings outstanding as of June 30, 2025, and December 31, 2024. The company was in compliance with all debt covenants[53][55] NOTE 9. INCOME TAXES The provision for income taxes for Q2 2025 was $256 million, up from $243 million in Q2 2024. For the first six months of 2025, it was $408 million, down from $421 million in 2024. The effective tax rate differs from the U.S. statutory rate primarily due to income in higher tax jurisdictions and losses with no tax benefit. The recently enacted OBBBA is being evaluated for its impact on Q3 2025 financial results Provision for Income Taxes: | Period | 2025 (Millions) | 2024 (Millions) | Change (Millions) | % Change | | :--------------------------------- | :-------------- | :-------------- | :---------------- | :------- | | Three Months Ended June 30 | $256 | $243 | $13 | 5.3% | | Six Months Ended June 30 | $408 | $421 | $(13) | (3.1)% | - The One Big Beautiful Bill Act (OBBBA), signed on July 4, 2025, preserves the 21% U.S. Federal statutory tax rate, favorably changes business interest expense limitation, and makes key elements of the Tax Cuts and Jobs Act permanent. The company is evaluating its impact for Q3 2025 financial results[59] NOTE 10. EQUITY The company repurchased and canceled 5.3 million shares of Class A common stock for $196 million in Q2 2025 and 9.8 million shares for $384 million in the first six months of 2025. As of June 30, 2025, $1.3 billion remained authorized for repurchases. Accumulated other comprehensive loss decreased due to positive foreign currency translation adjustments Share Repurchases (Class A Common Stock): | Period | Shares Repurchased (Millions) | Cost (Millions) | Average Price per Share | | :--------------------------------- | :---------------------------- | :-------------- | :---------------------- | | Three Months Ended June 30, 2025 | 5.3 | $196 | $36.66 | | Six Months Ended June 30, 2025 | 9.8 | $384 | $39.38 | | Three Months Ended June 30, 2024 | 5.1 | $166 | $32.19 | | Six Months Ended June 30, 2024 | 10.5 | $324 | $30.72 | - As of June 30, 2025, the company had authorization remaining to repurchase approximately $1.3 billion of its Class A common stock[61] - Accumulated other comprehensive loss decreased from $(3,161) million at December 31, 2024, to $(2,653) million at June 30, 2025, primarily due to $513 million in foreign currency translation adjustments[64] NOTE 11. EARNINGS PER SHARE Basic and diluted EPS for Class A common stock increased for both the three and six months ended June 30, 2025, compared to the prior year periods, reflecting higher net income attributable to Baker Hughes Company Basic and Diluted EPS (Class A Common Stock): | Period | 2025 (Basic) | 2024 (Basic) | 2025 (Diluted) | 2024 (Diluted) | | :--------------------------------- | :------------- | :------------- | :------------- | :------------- | | Three Months Ended June 30 | $0.71 | $0.58 | $0.71 | $0.58 | | Six Months Ended June 30 | $1.11 | $1.04 | $1.11 | $1.03 | - Weighted average shares outstanding (diluted) for the six months ended June 30, 2025, were 995 million, slightly down from 1,002 million in 2024[67] NOTE 12. FINANCIAL INSTRUMENTS The company's total assets measured at fair value increased to $1,309 million as of June 30, 2025, from $1,295 million at December 31, 2024, primarily driven by investment securities. Derivative liabilities decreased from $64 million to $44 million. The company uses derivatives for risk management, not speculation, including cash flow hedges for foreign exchange and fair value hedges for interest rate risk Fair Value Measurements (June 30, 2025 vs. December 31, 2024): | Metric | June 30, 2025 (Millions) | December 31, 2024 (Millions) | Change (Millions) | % Change | | :--------------------------------- | :----------------------- | :--------------------------- | :---------------- | :------- | | Total Assets (Fair Value) | $1,309 | $1,295 | $14 | 1.1% | | Total Liabilities (Fair Value) | $(44) | $(64) | $20 | (31.3)% | | Investment securities (Fair Value) | $1,292 | $1,284 | $8 | 0.6% | - Net gains (losses) recorded to earnings related to investment securities were $119 million for the three months ended June 30, 2025 (vs. $19 million in 2024) and $(22) million for the six months ended June 30, 2025 (vs. $45 million in 2024)[71] - The company uses derivatives to manage risks, primarily foreign exchange rate changes on purchase and sale contracts (cash flow hedges) and interest rate risk on fixed-rate debt (fair value hedges), not for speculation[74][77][78] NOTE 13. REVENUE RELATED TO CONTRACTS WITH CUSTOMERS Total revenue decreased by $229 million to $6,910 million for Q2 2025 and by $220 million to $13,337 million for the first six months of 2025. OFSE revenue declined across all product lines, while IET revenue increased, driven by Gas Technology and Climate Technology Solutions. Remaining performance obligations totaled $34 billion as of June 30, 2025 Total Revenue by Segment (Three Months Ended June 30, 2025 vs. 2024): | Segment | 2025 (Millions) | 2024 (Millions) | Change (Millions) | % Change | | :--------------------------------- | :-------------- | :-------------- | :---------------- | :------- | | Oilfield Services & Equipment (OFSE) | $3,617 | $4,011 | $(394) | (9.8)% | | Industrial & Energy Technology (IET) | $3,293 | $3,128 | $165 | 5.3% | | Total | $6,910 | $7,139 | $(229) | (3.2)% | Total Revenue by Segment (Six Months Ended June 30, 2025 vs. 2024): | Segment | 2025 (Millions) | 2024 (Millions) | Change (Millions) | % Change | | :--------------------------------- | :-------------- | :-------------- | :---------------- | :------- | | Oilfield Services & Equipment (OFSE) | $7,116 | $7,794 | $(678) | (8.7)% | | Industrial & Energy Technology (IET) | $6,221 | $5,763 | $459 | 8.0% | | Total | $13,337 | $13,557 | $(220) | (1.6)% | - As of June 30, 2025, the aggregate amount of the transaction price allocated to unsatisfied (or partially unsatisfied) performance obligations (RPO) was $34 billion, with OFSE totaling $2.7 billion and IET totaling $31.3 billion[88][146] NOTE 14. SEGMENT INFORMATION Baker Hughes operates through two segments: Oilfield Services & Equipment (OFSE) and Industrial & Energy Technology (IET). OFSE revenue decreased by $394 million in Q2 2025, while IET revenue increased by $165 million. Segment EBITDA for OFSE decreased, while IET's increased, reflecting differing market conditions and operational efficiencies Segment EBITDA (Three Months Ended June 30, 2025 vs. 2024): | Segment | 2025 (Millions) | 2024 (Millions) | Change (Millions) | % Change | | :--------------------------------- | :-------------- | :-------------- | :---------------- | :------- | | OFSE | $677 | $716 | $(39) | (5.5)% | | IET | $585 | $497 | $88 | 17.7% | | Total Segment EBITDA | $1,262 | $1,213 | $49 | 4.0% | Segment EBITDA (Six Months Ended June 30, 2025 vs. 2024): | Segment | 2025 (Millions) | 2024 (Millions) | Change (Millions) | % Change | | :--------------------------------- | :-------------- | :-------------- | :---------------- | :------- | | OFSE | $1,300 | $1,360 | $(60) | (4.4)% | | IET | $1,086 | $883 | $203 | 23.0% | | Total Segment EBITDA | $2,386 | $2,243 | $143 | 6.4% | - OFSE provides products and services for onshore and offshore oilfield operations, expanding into new energy areas such as geothermal and carbon capture, utilization and storage. IET provides technology solutions and services for mechanical-drive, compression, and power-generation applications across the energy industry and broader industrial sectors[90][91] NOTE 15. RELATED PARTY TRANSACTIONS The company has a 50% ownership interest in an aeroderivative joint venture (Aero JV) with GE Vernova. Purchases from the Aero JV increased to $226 million in Q2 2025 and $374 million for the first six months of 2025, compared to the prior year periods Purchases from Aero JV: | Period | 2025 (Millions) | 2024 (Millions) | Change (Millions) | % Change | | :--------------------------------- | :-------------- | :-------------- | :---------------- | :------- | | Three Months Ended June 30 | $226 | $173 | $53 | 30.6% | | Six Months Ended June 30 | $374 | $276 | $98 | 35.5% | - Amounts due to the Aero JV were $146 million at June 30, 2025, up from $117 million at December 31, 2024[97] NOTE 16. COMMITMENTS AND CONTINGENCIES The company is involved in legal proceedings, including a securities class action related to C3.ai, Inc., where claims against the company were reasserted. Management does not expect current legal proceedings to have a material adverse effect. Total off-balance sheet arrangements were approximately $5.8 billion at June 30, 2025 - The company is a defendant in a putative securities class action related to C3.ai, Inc., with claims reasserted against it in February 2025[100] - Management does not expect the ultimate outcome of currently pending legal proceedings to have a material adverse effect on its results of operations, financial position, or cash flows[99] - Total off-balance sheet arrangements were approximately $5.8 billion at June 30, 2025, including surety bonds, letters of credit, and other bank issued guarantees[102] NOTE 17. OTHER (INCOME) EXPENSE, NET Other (income) expense, net, was $(134) million for Q2 2025, a significant decrease from $(26) million in Q2 2024, primarily due to a net gain of $119 million from the change in fair value of equity securities. For the first six months of 2025, it was $6 million, compared to $(48) million in 2024 Other (Income) Expense, Net: | Period | 2025 (Millions) | 2024 (Millions) | Change (Millions) | | :--------------------------------- | :-------------- | :-------------- | :---------------- | | Three Months Ended June 30 | $(134) | $(26) | $(108) | | Six Months Ended June 30 | $6 | $(48) | $54 | - The change in fair value of equity securities resulted in a $(119) million gain for the three months ended June 30, 2025 (vs. $(19) million gain in 2024) and a $21 million gain for the six months ended June 30, 2025 (vs. $(71) million loss in 2024)[105] NOTE 18. ACQUISITIONS AND BUSINESSES HELD FOR SALE The company agreed to acquire Continental Disc Corporation (CDC) for approximately $540 million in Q3 2025. It also entered agreements to form a joint venture for its Surface Pressure Control (SPC) business (35% non-controlling interest and $345 million cash) and to sell its Precision Sensors & Instrumentation (PSI) business for approximately $1.15 billion cash, both expected to close late 2025 or early 2026 - The company entered into an agreement to acquire Continental Disc Corporation (CDC) for approximately $540 million, expected to close in Q3 2025[106] - The company agreed to form a joint venture for its Surface Pressure Control (SPC) business, contributing it in exchange for a 35% non-controlling interest and approximately $345 million cash[108] - The company agreed to sell its Precision Sensors & Instrumentation (PSI) business for approximately $1.15 billion cash. Both SPC and PSI transactions are expected to close late 2025 or early 2026[109][108] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance, market conditions, operational results, liquidity, and capital resources for the three and six months ended June 30, 2025, compared to the prior year. It highlights slowing global oil market activity, strong LNG and natural gas outlook, and strategic initiatives to improve profitability and capital allocation EXECUTIVE SUMMARY In Q2 2025, Baker Hughes experienced slowing global oil market activity due to geopolitical tensions and slower economic growth, leading to a revenue decrease. However, net income increased due to higher EBITDA margins and fair value gains. The company remains optimistic about global LNG and natural gas, while expecting continued volatility in oil markets and lower upstream spending in 2025 - Slowing activity across global oil markets in Q2 2025 was primarily due to ongoing geopolitical tensions, uncertainty around trade policy and tariffs, and slower global economic growth[117] - The company expects 2025 global upstream spending to be lower than 2024, with pockets of resilience in select international markets and a shift towards optimizing mature fields[118] - Q2 2025 revenue decreased by $0.2 billion to $6.9 billion (YoY), with IET revenue increasing and OFSE revenue decreasing. Net income increased by $0.1 billion to $0.7 billion (YoY), driven by higher EBITDA margins, gains in equity securities, and FX, partially offset by lower OFSE volume[121] BUSINESS ENVIRONMENT The business environment is characterized by slowing global oil markets and lower E&P spending in North America and internationally for OFSE, while IET sees continued strength in LNG, gas infrastructure, and industrial/distributed power markets, including data centers. Oil prices (Brent and WTI) and worldwide rig counts decreased significantly in Q2 2025 compared to Q2 2024, while natural gas prices increased Average Oil and Natural Gas Prices (Three Months Ended June 30): | Metric | 2025 | 2024 | % Change | | :--------------------------------- | :------ | :------ | :------- | | Brent oil prices ($/Bbl) | $68.07 | $84.68 | (19.6)% | | WTI oil prices ($/Bbl) | $64.57 | $81.81 | (21.1)% | | Natural gas prices ($/mmBtu) | $3.19 | $2.07 | 54.1% | Average Rig Counts (Three Months Ended June 30): | Region | 2025 | 2024 | % Change | | :--------------------------------- | :------ | :------ | :------- | | North America | 699 | 738 | (5)% | | International | 897 | 963 | (7)% | | Worldwide | 1,596 | 1,701 | (6)% | - OFSE outlook for 2025 anticipates a second consecutive year of lower Exploration and Production (E&P) spending in North America and lower international activity due to recent commodity price weakness. IET outlook sees continued strength in LNG and gas infrastructure, with increasing opportunities in industrial and distributed power markets, emphasizing data centers[131] RESULTS OF OPERATIONS For Q2 2025, total revenue decreased by $0.2 billion, with OFSE down $0.4 billion and IET up $0.2 billion. Net income increased by $0.1 billion. For the first six months of 2025, total revenue decreased by $0.2 billion, with OFSE down $0.7 billion and IET up $0.5 billion, and net income increased by $0.1 billion. Both periods saw cost optimization efforts, partially offset by inflation - Total revenue decreased by $0.2 billion to $6.9 billion in Q2 2025 compared to Q2 2024, with OFSE revenue decreasing by $0.4 billion and IET revenue increasing by $0.2 billion. Net income increased by $0.1 billion, or 21%, to $0.7 billion[147][151] - For the first six months of 2025, total revenue decreased by $0.2 billion to $13.3 billion, with OFSE revenue decreasing by $0.7 billion and IET revenue increasing by $0.5 billion. Net income increased by $0.1 billion, or 7%, to $1.1 billion[157][162] Orders (Three Months Ended June 30): | Segment | 2025 (Millions) | 2024 (Millions) | $ Change | | :--------------------------------- | :-------------- | :-------------- | :------- | | Oilfield Services & Equipment | $3,503 | $4,068 | $(565) | | Industrial & Energy Technology | $3,530 | $3,458 | $72 | | Total | $7,032 | $7,526 | $(494) | LIQUIDITY AND CAPITAL RESOURCES The company maintains solid financial strength with $3.1 billion in cash and cash equivalents as of June 30, 2025. Operating cash flows increased to $1,219 million for the first six months of 2025. Capital expenditures are expected to be up to 5% of annual revenue in 2025, and income tax payments are anticipated to be $1.0 billion to $1.1 billion. The company has a $3.0 billion revolving credit facility with no outstanding borrowings and is in compliance with debt covenants - Cash and cash equivalents were $3.1 billion at June 30, 2025, down from $3.4 billion at December 31, 2024. Approximately 82% of the total cash balance is held outside the U.S.[168][169][188] Cash Flows (Six Months Ended June 30): | Activity | 2025 (Millions) | 2024 (Millions) | | :--------------------------------- | :-------------- | :-------------- | | Operating activities | $1,219 | $1,132 | | Investing activities | $(596) | $(530) | | Financing activities | $(945) | $(929) | - Capital expenditures in 2025 are expected to be up to 5% of annual revenue, primarily for normal, recurring items. Anticipated income tax payments for 2025 are in the range of $1.0 billion to $1.1 billion[185] - The company has a $3.0 billion committed unsecured revolving credit facility with no borrowings outstanding as of June 30, 2025, and is in compliance with all debt covenants. Total guaranteed Debt Securities amount to $5.8 billion[170][171][189] CRITICAL ACCOUNTING ESTIMATES The company's critical accounting estimation processes are consistent with those described in its 2024 Annual Report - The company's critical accounting estimation processes are consistent with those described in Item 7 of Part II, "Management's discussion and analysis of financial condition and results of operations" of its 2024 Annual Report[191] FORWARD-LOOKING STATEMENTS This section highlights that the report contains forward-looking statements subject to risks, uncertainties, and assumptions, and actual results may vary materially. Readers are cautioned not to place undue reliance on these statements, and the company does not undertake to update them except as required by law - This Quarterly Report contains forward-looking statements based on current plans, estimates, and expectations that are subject to risks, uncertainties, and assumptions, which could cause actual results to vary materially[192] - Readers are cautioned not to place undue reliance on any forward-looking statements, and the company does not undertake any obligation to update them, except as required by law[193] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's exposure to market risk has not materially changed since December 31, 2024, and further details are available in the 2024 Annual Report - The company's exposure to market risk has not changed materially since December 31, 2024[194] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025. There have been no material changes to internal controls over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025[195] - There has been no material change in internal controls over financial reporting during the quarter ended June 30, 2025[196] PART II - OTHER INFORMATION This part contains information on legal proceedings, risk factors, equity sales, defaults, mine safety disclosures, other information, and exhibits Item 1. Legal Proceedings Information on legal proceedings is referenced to "Note 16. Commitments and Contingencies" in this report and the 2024 Annual Report - Legal proceedings are discussed in "Note 16. Commitments and Contingencies" of this Quarterly Report and the 2024 Annual Report[198] Item 1A. Risk Factors The company's operations remain subject to the risk factors previously discussed in the 2024 Annual Report - The company's operations continue to be subject to the risk factors previously discussed in the "Risk Factors" sections contained in the 2024 Annual Report[199] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2025, the company repurchased 5.3 million shares of Class A common stock for $196 million at an average price of $36.66 per share under its publicly announced repurchase program Class A Common Stock Repurchases (Three Months Ended June 30, 2025): | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of a Publicly Announced Program | | :--------------------------------- | :----------------------------- | :--------------------------- | :----------------------------------------------------------------------- | | April 1-30, 2025 | 857,498 | $35.70 | 839,500 | | May 1-31, 2025 | 4,507,700 | $36.87 | 4,506,172 | | June 1-30, 2025 | 8,179 | $37.50 | — | | Total | 5,373,377 | $36.68 | 5,345,672 | - During the three months ended June 30, 2025, the company repurchased 5.3 million shares of Class A common stock for a total of $196 million at an average price of $36.66 per share[204] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities - There were no defaults upon senior securities[202] Item 4. Mine Safety Disclosures Information regarding mine safety violations for the company's barite mining operations is included in Exhibit 95 of this report - Information concerning mine safety violations for the company's barite mining operations is included in Exhibit 95 to this Quarterly Report[203] Item 5. Other Information No officers or directors adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q2 2025 - During the three months ended June 30, 2025, none of the company's officers or directors adopted or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement"[205] Item 6. Exhibits This section lists the exhibits filed or furnished as part of the Form 10-Q, including certifications, mine safety disclosures, and XBRL documents - The exhibits include certifications (31.1, 31.2, 32), Mine Safety Disclosure (95), and various XBRL documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[207] Signatures The report is signed by Ahmed Moghal, Executive Vice President and Chief Financial Officer, and Rebecca Charlton, Senior Vice President, Controller and Chief Accounting Officer, on July 23, 2025 - The report was signed on July 23, 2025, by Ahmed Moghal, Executive Vice President and Chief Financial Officer, and Rebecca Charlton, Senior Vice President, Controller and Chief Accounting Officer[210]