Baker Hughes(US:BKR)2026-02-05 21:16Financial Performance - In 2025, the company generated revenues of $27.7 billion, a decrease of $0.1 billion compared to 2024, with IET revenue increasing by $1.2 billion (10%) and OFSE revenue decreasing by $1.3 billion (8%) due to declines across all regions [220]. - Net income for 2025 was $2.6 billion, a decrease of $0.4 billion (13%) compared to 2024, impacted by lower mark-to-market adjustments for equity securities and transaction-related costs [220]. - The average Brent oil price in 2025 was $69.14 per barrel, down from $80.52 in 2024, while WTI oil prices averaged $65.39 per barrel, down from $76.63 [229]. - Rig counts in North America decreased to 738 in 2025 from 787 in 2024, and international rig counts fell to 1,080 from 1,161, indicating a decline in drilling activity [233]. - OFSE segment revenue decreased by $1,304 million, or 8%, to $14,324 million in 2025 compared to 2024, primarily due to reduced oilfield activity and a lower rig count [253]. - IET segment revenue increased by $1,208 million, or 10%, to $13,409 million in 2025 compared to 2024, driven by growth in Gas Technology Equipment and Services [255]. - OFSE segment EBITDA decreased by $263 million, or 9%, to $2,618 million in 2025, attributed to lower volume and inflation, partially offset by cost reduction initiatives [254]. - IET segment EBITDA increased by $432 million, or 21%, to $2,482 million in 2025, driven by higher volume and pricing, despite inflationary pressures [256]. - Cash flows from operating activities increased to $3,810 million in 2025, up from $3,332 million in 2024 [276]. - Capital expenditures for 2025 were $1,273 million, slightly down from $1,278 million in 2024 and $1,224 million in 2023, with cash flows from the disposal of PP&E at $195 million in 2025 [282]. Shareholder Returns - The company returned a total of $1.3 billion to shareholders in 2025 through dividends and share repurchases, with a quarterly dividend increase to $0.23 per share [222]. - The company repurchased 9.8 million shares for $384 million in 2025, compared to 15.2 million shares for $484 million in 2024 and 16.3 million shares for $538 million in 2023 [288]. - Cash flows used in financing activities were $1,482 million in 2025, down from $1,527 million in 2024 and $2,028 million in 2023, with dividends paid of $910 million in 2025 [287]. Acquisitions and Investments - The anticipated acquisition of Chart is expected to close in Q2 2026, pending regulatory reviews, while the acquisition of Continental Disc Corporation was completed in August 2025 [221]. - The company entered into an agreement to acquire Chart's common stock for $210 per share, totaling approximately $13.6 billion in enterprise value [273]. - The company completed the acquisition of CDC for approximately $543 million in 2025 and incurred a termination fee of $258 million related to the acquisition of Chart [283]. - In 2023, the company acquired businesses for a total cash consideration of $301 million and sold businesses for $293 million [284]. Future Outlook - The company anticipates modest declines in global upstream spending in 2026, influenced by geopolitical uncertainties and the need for a reduction in idled OPEC+ production [218]. - The company expects continued growth in new energy solutions focused on reducing carbon emissions, including hydrogen and energy storage technologies [224]. - The company anticipates making income tax payments in the range of $1.0 billion in 2026 [292]. Financial Position and Obligations - Total remaining performance obligations (RPO) as of December 31, 2025, amounted to $35.9 billion, with OFSE contributing $3.5 billion and IET contributing $32.4 billion [245]. - The company maintained cash and cash equivalents of $3.7 billion as of December 31, 2025, compared to $3.4 billion in 2024 [268]. - As of December 31, 2025, the company had purchase obligations of $1,840 million payable within the next twelve months [296]. - Expected cash payments for estimated interest on long-term debt and finance lease obligations are $247 million within the next twelve months and $2,223 million payable thereafter [295]. Research and Development - Research and development costs decreased by $43 million (7%) to $600 million in 2025, reflecting cost management efforts [247]. - Research and development costs decreased by $19 million, or 7%, to $241 million in the OFSE segment in 2025 [253]. Risk Management - The company is exposed to market risks from changes in interest rates and foreign currency exchange rates, which may affect revenue and costs [327]. - The company had outstanding foreign currency forward contracts with notional amounts of $4.0 billion as of December 31, 2025, to hedge against currency fluctuations [333]. - A 1% appreciation or depreciation in the U.S. dollar is estimated to impact pre-tax earnings by less than $15 million [334]. - The company's fixed rate long-term debt totals $5.706 billion, with a weighted average interest rate of 4.08% [330]. - The fair market value of the company's fixed rate long-term debt, excluding finance leases, was $5.4 billion at December 31, 2025 [335]. - The company performs annual impairment tests for goodwill and other long-lived assets, which may involve significant estimates and assumptions [318]. - The company assesses the recoverability of deferred income tax assets based on a rolling three-year period of cumulative pretax losses and other evidence [320]. - The company has $525 million of gross unrecognized tax benefits as of December 31, 2025, excluding interest and penalties [322]. - As of December 31, 2025, the company had interest rate swaps with a notional amount of $500 million, converting part of its $1,350 million fixed rate Senior Notes into a floating rate instrument [328]. - The company has the option to perform a qualitative assessment for goodwill impairment before conducting a quantitative assessment [316].