Baker Hughes Has Two Catalysts In Two Years

Company Overview - Baker Hughes is well-positioned for the energy future with strength in gas technology and LNG portfolios within their Industrial & Energy Technology Segment [2] - The company has found resilience in enhanced oil recovery and subsea & surface pressure systems despite global rig utilization decline [3] - Management has confirmed a margin enhancement strategy targeting 20% for both OFSE & IET by 2025 & 2026 respectively [2] Financial Performance - Gas Technology Revenue increased from $6,730 million in FY 2021 to$10,372 million in FY 2023 [12] - Adjusted EBITDA is forecasted to reach $4.55 billion in eFY24 and$4.96 billion in eFY25 [56] - Free Cash Flow is projected to be $1,832 million in eFY24 [45] Operational Highlights - Baker Hughes booked$3.5 billion in projects in the IET segment in Q2 '24, including $1 billion from the Master Gas System with Aramco [13] - The company anticipates gas tech excluding LNG to bring a total value of$100-120 billion through 2030 [13] - Management forecasts LNG demand to increase in mid-single digits annually through the end of the decade, with installed nameplate capacity reaching 800MTPA by 2030 [14] Market Trends - Domestic production is declining due to fewer land rigs being utilized, with operators focusing more on enhanced oil recovery [6] - US rigs are down while Canadian rigs are up, indicating a shift in drilling programs to the Alberta-Montney Basin [10] - The Permian Basin has seen a decline in rigs due to enhanced drilling and recovery programs [11] Strategic Initiatives - Management is driving cost-cutting measures to eliminate overlap and redundancies, aiming for 20% EBITDA margin in OFSE & IET by 2025 & 2026 [56] - The company is focusing on high-margin backlog and supply chain optimization to improve margins [56] - Baker Hughes is refocusing on gas tech and LNG segments, with significant projects booked in these areas [13] Global Outlook - Gas demand is expected to grow at a 20% rate through 2040, with LNG trade playing a significant role [16] - Offshore markets, particularly in Latin America, West Africa, and the Middle East, are expected to drive upstream growth [53] - The Gulf of Mexico remains a strong area for offshore activity, with companies like Chevron and Occidental Petroleum focusing on these assets [54] Shareholder Value - Baker Hughes returned $375 million to shareholders in Q2 '24 through dividends and share repurchases [64] - The company aims to return 60-80$3.2 billion in EBITDA in eFY25 [59] - The company is well-positioned for growth in areas outside hydrocarbons, including electrification and turbines for small modular reactors [68] - Natural gas is expected to supply most power during the 2020s, with nuclear capacity taking over in the 2030s, benefiting Baker Hughes [69]