December 15, 2025 02:04 PM GMT Energy Services & Equipment | North America 2026 Outlook: Navigating an Oil Surplus Into 2026, we see NAm nearing a bottom, growth in int'l onshore driven by OPEC activity & take a more muted view on offshore as efficiency gains moderate upside. Against a challenging oil backdrop, we generally prefer exposure to more defensive & unique revenue streams. HAL to Top Pick, NOV to EW. Key Takeaways With this report, Joe Laetsch assumes coverage of North America Energy Services & Eq ...

Market Overview - The Dow Jones Industrial Average and other stock indexes have extended gains, indicating a bullish market move [1] - Investors are advised to patiently await new breakouts using The IBD Methodology while methodically raising exposure [1] Company Performance - Jones Lang LaSalle (JLL) has shown rising price performance, earning an upgrade to its IBD Relative Strength Rating from 76 to 81 [1][2] - Baker Hughes (BKR) has also seen an improvement in its price strength, with its IBD Rating upgraded to 71 [4] - Baker Hughes achieved a significant jump in its RS Rating to 82, clearing key benchmarks [4]

Financial Performance - Baker Hughes reported strong 3Q 2025 results, with revenues of $7010 million, a 1% increase compared to 2Q 2025 and 1% increase year-over-year[25] - Adjusted EBITDA for 3Q 2025 was $1238 million, up 2% from 2Q 2025 and up 2% year-over-year, with an adjusted EBITDA margin of 177%, a 10 bps increase sequentially and a 20 bps increase year-over-year[25] - Adjusted diluted EPS was $068 per share, a 9% increase compared to 2Q 2025 and a 3% increase year-over-year[25] - Free cash flow was $699 million, a 192% increase compared to 2Q 2025 and a (7)% decrease year-over-year[25] Orders and Growth - Total orders reached $8207 million, showing a 17% increase compared to 2Q 2025 and a 23% increase year-over-year[25] - Industrial & Energy Technology (IET) orders were $4139 million, up 17% sequentially and 44% year-over-year, driven by LNG equipment and power generation awards[6, 31] - Subsea and Surface Pressure Systems (SSPS) orders hit a record $12 billion, boosted by subsea tree awards in Brazil and Turkiye[6] - New energy orders year-to-date reached $16 billion, hitting the high end of the 2025 order guidance range[16] Segment Performance - IET revenue was $3374 million, up 2% sequentially and 15% year-over-year, with an EBITDA of $635 million, up 9% sequentially and 20% year-over-year, and an EBITDA margin of 188%[31] - Oilfield Services & Equipment (OFSE) revenue was $3636 million, up 1% sequentially and down (8)% year-over-year, with an EBITDA of $671 million, down (1)% sequentially and (12)% year-over-year, and an EBITDA margin of 185%[34] Guidance - The company provided 4Q 2025 revenue guidance of $6650 - $7450 million and adjusted EBITDA guidance of $1145 - $1365 million[37] - Full year 2025 revenue guidance is $27000 - $27800 million and adjusted EBITDA guidance is $4630 - $4850 million[37]

Core Insights - Baker Hughes has received a multi-year agreement from Aramco to expand its integrated underbalanced coiled tubing drilling (UBCTD) operations in Saudi Arabia's natural gas fields, increasing its fleet from four to ten units [1][2][4] Group 1: Agreement Details - The agreement includes the provision of integrated solutions for coiled tubing drilling units, underbalanced drilling services, operational management, well construction, and geosciences [2][6] - Work under the expanded agreement is set to commence in 2026, reinforcing Baker Hughes' established presence in the region since entering the UBCTD market in 2008 [4][6] Group 2: Technological Advancements - Baker Hughes will utilize its industry-leading CoilTrak™ bottomhole assembly system and enhanced reservoir analysis from GaffneyCline™ energy advisory to improve drilling efficiency [3] - The integrated approach aims to enhance production efficiency, speed, and safety while reducing reservoir damage compared to traditional methods [3] Group 3: Historical Context and Collaboration - The project is a culmination of nearly two decades of collaboration between Baker Hughes and Aramco, setting a standard for UBCTD operations [3] - Baker Hughes maintains a strong health, safety, and environment (HSE) record while delivering operational excellence through its existing UBCTD units in Saudi Arabia [4]

Core Insights - Baker Hughes reported strong third-quarter performance for 2025, driven by operational discipline and positive trends in Gas Technology, particularly in the U.S. land market [3][4] - The company secured over $4 billion in Industrial & Energy Technology (IET) orders, marking a record backlog of $32.1 billion, indicating robust growth prospects [4][7] - The company announced its intent to acquire Chart Industries for approximately $13.6 billion, enhancing its portfolio in high-growth markets [9] Financial Performance - Total orders reached $8.2 billion, a 17% increase sequentially and a 23% increase year-over-year [5] - Revenue for the quarter was $7.0 billion, reflecting a 1% increase both sequentially and year-over-year [5][24] - Net income attributable to Baker Hughes was $609 million, down 13% sequentially and 20% year-over-year [5][25] - Adjusted net income was $678 million, up 9% sequentially and 2% year-over-year [5][26] - Adjusted EBITDA was $1,238 million, a 2% increase year-over-year [5][27] Segment Performance Oilfield Services & Equipment (OFSE) - OFSE orders totaled $4.1 billion, a 16% sequential increase and a 7% year-over-year increase [36] - Revenue for OFSE was $3.6 billion, up 1% sequentially but down 8% year-over-year [36][38] - Segment EBITDA was $671 million, a decrease of 1% sequentially and 12% year-over-year [38] Industrial & Energy Technology (IET) - IET orders were $4.1 billion, a 44% increase year-over-year [41] - Revenue for IET was $3.4 billion, a 15% increase year-over-year [42] - Segment EBITDA was $635 million, a 20% increase year-over-year [43] Key Awards and Contracts - Significant contracts were secured in the LNG sector, including orders for gas turbine technology for major LNG facilities in Texas [11][12] - Baker Hughes received a multi-year contract from bp for service support at the Tangguh LNG plant in Indonesia [15] - The company was awarded a contract from Aramco to expand drilling operations in Saudi Arabia [21] Market Outlook - The company anticipates full-year orders to exceed prior expectations, supported by strong visibility on expected awards in the fourth quarter [4] - Baker Hughes continues to experience strong demand for its New Energy solutions, particularly in geothermal power generation [16]

Core Insights - Baker Hughes has received a significant contract from Turkish Petroleum (TPAO) and Turkish Petroleum Offshore Technology Center (TP-OTC) to supply subsea production and intelligent completion systems for the Sakarya Gas Field Phase 3 [1][2] Group 1: Project Details - The agreement includes the provision of deepwater horizontal tree systems and associated subsea structures and control systems for production at depths ranging from 6,500 to 7,200 feet [2][4] - Baker Hughes will integrate advanced completions technologies such as InForce HCMTM-A interval control valves and SureTREAT chemical injection valves to enhance operational efficiencies [4] Group 2: Strategic Importance - The development of the Sakarya gas fields is pivotal for transforming Turkey's energy sector, contributing to a more prosperous and secure future for the country [3] - Baker Hughes has been collaborating with TPAO and TP-OTC since the project's inception in 2022, focusing on reservoir and technology evaluations for the unique subsurface geology of the field [3] Group 3: Timeline and Execution - Deliveries and execution for the Sakarya Gas Field Phase 3 are set to commence in late 2025 [4]

Core Insights - Aspen Aerogels is uniquely positioned in the energy services sector, successfully transitioning from traditional energy markets to emerging markets in new energy, particularly as a supplier to EV batteries [1]. Company Overview - Aspen Aerogels has established a product line in traditional energy that is now experiencing significant revenue growth due to its involvement in the electric vehicle battery supply chain [1]. Leadership - Ricardo Rodriguez joined Aspen Aerogels as CFO and Treasurer in November 2021, indicating a strategic move to strengthen the company's financial leadership [2].

Core Insights - Baker Hughes has undergone a significant transformation since the merger with GE Oil & Gas in 2017, focusing on reshaping its portfolio towards gas infrastructure and moving away from upstream activities [1] - The company aims to create a new culture centered around execution, consistency, and accountability, which is considered a challenging endeavor in the industry [1] Company Overview - The transformation of Baker Hughes is described as unprecedented in the sector, highlighting the company's strategic shift and operational changes [1] - Lorenzo Simonelli, the key figure behind this transformation, is set to present further insights into the company's direction and strategies [2]

Financial Data and Key Metrics Changes - The company reported total revenue of $628 million for the second quarter, up 5% from the previous quarter and twice the midpoint of the sequential guidance provided in May [11][25] - EBITDA for the quarter was $51 million, marking an 11% sequential increase and representing the best second quarter EBITDA results in the company's public history [10][25] - Gross margins remained resilient at 22.9%, consistent with expectations and better than the full year 2024 average [11][27] - Free cash flow for the quarter was $41 million, with a cash balance of $232 million and no debt [13][14][30] Business Line Data and Key Metrics Changes - U.S. revenue totaled $528 million, an increase of $54 million or 11% sequentially, driven by midstream strength [17][26] - The midstream business grew to approximately 27% of total revenue, more than doubling its contribution over the past six quarters [12] - Canadian revenue was $48 million, down $14 million primarily due to seasonal impacts [20][26] - International revenue was $52 million, down 17% sequentially, in line with guidance due to non-repeating project activity [21][27] Market Data and Key Metrics Changes - U.S. midstream project investments drove strong sequential revenue gains, while upstream production remained disciplined with limited project backlogs [12][18] - The company noted a projected 2% increase in produced water volumes and a 13% increase in produced water recycling volumes for 2025, indicating growth opportunities in water management solutions [20] - The acquisition of Natron International expanded the company's electrical products opportunities in Singapore and the Asia Pacific region [21] Company Strategy and Development Direction - The company is focused on integrating with MRC Global to enhance service offerings and capture growth opportunities in alternative energy, AI infrastructure, and other industrial markets [14][15] - The strategic combination aims to realize $70 million in annual cost synergies within three years post-closing [15] - The company plans to balance organic and inorganic growth while pursuing potential bolt-on acquisitions [23][24] Management's Comments on Operating Environment and Future Outlook - Management acknowledged macroeconomic headwinds but emphasized solid execution and customer focus as key to success [8][10] - The outlook for the third quarter anticipates relatively flat revenue compared to the second quarter, with expectations of low single-digit percentage growth for the full year [34][36] - Management reaffirmed a target of $150 million in free cash flow for 2025 [36] Other Important Information - The company has a strong balance sheet with zero debt and total liquidity of $582 million [30] - The effective tax rate for the quarter was 21.9%, favorably impacted by tax benefits associated with stock awards [29] Q&A Session Summary Question: What are the most difficult parts of the integration likely to be? - Management emphasized focusing on customer needs and aligning teams early in the integration process to ensure a smooth transition [44] Question: Is it safe to assume the year is heading towards the top half of the current guidance? - Management indicated a bias towards the top end of the guidance but acknowledged potential budget exhaustion in the fourth quarter [46][48] Question: Are there opportunities to drive synergies with vendors and customers? - Management stated that while estimating synergies is ongoing, the focus remains on growth rather than immediate cost reductions [52] Question: Do you expect increased visibility in future earnings power with less exposure to upstream? - Management confirmed that diversification is a key opportunity, allowing for growth in both upstream and other markets [54] Question: How do you think about the impact from tariffs in the back half of the year? - Management noted that while tariffs have increased product costs, most sales growth has come from volume rather than price increases [67] Question: Were there specific factors that drove the outperformance in EBITDA? - Management attributed the improved EBITDA performance primarily to growth in the midstream sector [79]

Financial Data and Key Metrics Changes - Total company revenue for the quarter was $2,500,000,000 with an Adjusted EBITDA of $509,000,000, reflecting a margin of 20.1% when excluding foreign exchange impacts [7][22] - Free cash flow generated was $261,000,000, with total shareholder distributions amounting to $271,000,000 through dividends and share buybacks [7][25] - The total company backlog increased by 5% sequentially to €16,600,000,000 [22] Business Line Data and Key Metrics Changes - In the Subsea segment, revenue was DKK2.2 billion, a 14% increase compared to the first quarter, driven by increased iEPCI project activity in the North Sea and higher installation activity in Brazil [22][23] - Surface Technologies revenue was €318,000,000, a 7% increase from the first quarter, primarily due to higher project and services activity in the Middle East [23][24] - Adjusted EBITDA for Subsea was €483,000,000, up 44% sequentially, with an EBITDA margin of 21.8% [23] Market Data and Key Metrics Changes - In North America, the company has reduced its footprint by 50% over the last three years while improving operating margins and increasing cash flow [10] - International markets now represent nearly two-thirds of Surface Technologies revenue, focusing on core markets with long-term production growth ambitions [10] - Subsea orders achieved $2,600,000,000 in the quarter, with a strong performance in Subsea Services, particularly in greenfield developments [11][12] Company Strategy and Development Direction - The company is focused on transforming its Subsea operations through new commercial models and configurable product offerings, enhancing customer relationships and technology leadership [8][20] - The strategy includes exiting unprofitable markets and consolidating facilities in North America while emphasizing operational efficiency [10] - The company aims to reach a three-year goal of $30,000,000,000 in Subsea inbound by the end of the year, supported by a robust order book [21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating current market challenges and highlighted the importance of strong customer relationships and technology innovation [20] - The outlook for offshore activity remains robust, with significant project sanctioning expected in regions like Guyana and Mozambique [17][19] - The company anticipates continued strength in Subsea revenue growth and an adjusted EBITDA margin similar to the current quarter [25][27] Other Important Information - The company has increased its full-year guidance for total company adjusted EBITDA to approximately $1,800,000,000, a 30% increase compared to the prior year [28] - The company has committed to distributing at least 70% of free cash flow to shareholders, with a current distribution rate of 85% [28] Q&A Session Summary Question: Breakdown of Subsea order book composition - Management confirmed that the strong performance in Subsea Services is a result of successful market strategies and direct awards, indicating a positive trend for the business [31][32] Question: Expectations for awards in the second half - Management indicated that both the Subsea opportunities list and direct awards are expected to contribute to future awards, with confidence in maintaining a robust level of direct awards [34][36] Question: Growth trajectory for services revenue - Management confirmed that services revenue is expected to grow in line with Subsea revenue, with a strong installed base contributing to long-term sustainability [42][44] Question: Insights on brownfield and greenfield project appetite - Management noted a strong commitment to advancing both greenfield and brownfield projects, with significant capital flowing into offshore markets [51][53] Question: Emerging areas for activity outside the Golden Triangle - Management highlighted the importance of regions like East Africa and the Eastern Mediterranean, along with ongoing projects in Brazil and Guyana [61][63] Question: Competitive dynamics in the Middle East - Management emphasized the unique challenges of the Middle East market and the company's focus on technology and high-end services to maintain a competitive edge [70][72] Question: Pricing dynamics in the market - Management clarified that over 80% of their business is direct awarded, which mitigates competitive pricing pressures, focusing instead on project returns and cycle time [88][91] Question: Potential of hybrid flexible pipe technology - Management expressed optimism about the hybrid flexible pipe's applicability across various markets, emphasizing its advantages in weight and installation costs [96][98]