Weatherford International (WFRD) Q2 2025 Earnings Call July 23, 2025 08:30 AM ET Company ParticipantsLuke Lemoine - SVP - Corporate Development & IRGirish Saligram - President and Chief Executive OfficerAnuj Dhruv - EVP & CFOJ. David Anderson - Managing DirectorScott Gruber - Director - Oilfield Services & Equipment ResearchJames West - MD, Head - Energy & Power ResearchAtidrip Modak - Vice President - Energy Services & E&PsJosh Jayne - Managing DirectorConference Call ParticipantsJim Rollyson - Director & ...

2Q 2025 Results July 23, 2025 Copyright 2025 Baker Hughes Company. All rights reserved. The information contained in this document is company confidential and proprietary property of Baker Hughes and its affiliates. It is used only for the benefit of Baker Hughes and may not be distributed, transmitted, reproduced, altered, or used for any purpose without the express written consent of Baker Hughes. Copyright 2025 Baker Hughes Company. All rights reserved. 1 This presentation (and oral statements made regar ...

Second-quarter highlights Orders of $7.0 billion, including $3.5 billion of IET orders.RPO of $34.0 billion, including record IET RPO of $31.3 billion.Revenue of $6.9 billion, down 3% year-over-year.Attributable net income of $701 million.GAAP diluted EPS of $0.71 and adjusted diluted EPS* of $0.63.Adjusted EBITDA* of $1,212 million, up 7% year-over-year.Cash flows from operating activities of $510 million and free cash flow* of $239 million.Returns to shareholders of $423 million, including $196 million of ...

Core Viewpoint - Baker Hughes (BKR) is expected to report second-quarter 2025 results on July 22, with indications of a decline in both earnings and revenues compared to the previous year [1][7]. Group 1: Earnings Performance - In the last reported quarter, BKR's adjusted earnings were 51 cents per share, exceeding the Zacks Consensus Estimate of 47 cents, driven by higher demand for natural gas technology and improved EBITDA margins [2]. - The Zacks Consensus Estimate for second-quarter earnings per share is 55 cents, reflecting a 3.5% decline from the prior year's reported figure [2]. - The estimated revenue for the second quarter is $6.6 billion, indicating a 7.1% decline from the year-ago figure [2]. Group 2: Market Conditions - The average WTI spot prices for April, May, and June were $63.54, $62.17, and $68.17 per barrel, respectively, suggesting a favorable pricing environment for exploration and production companies [3]. - The advantageous crude pricing is expected to boost demand for oilfield services, aiding exploration and production players in efficiently managing oil and gas wells [3]. Group 3: Order and Revenue Estimates - The Zacks Consensus Estimate for BKR's total orders is $6.8 billion, down from $7.5 billion reported in the same quarter last year [4]. - Orders from the Oilfield Services & Equipment business are estimated at $3.5 billion, lower than the $4.1 billion reported in the previous year [4]. - Revenue from the Oilfield Services & Equipment segment is projected to decline by 10% year-over-year, which may negatively impact overall results for the upcoming quarter [5][7]. Group 4: Earnings Expectations - The current Earnings ESP for BKR is +3.03%, but the model does not indicate a definitive earnings beat this time [6][8]. - BKR holds a Zacks Rank of 4 (Sell), which suggests a less favorable outlook compared to other stocks in the sector [8].

Financial Data and Key Metrics Changes - Total Q1 revenue was $280 million, up 3% sequentially, with adjusted EBITDA of $94 million, an increase of 1.2% sequentially [9][11] - GAAP net income for Q1 was $54 million, down from $57 million in the previous quarter, primarily due to professional fees incurred at corporate [12] - Adjusted net income and earnings per share were $59 million and $0.73 per share, respectively, compared to $57 million and $0.71 per share in the fourth quarter [12] Business Line Data and Key Metrics Changes - Pressure Control segment revenues were $190 million, up 7.7% sequentially, driven by customer drilling efficiencies [9][10] - Spoolable Technologies segment revenues were $93 million, down 3.6% sequentially due to lower domestic customer activity, partially offset by increased international shipments [10][11] - Operating income for Pressure Control increased by $3.5 million or 6.9% sequentially, while Spoolable Technologies saw a decrease of $1.6 million or 6.5% sequentially [10] Market Data and Key Metrics Changes - International sales in the Spoolable Technologies segment increased by 30% quarter over quarter, driven by robust demand in Canada [22] - The company expects U.S. land drilling activity to decline slightly in the second quarter, with approximately 30 fewer land rigs operating than at the end of Q1 [20] Company Strategy and Development Direction - The company is focused on mitigating tariff impacts by increasing alternative sourcing and ramping up production from its Vietnam facility [16][17] - There is a commitment to international expansion, although no specific updates were provided during the call [26] - The company plans to reduce full-year 2025 net CapEx outlook to a range of $40 million to $50 million while maintaining critical investments [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining profitability despite macroeconomic uncertainties and tariff impacts [27] - The company anticipates a decline in pressure control revenue in Q2 but expects spoolable technologies revenue to increase due to seasonal expansion [20][21] - Management noted that downturns historically create opportunities for new customer acquisition and that they are already seeing such opportunities [90] Other Important Information - The company paid a quarterly dividend of $0.13 per share, resulting in a cash outflow of approximately $11 million [13] - The cash balance at the end of the quarter was $348 million, reflecting a sequential increase of approximately $5 million [13] Q&A Session Summary Question: Transition to Vietnam and cost advantages - Management clarified that Bossier City is not a low-cost operation but offers fast turnaround and robust manufacturing, protecting market share [30] Question: Customer behavior regarding tariffs - Management confirmed that customers have requested to pull forward purchases, but these requests have been denied to maintain fairness among all customers [39] Question: Customer loyalty during downturns - Management indicated that major customers are sticking with the company, emphasizing the importance of supply chain sustainability [42] Question: M&A opportunities in the current environment - Management noted that private equity firms are willing to sell oil field service investments at attractive prices, but the focus remains on the current industry [46] Question: Impact of tariffs on margins - Management acknowledged that there will be some margin compression in the second half of the year due to tariffs, but diversification efforts will help mitigate impacts [68] Question: Ongoing Section 232 investigation - Management expressed that the U.S. lacks adequate steelmaking capacity, which could lead to inflationary pressures [81]

Financial Data and Key Metrics Changes - Solaris generated total revenue of $126 million in Q1 2025, reflecting a 31% increase from the prior quarter [24] - Adjusted EBITDA for the quarter was $47 million, representing a 25% increase from the prior quarter [24] - The average contract tenor for Power Solutions increased to approximately 5.5 years, compared to about 4 years last quarter [20] Business Segment Data and Key Metrics Changes - Power Solutions contributed 55% of total segment adjusted EBITDA and is expected to contribute more than 80% of consolidated adjusted EBITDA after the on-order fleet is deployed [24] - Solaris Logistics experienced a strong first quarter with system activity up over 25% sequentially, benefiting from seasonal rebound and new customer wins [12] - Approximately 75% of locations were equipped with both legacy sand silo systems and top fill systems, effectively doubling earnings potential at the individual wellsite level [13] Market Data and Key Metrics Changes - The company secured an additional 330 megawatts of 16.5 megawatt turbines to meet accelerating market demand, bringing the total expected operating fleet to approximately 1,700 megawatts [18][19] - The average megawatts earning revenue is expected to increase by 13% sequentially to 440 megawatts in Q2 2025 and by 18% to approximately 520 megawatts in Q3 2025 [24] Company Strategy and Development Direction - The company is focused on generating strong free cash flow from its logistics business and reinvesting that cash into the growing Power Solutions business [5] - Solaris aims to maximize shareholder value through growth while maintaining a strong financial profile [17] - The company is working on diversifying its customer base while securing extended contract tenors with existing customers [80] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the demand for power solutions, citing ongoing discussions for additional oilfield applications and data center projects [33] - The company anticipates a potential slowdown in oil-directed activity in the second half of the year due to commodity price softness [14] - Management highlighted the importance of co-locating generation on-site for customers to diversify energy sources and control primary and backup power [10] Other Important Information - The company is planning to manufacture certain capital items in-house to reduce costs and enhance returns [28] - Solaris is addressing regulatory challenges by collaborating with customers to select the best available control technology for emissions [16] Q&A Session Summary Question: What is the demand outlook for uncontracted assets? - Management indicated strong demand for uncontracted assets, with ongoing discussions for various applications, including oilfield and data center projects [33] Question: What is the expected EBITDA per megawatt? - Management noted that the dollar per megawatt economics are in line with expectations, with some lumpiness due to ramping up the business [35][36] Question: Will clients be able to attain air permits in a reasonable time? - Management confirmed that the customer is following EPA guidelines and expects to obtain the necessary permits [44] Question: What is the margin profile difference between data center power and other industrial applications? - Management stated that while the pricing is similar, larger jobs in data centers provide a bit more operating leverage, resulting in slightly higher margins [83] Question: How is the company addressing supply chain challenges? - Management acknowledged the tight supply chain but emphasized their ability to secure additional capacity through strong relationships with OEMs [51] Question: What are the end markets for industrial opportunities? - Management highlighted various industrial applications, including metals manufacturing and high-load compressors, as key areas for future growth [101]

Financial Data and Key Metrics Changes - First quarter revenue decreased by 3% year on year, totaling $8.5 billion, primarily due to lower international revenue offsetting strong North American results [9][24] - Earnings per share excluding charges and credits was $0.72, a decrease of $0.03 compared to the same quarter last year [23] - Adjusted EBITDA margin for the first quarter was 23.8%, up 18 basis points year on year [24] Business Line Data and Key Metrics Changes - Digital and Integration revenue increased by 6% year on year, driven by a 17% growth in digital revenue [28] - Reservoir Performance revenue decreased by 1% year on year, with margins declining due to less favorable activity mix and project startup costs [29] - Well Construction revenue declined by 12% year on year, primarily due to lower drilling activity in North America and international markets [29] - Production Systems revenue increased by 4%, with margins growing by 197 basis points year on year, supported by strong demand in production and recovery activities [30] Market Data and Key Metrics Changes - International revenue decreased by 5% year on year, largely driven by reduced activity in Mexico, Saudi Arabia, and Russia [24] - North America revenue increased by 8% year on year, attributed to higher digital and subsea production system sales [24] - Double-digit growth was achieved in several markets, including the UAE, North Africa, Kuwait, Argentina, and China [10] Company Strategy and Development Direction - The company remains focused on executing its strategy, managing costs, and delivering differentiated performance for customers amid global economic uncertainty [16] - There is an increased emphasis on production recovery and technology deployment to unlock new growth potential [17] - The company is capitalizing on low carbon markets and expanding its Data Center Infrastructure Solutions business [19][63] Management's Comments on Operating Environment and Future Outlook - The management expects global upstream investment to decline compared to 2024, with more resilient customer spending in the Middle East and Asia [15] - The company anticipates flat to mid-single-digit revenue growth in the second half of the year, assuming stable oil prices [20] - Management expressed confidence in the company's ability to generate strong margins and cash flows despite market uncertainties [21] Other Important Information - The company is committed to returning at least $4 billion to shareholders in 2025 [20] - The pending acquisition of ChampionX is progressing, with confidence in closing by the end of the second quarter or early third quarter of 2025 [33][75] Q&A Session Summary Question: Outlook for international and North American markets - Management clarified that upstream spending is expected to decline year on year, with North America facing more downside exposure than international markets [38] Question: Activity in Saudi Arabia - Management indicated that while there are many moving parts, they expect an uptick in activity in Saudi Arabia driven by gas ambitions and OPEC production stabilization [44][46] Question: EBITDA margin expectations - Management aims to maintain an EBITDA margin around 25% for the full year, but tariffs could impact this goal [52] Question: Digital growth resilience - Management believes that the secular trend of digital adoption is accelerating, with mid to high teens growth expected in the digital business [55] Question: Diversification strategy beyond oil and gas - Management outlined steps taken to diversify into low carbon markets, including carbon capture and geothermal projects, with revenue expected to exceed $1 billion in 2025 [60][65] Question: Confidence in free cash flow generation - Management expressed confidence in strong free cash flow generation throughout the year, supporting their commitment to return capital to shareholders [103]

Core Insights - Baker Hughes reported revenue of $6.43 billion for the quarter ended March 2025, a slight year-over-year increase of 0.1% [1] - The company's EPS for the same period was $0.51, up from $0.43 a year ago, exceeding the consensus estimate of $0.47 by 8.51% [1] - Revenue fell short of the Zacks Consensus Estimate of $6.51 billion, resulting in a surprise of -1.31% [1] Financial Performance - Total orders for the quarter were $6.46 billion, slightly above the average estimate of $6.43 billion [4] - Orders in the Industrial & Energy Technology segment were $3.18 billion, exceeding the $3.09 billion estimate [4] - Oilfield Services & Equipment orders were $3.28 billion, below the $3.42 billion estimate [4] Segment Revenue Analysis - Revenue from Oilfield Services & Equipment International was $2.58 billion, a decline of 7.7% year-over-year, and below the $2.62 billion estimate [4] - North America Oilfield Services & Equipment revenue was $922 million, slightly above the $917.32 million estimate, representing a year-over-year decrease of 6.9% [4] - Revenue from Climate Technology Solutions surged to $178 million, a significant increase of 114.5% year-over-year, surpassing the $146.53 million estimate [4] Stock Performance - Baker Hughes shares have declined by 18.5% over the past month, compared to a 5.1% decline in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market [3]

Financial Data and Key Metrics Changes - The first quarter results were in line with earlier expectations, but activity levels softened further in key segments and geographies [9] - Adjusted free cash flow for the quarter was $66 million, with a free cash flow conversion rate of 26.1% compared to 24.4% in Q1 2024 [10][23] - Adjusted EBITDA margins for Q1 were 21.2%, impacted by lower revenues and project startup costs [11] Business Line Data and Key Metrics Changes - North America saw a sequential decline of 4%, while Europe softened due to operator cutbacks in the UK [10] - The Middle East and Asia regions experienced year-on-year growth, demonstrating resilience [10] - The company successfully delivered advanced services in the UK North Sea and deepwater Brazil, showcasing technology adoption [12] Market Data and Key Metrics Changes - Activity in Mexico is expected to decline around 60% year-on-year, worse than the previously anticipated 30% to 50% [10] - The overall international market has softened, with significant drops in Mexico and continued reductions in U.S. land activity levels [14] - The company anticipates a broad-based slowdown in the second half of the year due to global trade reductions and increased supply [18] Company Strategy and Development Direction - The company is focused on maintaining margins and not chasing market share without value [29] - A significant reduction in gross debt by approximately $1 billion has strengthened the balance sheet [30] - The company is adapting its cost structure and has reduced headcount by over 1,000, with annualized personnel expenses down by over $100 million [16][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's future but acknowledged the changed market conditions and uncertainty [29] - The outlook for 2025 includes expected revenue declines of high single to mid double digits in North America and low double to mid double digits internationally [20] - Management remains hopeful for a milder spending reduction compared to previous cycles due to industry discipline [16] Other Important Information - The company has divested its Argentina pressure pumping and wireline businesses to focus on the Vaca Muerta region [19] - The proceeds from divestitures will be used to enhance the portfolio and return cash to shareholders [19] - The company plans to maintain its quarterly dividend of $0.25 per share and continue its share repurchase program [11][30] Q&A Session Summary Question: Insights on international markets and MENA trends - Management noted that international markets, particularly MENA, tend to be more stable, with ongoing robust spending patterns in regions like Kuwait and the UAE [37][40] Question: Duration and severity of the downturn - Management indicated that the current downturn is expected to be milder and not universal, with different causes in different regions [43][44] Question: Impact of divestitures on guidance - The divestitures are expected to impact revenue by approximately 100 to 300 basis points, with adjustments made for North America and other regions [55][56] Question: Use of proceeds from divestitures - Proceeds will enhance overall liquidity, support dividends, and allow for opportunistic debt reduction and potential acquisitions [61][62] Question: Potential tariff impacts - Management stated that quantifying tariff impacts is difficult at this stage, but they expect a degree of uncertainty leading to reduced activity levels [106][107] Question: Digital spending outlook - Management believes that digital products focused on production optimization will remain a significant opportunity, despite potential reductions in discretionary spending [110]