Baker Hughes(US:BKR)2022-10-19 16:24Financial Data and Key Metrics Changes - Orders for the quarter were $6.1 billion, up 3% sequentially and up 13% year-over-year, driven by increases across all four segments [27] - Revenue for the quarter was $5.4 billion, up 6% sequentially and up 5% year-over-year [28] - Adjusted operating income was $503 million, up 34% sequentially and up 25% year-over-year [29] - Adjusted EBITDA was $758 million, up 16% sequentially and up 14% year-over-year [30] - Free cash flow in the quarter was $417 million, with expectations for improvement in the fourth quarter [32] Business Line Data and Key Metrics Changes - Oilfield Services (OFS): Revenue was $2.8 billion, up 6% sequentially, with operating income of $330 million, up 27% sequentially [35][36] - Oilfield Equipment (OFE): Orders were $874 million, up 21% year-over-year, but revenue was $561 million, down 7% year-over-year [39] - Turbomachinery and Process Solutions (TPS): Orders were $1.8 billion, up 5% year-over-year, with revenue of $1.4 billion, down 8% year-over-year [41][42] - Digital Solutions (DS): Orders were $547 million, up 5% year-over-year, with revenue of $528 million, up 4% year-over-year [44] Market Data and Key Metrics Changes - The macro outlook remains uncertain with inflationary pressures and rising interest rates impacting demand growth [5][6] - In the oil market, price volatility is expected, but supply constraints may support price levels conducive to upstream spending growth [6] - The natural gas and LNG markets are experiencing elevated prices due to high demand, particularly from Europe [7][8] Company Strategy and Development Direction - The company announced a restructuring and resegmentation into two reporting segments: OFSE and IET, aiming for at least $150 million in cost savings [10][11] - Investments in new energy technologies and strategic acquisitions are ongoing, including the acquisition of the Power Generation division of BRUSH Group [11] - The company is focused on improving operational execution and capitalizing on the multiyear upstream spending cycle [24] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about the outlook for oil and gas, expecting double-digit upstream spending growth in 2023 [5][6] - The restructuring is expected to enhance shareholder value and improve long-term growth opportunities [11] - The company is preparing for a volatile environment but is confident in navigating challenges with recent corporate actions [24] Other Important Information - The company will change its reporting structure in the fourth quarter to enhance transparency across its business segments [33][34] - The CFO, Brian Worrell, will be leaving the company in 2023, with Nancy Buese set to replace him [25] Q&A Session Summary Question: Outlook for oil and gas capital formation cycle - Management sees a multiyear upturn in global upstream spending, particularly in international and offshore markets [50][51] Question: Impact of the Inflation Reduction Act on clean energy - The act is expected to significantly boost investments in green hydrogen and carbon capture technologies, leading to increased customer discussions and project developments [52][53] Question: Capital allocation strategy moving forward - The company remains committed to returning 60% to 80% of free cash flow to shareholders through dividends and stock repurchases [56][57] Question: Subsea business strategy and future plans - A wholesale reevaluation of the subsea business is underway, with multiple facility rationalization opportunities identified [60][61] Question: LNG services revenue outlook - Management anticipates elevated services revenues in 2023 as operators catch up on maintenance work [64][65] Question: Digital Solutions margins and revenue recovery - Margins are not expected to return to 2019 levels in 2023 due to ongoing supply chain issues, but long-term outlook remains positive [70]