Baker Hughes(US:BKR)2022-07-20 15:37Financial Data and Key Metrics Changes - Orders for the quarter were $5.9 billion, down 14% sequentially but up 15% year-over-year, driven by increases across all four segments [41] - Revenue for the quarter was $5 billion, up 4% sequentially but down 2% year-over-year, impacted by lower TPS volumes [43] - Adjusted operating income was $376 million, up 8% sequentially and up 13% year-over-year, with an adjusted operating income rate of 7.5% [45] - Free cash flow in the quarter was $147 million, impacted by lower collections and a build in inventory [48] Business Line Data and Key Metrics Changes - Oilfield Services (OFS) revenue was $2.7 billion, up 8% sequentially, with international revenue also up 8% [54] - Turbomachinery (TPS) orders were $1.9 billion, up 23% year-over-year, but revenue was $1.3 billion, down 21% [65][66] - Digital Solutions (DS) orders were $609 million, up 13% year-over-year, with revenue for the quarter at $524 million, up 1% year-over-year [71][72] Market Data and Key Metrics Changes - The natural gas market is experiencing sustained high prices and a significant increase in long-term LNG offtake agreements in the U.S., totaling over 35 MTPA in the first half of 2022 [8][9] - The company expects continued growth in international markets, particularly in the Middle East, Latin America, and North America, with strong activity levels anticipated [18][58] Company Strategy and Development Direction - The company is focused on executing its long-term strategy, investing in energy transition initiatives, and returning 60% to 80% of free cash flow to shareholders [12][13] - There is an emphasis on optimizing operations around core business areas of OFSE and IET to drive productivity and efficiency [15][16] - The company is evaluating organizational structures to drive synergies between TPS and DS, as well as OFS and OFE [90][92] Management's Comments on Operating Environment and Future Outlook - The management highlighted a mixed outlook for oil markets, with deteriorating demand due to inflation but potential supply constraints keeping prices elevated [6][7] - The company remains positive on the outlook for natural gas and anticipates significant infrastructure investment over the next five to ten years [10][11] - Management expects OFS revenue to increase in the mid-double digits for 2022, with EBITDA margin rates improving [59] Other Important Information - The company reported a GAAP diluted loss per share of $0.84, primarily due to losses related to operations in Russia [47] - The company is in the process of selling its Nexus Controls product line to General Electric, expected to close in Q2 2023 [35] Q&A Session Summary Question: Update on Russia operations and resolution timeline - Management indicated that the Russian operations are classified as held for sale, with a resolution expected by the end of the year, either through a management buyout or outright sale [75][78] Question: Inflection point in OFS business - Management agreed that there is a broad-based recovery expected internationally, particularly in the Middle East and North America, with strong growth anticipated [83][85] Question: Business realignments and synergies - Management is evaluating organizational structures to drive synergies between TPS and DS, as well as OFS and OFE, with potential financial impacts still under assessment [88][92] Question: European manufacturing exposure and energy crisis - Management does not foresee major risks to operations in Europe but is monitoring the situation and has contingency plans in place [95][96] Question: LNG order visibility and modular solutions - Management expressed confidence in the LNG pipeline of opportunities, with a notable trend towards modular LNG designs and a strong order outlook for TPS [100][104]