Baker Hughes(US:BKR)2020-04-22 19:06Financial Data and Key Metrics Changes - The first quarter of 2020 saw a revenue decline of 15% sequentially and 3% year-over-year, totaling $5.4 billion, driven by declines in TPS, Digital Solutions, and OFE, partially offset by growth in OFS [50][51] - Operating loss for the quarter was $16.1 billion, which included a $14.8 billion goodwill impairment and $1.5 billion in restructuring charges [51][52] - Free cash flow generated was $152 million, with strong receivables performance contributing to $183 million from working capital [55][56] Business Line Data and Key Metrics Changes - Oilfield Services (OFS) revenue was $3.1 billion, down 5% sequentially, with North America revenue down 2% and international revenue down 6% [60][61] - Oilfield Equipment (OFE) revenue was $712 million, down 3% year-over-year, with orders down 36% year-over-year due to no major subsea tree awards [65][66] - Turbo Machinery (TPS) revenue was $1.1 billion, down 17% year-over-year, but operating income increased by 13% year-over-year to $134 million [72][73] - Digital Solutions (DS) revenue was $489 million, down 17% year-over-year, with operating income down 57% due to lower volumes related to Covid-19 [75][77] Market Data and Key Metrics Changes - The Covid-19 pandemic is expected to negatively impact global oil demand by 20 million to 30 million barrels per day in the second quarter and by 9 million to 10 million barrels per day for the entire year [9][13] - North America drilling and completion spending is projected to contract by at least 50% in 2020 compared to 2019 [15][63] - Internationally, spending is expected to decline by double digits, with Latin America and Sub-Saharan Africa facing the sharpest declines [17][64] Company Strategy and Development Direction - The company is focusing on cost-cutting measures, including a restructuring plan expected to drive around $700 million in annualized savings [24][43] - There is an emphasis on transitioning the portfolio to a higher mix of industrial and chemical end-markets while capitalizing on energy transition-related growth opportunities [31][29] - The company aims to maintain financial strength and liquidity during the downturn, with cash and cash equivalents totaling $3 billion at the end of the quarter [46][47] Management's Comments on Operating Environment and Future Outlook - Management expressed that the current downturn is different from previous ones, with improved systems and processes in place to respond quickly [85][88] - The outlook for oil supply and demand remains uncertain, with expectations of a significant decline in activity levels and project delays [14][15] - The company remains positive on the medium to long-term outlook for natural gas and LNG prices, despite the challenges faced in 2020 [13][120] Other Important Information - The company has taken decisive actions to cut costs and optimize processes, including reducing capital expenditures by over 20% compared to prior estimates [24][47] - The company is leveraging technology for remote operations and virtual testing to enhance efficiency and reduce costs for customers [26][90] Q&A Session Summary Question: How does Baker Hughes' current situation differ from past downturns? - Management highlighted that the company has better visibility and improved processes since the last downturn, allowing for a more agile response to market conditions [85][88] Question: What is the outlook for margins in Oilfield Services? - Management indicated that despite headwinds, they expect to maintain strong margins through cost efficiency measures [97][102] Question: What is the medium to long-term outlook for LNG orders? - Management expects fewer LNG FIDs in 2020 but remains optimistic about the long-term growth outlook for LNG demand [120][121]