Baker Hughes(US:BKR)2024-04-24 17:55Financial Data and Key Metrics Changes - The company reported adjusted EBITDA of $943 million, a 21% year-over-year increase, exceeding the midpoint of guidance due to stronger performance in IET [60] - GAAP diluted earnings per share were $0.45, with adjusted earnings per share increasing by 50% compared to the same quarter last year [60] - Free cash flow was robust at $502 million, with a target for full-year free cash flow conversion of 45% to 50% [63] Business Line Data and Key Metrics Changes - IET orders totaled over $2.9 billion, with non-LNG Gas Tech Equipment orders more than tripling year-over-year, highlighting the diversity of the customer base [71][72] - OFSE revenue was $3.8 billion, up 6% year-over-year, with EBITDA in the segment increasing by 11% year-over-year [70] - IET revenue for the quarter was $2.6 billion, a 23% increase from the prior year, driven by a 46% increase in Gas Tech Equipment revenues [73] Market Data and Key Metrics Changes - The company expects E&P spending to increase by high single digits this year, with a decline in North American gas basins partially offset by modest improvement in oil activity [25][26] - Global LNG demand is projected to grow by mid-single digits annually through the end of the decade, supported by a strong demand outlook [32][34] - The company anticipates continued upstream spending growth, particularly in offshore markets in Latin America and West Africa [27] Company Strategy and Development Direction - The company is focused on achieving 20% EBITDA margins for both OFSE and IET segments by 2025 and 2026, respectively, through operational improvements and cost efficiencies [75][92] - A three-pronged approach of transforming the core, investing for growth, and positioning for new energy frontiers is being employed to enhance profitability [77] - The company is well-positioned to capitalize on the transition towards gas and increasing investments in new energy and chemicals [44][46] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the orders range for 2024, with a strong pipeline of activity and growing customer confidence in gas infrastructure [3][4] - The company remains optimistic about achieving new energy orders between $800 million and $1 billion, reflecting a tripling of new energy orders since 2021 [39] - Management noted that the macroeconomic environment, including oil price dynamics and geopolitical risks, will influence the company's performance but does not alter the strategic outlook [23][24] Other Important Information - The company increased its quarterly dividend by $0.01 to $0.21, representing an 11% year-over-year increase, and repurchased $158 million of shares [22][64] - The balance sheet remains strong, with cash of $2.7 billion and a net debt to trailing 12-month adjusted EBITDA ratio of 0.8x [63] Q&A Session Summary Question: Can you discuss the annual order guidance for IET? - Management remains confident in the 2024 orders range, having booked over $2.9 billion in orders, including significant awards from Aramco and Black & Veatch [2][15] Question: What are the drivers for achieving 20% OFSE margins next year? - Management highlighted productivity, cost management, and price volume as key drivers, with a cost-out program in place to enhance efficiency [5][6][7] Question: How does the company view the competitive landscape in production optimization? - Management emphasized the company's strong capabilities in production optimization and the importance of mature asset management, which represents a significant opportunity [102][108] Question: What impact does the Saudi MSC reduction have on Baker Hughes? - Management sees the MSC reduction as an opportunity for growth in gas production and infrastructure, benefiting the IET business [112][114] Question: Can you elaborate on the non-LNG Gas Tech Equipment orders? - Management noted that non-LNG orders have tripled year-over-year, driven by strong demand across various end markets, including upstream and midstream sectors [123][125]