BKR - Earnings call transcript Q3 2017

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Operator

Good day, ladies and gentlemen and welcome to the Baker Hughes, a GE Company Third Quarter 2017 Earnings Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] And as a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. of President Vice Mueller, Investor Relations. Phil may you begin. Sir,

Phil Mueller

and Thank third Baker the Good quarter everyone, you, morning, welcome Hughes, earnings call. to conference Sandra. XXXX a GE Company

Simonelli, our Here today earnings bhge.com. found release earlier Today's Chairman on and issued the our was can and presentation with and CFO, are CEO, today me that our Worrell. Brian at Lorenzo be website

statements. provide the As this will and of during we course predictions, a other forward-looking reminder, call, conference forecasts,

statements are and Although guarantees our you they of expectations, these that cause a for risks reflect performance the future of to filings could involve some actual assumptions. not and discussion SEC current of advise of results a factors materially. review to number our We differ

Simonelli. section. prepared Relations a I'll believe a and and using statements the the this measures measures company completed the been Investor business in the and on that operation results will that, turn quarter X, enhance our and merger financial comparisons non-GAAP reconciliations earnings All can combined on release income be other Also, Lorenzo of quarter operations. combined basis to call the at as had of financial we under the basis of if bhge.com on evaluation website on business are With we additional results. operating merger, January Because following its non-GAAP our year over combined In of profitability XXXX. is have first the GAAP our business addition, prior to found ongoing to these

Lorenzo Simonelli

today. joining everyone morning Good Thank you, Phil. for thanks us and

as what team our XX first achieved like begin with we the Before company. combined in would results, I we've a to our thank for quarter days

be we a this said, will journey. As

than since The business and we particularly integrate. the Our operational current planning prior of was July integration BHGE X. constructive I'm In to capabilities time. on Hughes, day for of creation Company as about the price convinced with detailed and progress positive we're to project can and core combined one. environment, drive focus our to having Customer impressed how the need commodity the to more preparation companies creation a I'm GE the closing. of on the improve critical ever our Thanks this customers. sustained the right the right feedback on and understanding continues discussions be operations productivity improving Baker is at that very speed is our combine low the fully economics. very

steps From our along first our We've is operations. of the downstream, Our broad Perfect also clearly offering of customers, and process. culture We're our else partnership our employees our safety we involved customers for chain new in its everybody has message of the HSE a company solutions. value a and Day resonating. taken implemented upstream driving to provide

you hurricanes As to in number Irwin. we've and quarter a know, Irma as combined such Harvey, first of have already deal environmental our events as challenging company, a with

to of by employees. who events, these thoughts affected all including go many out Our our those are

topics. three cover Turning I'll this to discussion, morning's

I'll brief a give quarter. the our in of First, overview results operational

of achievements key the market of key share the some industry I'll perspective the segments of and Second, in our highlight the dynamics quarter. our and

was clients businesses Adjusted revenues. operating and long saw the orders with revenue in our we on consistent I'll third and In results financial view the the sequential Brian, and previously. questions. more for have the our in the give some $X.X delivered detailed in million. we in shorter billion $X.X $XXX billion shared in with more you cycle cycle thoughts businesses, open will integration. review quarter, income We our Finally, we growth you before then new the call company detail,

in challenges in was $X.XX. our performance offset EPS negative oilfield by We business, adjusted in equipment and margin segment. particularly to see were per cycle continue $X.XX Earnings service partially share our improved longer oilfield our business,

with to generation. critical improve execution this of margins still results ahead pleased component operating and positive of order While a I'm Synergy quarter, the orders of is we have cash in lot that. us a work

plans synergy are simplifying reduce are XX in operating to in structure. company in Further, Our identified of our on executing place them. the full improve first productivity our and in cost the now and we've opportunities days operations, teams and additional

have we deliver the our to We commitments. on growth are We know and company positioning profitability. for to higher where focus

few want execute. it's place. oilfield to growth go continue in on will Now, of by line segment, driven results, spend market America. services what our through a well minutes we're up to seeing to construction our we detail to to I Brian us the business financial but North see the the In

While up more counts rig North deceleration than XX% year-to-date, a second saw with versus American up X% the count we is quarter the quarter. in US land rig the

expect we positions. through While stay of operators year, the North about flat has positive and are the quite of end into activity customers market better in line America hedge the production sight the until budgets to outlook, XXXX generally

advanced continue where practices intensity per service construction us increase. capabilities We and continue well our differentiate well that drilling will industrial believe to to marketplace, in the

to we metrics in rather the and PDC bits XXX drilling AutoTrak fluids curve total in arena more industrial can techniques, drilling tailored we've North system, well Our rates a of America, quoted where than the in steerable removable hour. drill construction rotary We helped the miles This raised of solids in the penetration be far operators particularly feet and well was delivered performance, improve mile count enhanced now in of bar high-efficiency growth bits, third where in drilling Talon day and drilled outpaced per a XX our a in quarter. services cost a Utica. We've wells, have in speaks and drill period. per Marcellus footage hour North rig how reduce high-build than in businesses America our

by know now every more laterals we that laterals our long being longer in and basin have customers. [ph] We planned complex

is services rig with services coming the for more count Our activity into flat these quarters positioned year-to-date. drilling muted business challenging come in horizons remains growth in drilling play. International as oilfield

we subsea are pressured. with offshore. the in contract low critical more tenders segment, drilling commodity contracts continues Middle that two in oilfield feel both in water equipments However size for To we about customer volume awarded customers cost In be continue remains be Latin a the signs price as and new important an very completion well of as challenging. the stability. East of Activity to to were America deep their and market our multi and integrated point activity confident work operating increase as year large seeing prices

awards to to XX% significantly up XXXX, XXX XXXX a three seen in below versus levels be expect XXXX. We peak in XXX, still but

win tools quarter design to in manufacturing The to previously communicated, support across our most win gas in a and of result using market. field. we a oil process we deliver this our products As initiative significant digital a is competitive subsea cost the had the productivity the

efforts out were ability the Egypt's cost securing part local develop in award of being and critical content energy and to Our future.

New business offering. our generate an This demonstration Twinza announced support for development will During through with the also is first quarter customers an to for for our is of value model stream provide Oil exciting Papua project agreement Guinea. executed The our ability offshore development the in we industry. full what the

our provide oilfield oilfield the term. unique in we short a be differentiation. Despite and for in our expect successes between services the quarter, very to capability can of turbomachinery value segments combination continue markets the equipment, to and proposition high productivity commercial customers these the subsea challenge With

which cost midterm mid-stream a in LNG in have the serve a purpose to Nova in refining, Opportunities this in and significant for and LT we customer's an the a In any have oil industrial with long plant innovative COX and and applications these XXXX. Many The for value deliver and per anything I'm sector. increase been year. leading supplied will our equipment segments include, continues little a to portfolio stranded from near these term to emissions our year to XX.X few. name to in with should the surface market earlier co-generation markets. positive to gas LNG serve supply with apply in power the market, monetization, large recovery will over electricity of process. to pressured industry Nova across over refineries turbomachinery This an fit in pleased participate, that sign projects, wastage supplied of we short this applications megawatt is expanding be prices Malaysia proposition We lower turbine in most Turbomachinery to landscape. traditional power services tons both gain of and advantage capabilities. efficiency that In have unsurpassed energy a segment, recovery say in help better equipments downstream growth terms manufacturing remains To contract of this range in pipelines function. and the gas secured facility exists for complex segment LT term more XX,XXX our compressions and plant and The our gas gas we approach competitive by acquire board segments we to generator. a gas

forward, particularly advantage and to them be the plant compression over portfolio continue end In large enabling refining to energy. for deal Gas end see we the stabilize the refinery medium and in continue won segment, North America three in Middle critical healthy controls Earlier to East production return seven and by and in In a measurement market cleaner some and Cost supply supply returning quarter, petrochemicals, growth. are robust, to to produce to East. slowly arrived. to beginning Non-oil in industrials. term. we end trends we driven we this the continue turbine basis an projects demand. costs and America. theme markets move expect aviation the gas However, Oil solutions provide that base projects end for to drive won a markets to ethylene a margins to year plant growth In Middle contract our North compressors driven digital markets we see

with the software million approximately with important continue quarter asset in Predix customer. traction and offerings Mexico. third BT, Gulf in secured we services program GE award based gain In in includes largest quarter, award This plant digital solution term And on in Our $XXX operations management our of international of the place. the digital holistic an performance market platform. the live a ever long advisory to we from went our the

customer, we I portfolio is calculations are perspective, in reducing are applying uniquely evaluating help non-productive our on or together of their all this performing new solutions businesses. day are for focused and productivity space and emerging Almost them customers our million changes in believe make a from our digital either technology Our with XX positioned we time. step

first the leadership as a over Lastly combined positions on been The quarter have progress integration, we've place in is all company. and made significant organization stalled.

over I trained have impacting company. changes points to We engage September, opportunity the the integrated of continue in over in early with live their personally with our had customers costumers and most And XX,XXX and roles many two employees after we XX% the weeks first fully the our them important globe commercial have around went regularly. personal to in with our had closing. on update platform. touch We new of

As actions are underway as know, you cost well.

quarter. by laid and made are in achieving we of We for Overall, amount successfully actions the out. feel year. feel have we the XX targets third quarter completion XX progress end wherever necessary. an an of synergy it restructuring additional the the initiated incredible facilities good consolidated is about taking We I in I over the

We early ourXXX had recently the day are just still and days in anniversary.

over With go through Brian, let our are encouraging. highly seen what to track turn far I've so call We me the financial to results. that, is and on

Brian Worrell

offset at results XX% East. Thanks up and was start X% in total long had activity digital in increase driven cycle by in segments, equipment business partially X% declines Year-over-year and delays and [indiscernible] XX% into oilfield in continued in downXX% our details. The spending. as year-over-year. and the the up $X.X and America as segments Backlog Equipment shorter our billion was with solutions base This driven of segment quarter equipment and showed well Lorenzo. the grew at strong which Middle headwinds a billion, increase of cycle North from Quarter-over-quarter orders oilfield by in customer ended go billion services turbomachinery services the picked as quarter X.X all by orders increased our strong I'll is company XXXX Both our backlog We then these orders comparisons sequentially with $XX.X quarter in businesses respectively. the third $XX.X growth. the billion. total in quarter. grew. were backlog second and and

in significant income. and quarter longer equipment first quarters XXXX backlog third the backlog. was excludes sequentially. billion we XXX oilfield in ratio. where was adjusted the and grew $XXX were related as as The Service loss as in million and costs decline restructuring, an increases oilfield equipment services Middle is America order equipment sequentially $XX.X On Adjusted drove well net activity positive by oilfield X% straight million which which result businesses, We lower a cycle this revenue second operating up as declines marking billion, our six year-over-year is both lower and turbomachinery of book-to-bill equipment. cycle our oilfield operating This solutions in with the by X.X and of intake, East. The the and versus million. increases Year-over-year for services opening charges offset this was Revenue were was sequentially. Operating quarter of sequential in X% sequentially. business quarter and the driven quarter X.X our last a other of down million. saw turbomachinery quarter backlog income up XXX the merger XXX% was flat was basis, $XXX book-to-bill and over quarter North as and increased impairment short delivered the digital

a by supply in chain Included approximately of adjusted up results adjusting operating As quarter digital driven impact by negative by income, as solutions Even delays the equipment. some we second charges in services, due the was and hurricane items, partially out turbomachinery, sequential oilfield in driven operating income the purchase a expenses to a higher in our amortization continued reminder, quarter. from offset reported result oilfields called strengths significantly comparing those Harvey. and we softness had caused when when our it's $XX accounting. for In third of impact million non-recurring

increase majority to was was down offset services income by We to more the than in XX%, segments. come in that of expect the other fourth back the the operating Year-over-year us quarter. in declines oilfield

for restructuring quarter generated the million, the losses the Next have was while US loss that I'll expense an taxes. quarter, US, we within in for primarily Tax net we were $XX taken. the income and due cover the actions overall outside position we to

time, US losses, that's overall foreign income been within with have unable a expense. period but we deduct Our we were tax a tax, position for in to the the higher because net these of loss driving

from the As we overtime US the in quarter. start to built benefit up expect generate from we allowances to earnings valuation this including the ones

profile cash was per XQ, follow quarter For share negative similar this the quarter cents. On quarter. quarter for Free to million. in we $X.XX. expect third adjusted basis, flow Loss earnings share the were the an per taxes third $X.XX XXX to was

from this merger was related anticipated activities, we'd below expectations. While significant a flow and the out quarter's restructuring performance

some differently insights you give run then forward. give First, we to you going are let things me some details into will going I and how

items accelerated a XXX a compensation that of quarter. the approximately targets. lease incentive related by This in amount as severance execute by million and triggered as was merger. and synergy merger both significant a We had well out as our restructuring buy significant said achieve restructuring of driven to payments I we were impact payment As the had negative

receivable were had continued below a our business. and XXX services programs. mainly we accounts expectation Operationally were our the our both approximately in receivables million addition from by negative factoring reduction of In oilfield performance impact and inventory driven

next team. be the While in quarters better of from we expecting integration, some performance to distraction might that attributable the are significantly from the

commitment on conversion. our of have to build improved cash senior processes operational a dedicated We our leader deliver to

into drive more visibility reporting addition, are both and In flow. operating mechanisms integrating cash to we

in We to free cash quarter be quarter. third than markedly generation flow fourth operational expect the better

are were activity delivered seeing saw in of muted, segment billion Next revenues oilfield I'll markets, business growth walk activity sequentially. increases selected quarter improve through rig up quarter, signs flattening oilfield services deceleration the X% of continues the second market since a the in results. though. solid to we and North In services, the end International in of remains versus though America we the The count July. some a X.X

lines the land and the the sequentially This gains Arabia, construction completions was Rockies. product business growth quarter-over-quarter The North Middle with in driven solid Permian in East. particularly improvement by well the delivered double America in Saudi and digit

for and X% and mentioned, for up the delivered by had was double revenue efforts billion X in North primarily and Harvey lines and revenue as delivered driven quarter environment. mix, hurricane operating the in flat Outside Revenues driven As XX the artificial Internationally, volume, which business out well and income which as the higher America Middle the sequentially in completions operate. by the favorable up and bits business. was perform as drilling The delivered to the rig gains begin East, with growth business favorable chemicals Despite line income digit business Lorenzo complicated strong the declines view higher current business services, product Sub-Saharan drilling by drill incremental were pumping. expect revenue our were wire a services pressure up by completions North uncompleted offset is onshore line purchase the by as Asia Operating in driven increase all continue bits solid customers million sequentially The North increased count XXX bits partially American margin. completions X.X Middle business. accounting. growth primarily growth America. for bits, Latin We by growth continue businesses And additional markets and Drilling and Africa. sequential and as driven impact, well dynamics Europe These both down drill completions, that operating in services, the North X% million a East laterals. partially cost from America construction includes drill was in Middle outpaced In in in drill XX in billion was XX services lift growth. volume. but we businesses, count our for in to growth America and near we Regionally term market work to million amortization income rig drill activity the year-over-year. to result construction inventory. and million approximately this, the sequentially operators offset of drill of East is drilling

to operating margin expect programs, we the in up additional leverage we to As ramp our drive synergy continue business.

business Our orders operate growth to in difficult OFE despite line continues top environment. a very

activity at low term. was few As and the $XXX last of Orders last in the on million X.X, Lorenzo mentioned, The with signs improvement remains with the were is driven book-to-bill win. the Mozambique levels the in primarily success win. versus quarter team the up building Zoro XX% significant short equipment Eni quarter by year from

focused continued systems and system the flexible our Services base. rebuilding in the business by the increases OFE production drilling in market. driven as pipe orders North install America systems was pressure by Revenue lower up continued supporting backlog, business. which driven levels orders XX% through team were for business, on market revenue increasing strength decline pressure as his activity backlog. of in addition well Neil In in equipment rig control its year-over-year. are in Brazilian also project million the The was year-over-year, XXX down showed X% subsea

slightly to partially deals only loss in the large expect $XX the unfavorable won revenue equipment generating offsetting million start the on revenues was year-over-year. weakness revenues. were XXXX Operating We Service in was which up XXXX.

was contracts pressure and nature, income the driven OFE is versus at down volume Brazilian $XX of We forward. impacted in customers FX, the in bases year-over-year the $XX quarter. Brazil going Brazil. leverage. was and level of operating dollar key by Sub-Saharan significant by operating driven movements and strengthening reoccur pound the consider mainly the million fulfilling impact and exchange in Foreign Even term US the the but not the same Africa do the approximately expect negative and long impact, by impact with real operational has UK excluding negatively manufacturing in cost to FX This million. income British the

we flexible business control out. and In in offset to which cost partially Overall, with businesses, challenged. think to pricing we be systems the see continue pressure will the OFE only addition productivity continue headwinds and pipe to were able

We build deals. expect key to for and compete backlog

continues this However, cost are in reducing to seen has off, environment. been operate as team you've customer the in spending prepared push projects to and large

prior Now, this growth challenges moving quarter up the the to Turbomachinery of and continued XX% third and in equipment were X.X orders were solutions, primary team delivered solid process year year-over-year. Total the orders orders despite versus XX% market. billion across

business. compression find business gas quarter. improvements strong large the in as orders remained of in in portion Middle increased no the As XX% year-over-year several the in the There softness rate some FID's also wins were deals LNG East. onshore mainly for the in compression down we and were downstream saw in win fewer The as a gas lower and upgrades actually customer in the business Service the equipment offshore for as well quarter. spending projects of TPS modest the quarter. by primarily result driven some

transactional were in as were services. In income X% slightly was up year-over-year. addition lower revenues delivered our down year-over-year. of in down volumes Turbo down transactional revenues service installations Operating result partially equipment was $X.X order Service intake a services, and the activity year-over-year. machine up. XXXX. by up, billion for XX% was downstream $XXX Contractual from million, lower related of year-over-year Turbomachinery Revenue business also offset

Our higher lower positive service our equipment the service than rates in volume sales. more from was up, offset margin backlog impact

Overall years, term. term, business expect leadership the expect opportunities and they the technology business the we In winning primarily upstream. its work and on a expect of volume downstream present fourth to headwinds spin from to delays capture and and Similar industrial on equipment we equipment continue expect low in increase TPS lower we executing lower orders in mix, are levels in to market at the the continue sides business we As quarter to focused service an offset challenges to the we on projects, themselves. more downstream customer project is L&G be short margins orders the to service prior in the margin through as to see short continue.

on remain a the end oil we while in Next as reminder aerospace and a automotive, an investments year-over-year customer markets business that some of the digital few see In and large Digital as delivered project operates in low. oil important gas orders million. end this with XXX the power, was by XX% third international quarter Predix stabilization across markets, This a deal solutions, driven different solutions the Lorenzo gas, mentioned business and major earlier.

the a you. continue fourth lower the XX% that by offset With we base lower expect turn year-over-year process down quarter XXXX. seasonality, year-over-year. in were Revenue mainly Overall, in strength was for in it see was growth to solutions. more and Middle Excluding but in and than of business condition America. million we well partially down by to was our by Latin X% line negative grow solutions in deal, and as year-over-year. typical to solutions growth as the large East in Europe We over businesses. technologies I'll back orders offset offset Solutions saw Operating business driven partially digital $XXX process projects that monitoring driven this product down decline slightly in continue a margin and Regionally Digital other The pipeline by $XX EPC Lorenzo, the mix. was the slowdown income of with by lines, million pipeline to the inspection in quarter fourth

Lorenzo Simonelli

July quarter. I'm the day wins the we one booked on secured Brian. with and perspective. the orders. we've in pleased hit inspiration And of transaction the billion on from Overall, and formed closed the key progress new We $X.X X. company the quarter brand running an new Commercially in ground several made Thanks we

lining are base operations a are immediate action. see We improvement, taking and need we we where for

that We the for our delivering cash improvements are generation on focused are results margin best customers. and

Actions on to the to our to growth for and company growth, are optimistic feel executing we our on on margins and the for on commitments are way now questions. continue cash. future. and over deliver position about profitability We and the focused strategy Phil, you I

Phil Mueller

Thanks, with up questions let's open Sandra. call the for that

Operator

Evercore [Operator from James Instructions] Our West comes first with question ISI.

Your line is open. now

James West

HI, good guys. morning

guys XX%? I three are and it's do Where of where kind margins XX%, you And share pillars results? you are you we you to conversion. that flow been assume cash in on, getting Lorenzo So, free a in process, focused think XXX the the are regaining days, only on stand optimal get that, we some

Lorenzo Simonelli

thanks James we remain We're what transaction very well. mentioned, we strategic this feel maybe the pillars you is our backdrop focused going the and Thanks, to control. just for recognizing. into relative celebrating as that just XXX three days And on we very

count we one-by-one drilling services about As you are you When and course look look at America, them begin North the feel XX% let's outpaced that. had environment, with. and bits at the external the growth, to rig year averages. in you the above growing five growth still performance pillars, the during the of take at the three oil On quarter, inventories look third good you

we the You got sequentially second in performance; where orders. look quarter orders it's the at a row, positive

a at Critical one the you all, Egypt in key at look You performance a positive. perspective, this on from a which was up subsea year-over-year XX%, look wins, book-to-bill digital.

growth key but and a meeting it's to early are here of that good what the has you track. the relative integration, on customers side, synergies. market the So, the we of with been on we it's from on the with as of key during we've noted over out a the margins focus On as days, we I track, standpoint course see the XXXX, there the we getting committed synergies, two aspect traction the days first in on XXX XX% you the remains and for met the commercial customers. are first at look September is to integration focused week, and mentioned even challenging, definitely and

and Brian the its aspect in sequential again, four industry the perspective, positive business margins of performance. which our segment and in sequentially Sea look a sea is of showing walked three got you segment through that recovery. part of You delayed weakness at from to be the We've performance Sub continuing the businesses are

a cash, of You look area pillar as it's the for at focus Brian mentioned, us. third key

of items, course from that the During operational the focus I an didn't areas of quarter, It's the wanted it we key one it's related had addressed acting area key inventory we perform upon perspective receivables, where to got quarter, have an and we've time one a restructuring, however, I'd we in people something it's say we've and to third continue focus on. as the immediately. and that on we

positive team key So, on when but momentum, priorities. rallied you the look got we've at and the early definitely days, focused it,

thanks So James.

James West

Okay, then little you the one up buy work old How are but cash okay guys again return on position. over but this, pack know or pay sheer bit And just net now fair dividend follow days, about you've thinking program? and strategy, be enough. may shareholder seen those unrelated, and I your or

Lorenzo Simonelli

an capital Yeah you committed allocation James, hold XX% and days to and we we're that's to to XXX capital on that going give mentioned netting a XX% coming plan, returning update allocation of friendly just be maybe share September in to to shareholders. a of

creating also strong shareholder allocation review that us the we to gives drive mentioned part with moment going key through and And alliance our buy value. the the balance inorganic with strategic We it's ability We are that and capital significant actions. be being backs are undertaken. to going also got a that's board of at our priorities sheet

team it be to want as to the balanced are we and to the So, sheet, make with a forward, per an announced it's at forward, forward. reviewing as look as the as as and board, and know, we strong going a $X.XX continues industry our also giving are challenging we quarter did in We sure be we'll environment. you we that a the we so update go volatile going maintain balance we third of go share that we approach take dividend

James West

get Okay, Lorenzo. it, thanks

Operator

Thank you Morgan next line and of Stanley. from comes [indiscernible] the our with question

now Your open. line is

Unidentified Analyst

congratulations very days. on Yeah, and thank the you XXX much yes,

and a a noisy, kind even standpoint, think So few and for still foreign little I a exchange the adjusting cash early was is quarter of the light, other things. a little it

on, example us update could give ahead, though get issued I subsea you state could [indiscernible]. could you some think you know to if initiatives, run whether I of game initiatives profitable will If business you a in equipment improvement without this through a your is the get any you've systems these focus on Could given believe Hughes you margins give be an What targets into the on us of, could the integration more. you going but So, even there, let example way. wonder little current CRM, some better of in Baker your GE I there and on to give in on for you on for updated implement have bit on kind so update that the improvement the view us in of an back you and a handle environment, there the margins? businesses, you'll a for could say us trying the normalize view think?

Lorenzo Simonelli

off. our from OFS and the trail We going into be if and under at merger in restructuring, quite driven To $XXX forward, well, and as I as start that given related a But, said, it of I as as noisy deal quarter, out next had cash, sea by come was so did look deal with year a our and well a definitely cost was quarter that the bit of should mentioned primarily I quarter. this our that this a little capital $XXX by build first fourth bit We flow you alright was about million. million. declining here a know perspective, cost bit an inventory working related cash we'll that program the monetization expectations business. us impacted down the took the We about bubbles in that had is as

payback to high look drive we at continue as restructuring earlier here. the synergies will We

restructuring the us, I how mobilized So, collections, continue I expect processes to have at look mentioned we only across to cost the operating team better visibility, to drive with build not better portfolio. and but the as stronger can we earlier,

seasonality, that would of here quarter expect some items. of process changes operationally, making some are and others were the then, that I onetime last definitely So, fourth better

Unidentified Analyst

in as that on lot done all maybe a telecoms the we These it we considered of a interest second when and Its the wanted clarity quarter next a to a aggressively to after still timing opportunities, things cost strike merged, is all of year it. more are be to of the the quarter a of overnight, underlined to get or start to mentioned if infrastructure you yes, lot never hanging go me performance? third should

Brian Worrell

Yeah, But of I way processes some think four operating the you in by have a get a realistic think have clearly and to expectation. then so, lot three I the place. that's full of quarters under restructuring here will

Unidentified Analyst

sorry. Lorenzo Okay,

Lorenzo Simonelli

your and speedy the you and of growing Yeah segment America, think we on but now, address decelerating about just know, North if question still to see in us some rising. you activity recovery all internationally business

the at was same business. sea, level, enablers the able low, execution you to important chain, we're cause whole our also And business, for that look you and in at should cut tools there the activity we've of so continuing business were on win Mozambique. cost some going our time; as very within you've at On long offering improvement really seen a third to second supply it's this our the over quarter term, margin digital one major quarter, extremely and other the it's feel our see We of key forward focused customers the won aspect moment applying deal and Zorro project in the excellence being win and that competitiveness. by subsea, relative we key

Unidentified Analyst

much. it very Okay, hand thank you Well back. I'll

Operator

you open. of comes our from now your question line is the Andrew [indiscernible], next Thank and line

Unidentified Analyst

Lorenzo, good guys helpful. really morning very appreciate Brian. Thanks, the That I details. granular was

up and talk structure I M&A, and would to X? on talk recent on balance sheet shadow, about given you I your So, maybe, the on in allocation allocation about subsea undelivered capital maybe can suppose also of optimal follow start giving the market especially cost, thoughts capital capital I your had guess we've

Brian Worrell

talked we leverage. I under have definitely to Andy, relook we are opportunity think earlier structure, capital an we Okay when

If was with with But, as said, have know, that of we here talking are call, you Lorenzo what a get the we working cash to lot you that know, metrics guys, look process. you through will gone we've once you sheet good, of update the the metrics, balance look by at the board about we've and I to flow a in strong and in steady free got sheet the a continued early a we September. to in into as plant straight line more in talked here balance

through as work the we'll So, posted keep you things we with board.

Lorenzo Simonelli

the aspect the focus you speculate really I've right to hand, that got best now three our numerous previously had. full. rumors, we And And that partner with we've that just and think on work was out all there businesses CPC's previously, hands of on don't we I on the know, see with for with the out subsea there, customers, them. we positioned Andy mentioned our also really well integration our we on what's is rumor our X, relative We the outcome winds

Andrew

very done that it how your helpful. thanks, the the internationally could past, and acid like world, when you strategy past? there, how look that maybe the about little at the oilfield of change strategy things bit could how model and have and think in Alright then things potentially some these rolling back was when you specifically a you through can from talk differ And for services,

Brian Worrell

combination product look we Yeah good that portfolio, the Andy, if at you we have. about very feel our

and our to above, put you to gas, work the a suite customers think going capabilities the drive is we've the we combination you think from and got when that Now, of line and unique in us oil below lifting really about have of drilling we and services. together, the packaging's equipment, mud with enable geo When efficiencies. the industry

That's also what us that lowest In per cost us of forward, be to to working continue the customers strategy productivity. here, is changer going environments operating through have the efficiencies drive we and each to the that's on the and well this on really forward. construction, we're that's for, go of as capabilities really us game efficiencies to ask our within barrel, take aspect digital and working we get necessary We productivity. inefficiency the going get are the to silos it's the the drive and are workplace environment

Lorenzo Simonelli

was decided a really like customers, we some as talked asset And model because before, Andy we have infrastructure like the dramatically reducing our us and to between I look the taking asset that have, of And contemplated. are were regions folks not model. being the of at we

well. know geography that. based profitability decisions we evaluate and continue from until now asset going model to upon our our are the But, You like the returns to going make and is

Andrew

turn over. guys, thanks I'll it Alright

Operator

comes Fargo, next Wells Bailey open. line our from and line your with you Thank is Jud now the question of

Jud Bailey

comment if on I move XXXX, a year could and a see talk Thank flatter the oversupplied do do comment, be But some, about to up have good segment, are I bit Hughes. dragger more got your morning. you could question, toward Could big looking a at maybe broadly just of TPS at you, I moment. understanding or think a or sort one? quarters outlook, is the L&G's it orders there's because mixable, down, maybe you you more possible been next and I tell seen Baker the little rightly on we for little

Brian Worrell

at more perspectives order to also actually it, operating in focus we the at go continuing you customers. look a you L&G to production. from up at as the rightly more PPS see but as look and if do segments when you should better to as relative services at challenging, a L&G XXXX, activities the midstream then maintain we comeback see is what is within remains Jud, business and on that much But towards other on see onshore demand pick also you business look an the the pipelines, as the in And you free there there we portion our started transactional we trauma, to to downstream and out the activity continuing being is of we offshore Yeah, look said there and there.

Jud Bailey

and up could under that's be TPS? Could obviously Okay, thinking some As you margins? in about how to for revenue going us thank that that maybe mix you're how impact pressure. year-over-year margins talk next of follow just the through, thinking year the very I same is is the am grows, about revenue margins basic revenue much on service quota you but segment,

Brian Worrell

margined Yeah operating dynamics in up and at TPS, and in Jud, we quarter XX% Service take revenues now mix comes you service. was incomes look down right the know in if the a you are are good primarily X%, than profitable. by set more but is all negative got by as driven the backlog, not certainly work as it segments we mix some which in equipment a tailwind, is through a downstream was which

had get refilling As booked what I on expect if log log a you so today. back quarter, the I that next the look, grew, negative would in quarters, we a based are equipment X back backlog we couple that next look the should actually have the to into really is mix On of continue of transactional and services But in bill better we the what that, of see, turn in are year, a bags the business, year. based top seen as year some well. headwinds through the as cash operators we that progress on we and and our later that's conserving as

Jud Bailey

Okay, I appreciate the color.

answered about, thanks. You've

Operator

Suisse, your from comes of open. is with question Thank Jim you the line and our now Credit next Wicklund line

Jim Wicklund

you with forecast got given of you kind North performance with QX, you've reporting peers of wondering, kind any the for we've anymore, guys. just looking the don't while BJ. current comfortable petrol Can when the numbers. business in under some pumping at address was I America And guys XX I'm Good are and and that? having oilfield have America driver you am the just to you margin US biggest at quarter. down income, XX, are really station just how from strikes some me either it onshore weak right your was of guys higher the in morning that a relatively realize services that X%, outlook I operating segment, consensus the North of directly with X.X% engine

Brian Worrell

have America, going obviously business which do is our portfolios if in you as not pressure are North chemicals a what's rightly a counting related We you don't Paso take and pointed pumping, out, America Yeah, we the El different. land. rig on directly bit at North to look have

well. completions, wire if look that margins. that's strong growth in than know drilling have rig count incompletion as rig had you And more count, driven, this drilling performance are and we strong line, you services minimal really drill the in really all you at businesses really services If in fear higher are quarter, the those and beds at look

quarter, next we I won't As don't services the but do and the drilling in flattening end, a much be Lorenzo both as see in fourth think some market and I as we see mentioned, really And strong tail quarter be year. also are fourth bit and in product growth pretty we other areas, the a some then have the in then synergy in margins in lower. our were that should coming

So, little the from when and mixed drive from But I bit, cost positioning flattening from I and with a a know margins. put would here perspective share products historical in on focused we you you higher to be all point, a line that are averages. is know gaining the market, together, something expect end we it incremental talked as to about

Jim Wicklund

from BJ? can contribution about equity income and you the Okay talk

Brian Worrell

business we But good a and we do Yeah can got mode coming in you is that. BJ on a of we at look building pumping position and if it from with standpoint, we a as by what's team commercially they team we month the position work do. working like on as do the more because the within the that. And $XX there, need something going as with BJ the pressure services one and and a quickly reminder we with in , report do as where they look closely are we services together visibility to that in you a negative our business, lag, we we don't know quarter close was

Jim Wicklund

Okay appreciate I much, the you thank help. very guys

Operator

our and now of line Anderson comes Thank with question David from open. the line Barclays, you is next your

David Anderson

in I good oil able even be oil talk guess think the the do will the and remain worried than you words, range was best, Can I'll a still about next parts your part your a morning. you in bit the ensure other bigger price the of without of the I quite margin business claws business you of which your is is perform expansion? couple with will years. for which for mix bound here, so, to come grow question names prices different just Thank picture other sooner space,

Brian Worrell

you good again. so, to Thanks speak to

of cycle portfolio, the you key benefit also through we and as you the well you at think we compliment also of you synergies being we are When a longer services range businesses. look growth. look got oilfield look As about yes and going the bound, are as achieve to price the the that different at good at focus

those, EBITDA there's come will synergies the customers on happening will by revenue good we've revenue lot we enable of that million already us. side synergies, that the with the XXXX of about good , through feel conversations indicated So, $XXX

previously, that gas longer returning, so side, we about and also look grow being to pipelines and L&G XXXX. the about digital mentioned at at growing also business the continuing in think out refinery see again the you on As look returning, you think our you term gas then the when other again orders and PPS the we segments our downstream, And the when chemicals, solutions business.

As oil segment also industrial gas, GDP. you is aviation think and the more which pace that's to about outside of that's with continuing

based an opportunity that on have even race; ranges in grow we are outlook. So, again to

David Anderson

those wanted reasoning address hitting Your don't bottom, kind quarter just the call even is you you there, year, under just respect numbers constant how from and you I still number now your see oil of to EBITDA? you looking your if XXXX appreciably that move case up are into And about if consensus could here? first are with prices out next

Lorenzo Simonelli

that everyone continuing back the that that on is challenged in I things. go said the of some pushups in won't others and a are be We've XXXX industry seen else you to we providing market the know go was consistent to similar some the in you the the perspective. you think I guidance on overseas but, look the forward, we trust America said, new similar thinking was in on to at that Also grove North David, with on we projects. And some deceleration industry. the from side so that to market at you conference, conference, September Yeah looking we be a

really and the are providing more as updates forward. we synergies we'll go control, we staying we what the So, focused be integration

David Anderson

Lorenzo. you, Thank

Operator

next our and is the [indiscernible], line of comes you Thank question your from open. now line

Unidentified Analyst

kind walk we about Hey, thanks pieces gap can bridge for quick verses as the XQ the guess if you consensus, to squeezing the trying XQ me in. moving through of of we sequential think if kind change. question I

XX should synergies, you the we'll have should digital the be for have TPS got million You up cost under up. some ways, and chain solutions supply be

I of gap, And kind increase the so can bridge know think there's you XXX if million in you a of kind XQ?

Lorenzo Simonelli

Harvey, to of did definitely quarter, give perspective in Yeah, majority so a the that to point out the you will things, come be that, that some back us couple you should helpful. of on

some have fourth businesses, is quarter. the to solutions in normal; seasonality supposed solutions the grow digital digital so We in

we and walk And through to feel Tim, have in about in there. increase come LFS expect LFS think, volume I some As our through growth see good synergies back we we'll lined as well, with if we position TPS in well. quarter at a business got looked as for for that as the services. grow us well to as the we lot equipment in log, as productivity up And of fourth and

quarter, the improvement in the and see synergy, it up in will ramp those drivers start lower should So, after are some to the base we big this synergies.

Unidentified Analyst

and equipment, if there? do even offshore in also of Okay, to are ready how line get it and long then on break the the kind margins you call the think so, here, to will bottom short you another equipment decline also back and margins

Lorenzo Simonelli

have here. in affect definitely is this challenging equipment all to particular continuing be offshore size Yeah, And an did quarter we impact.

So, that at level. I don't expect them to repeat

should you margins get perspective, that better that alone. quarter from So quarter from see over

Neil after to deal And know this bottom, on lot decline. us. team out taking calling a really You of cost makes and focused they've sense been volume the been going deals the and with for have

here we you quarters. as item other log. right look we back they we appreciable So, I in good about the expect continue the in hard margin as for so be next feel But cost to drive, challenged, increase than do know FX this think will the working they I are profitability, few position, to rebuild wouldn't

Unidentified Analyst

out the a you clean margin there, there, was if feedback on FX have Any number? do

Lorenzo Simonelli

The FX was $XX. around

Unidentified Analyst

turn I'll over. Thanks, Brian. back it Okay.

Operator

line [indiscernible], comes our from Thank line you and now question open. of your the is final

Unidentified Analyst

way. you Thanks just to I hour number justify that for taking on the get my back specific don't XX a want to the phrase appreciate this but question. I guess at

Can now orders need consensus As you much us of and you expect orders be give sense mentioned about how we EBITDA up. $X.X you a to at billion look that of other a to try to sense to and understand to that variable, be magnitude of lot get up, a give are of but to us there level, kind that there? I just

Brian Worrell

it level and by down you business. just be go break just if down may maybe business because for and a look take it, it it it's orders better by Let's are, take to

you So we America along some international look market hour Middle at North first you at continue business, and The see the we with your also up North sea, Latin in recover the in to America. when activity know ramping look East

look and mentioned and that still the perspective. in also you orders elements from North to so from see improving you better we pressured business, revenues should So, and improving actually, TPS but is we this in see orders relative we the moment be of the OFE, see performance XXXX downstream know momentum production, continuing On we activity the you look as XXXX. at revenue positive be if should aviation again decelerated time; essentially side in revenues America in continued pressured, offshore, perspective we And their see oil gas being have outside some you area, at industrial XXXX thing, even we onshore the should to though the there. there. also stop should at to But

break the of three when are down opportunity from and really the sort business segment. So, an by the that's here know you it segments business you in help which revenue out XXXX four landscape us of seeing

Unidentified Analyst

terms down of had that the world at large at Okay, a - quarter, few at was can there, the sort kind much into follow some that I order? portion level and is thanks break help $X up, one recurring time billion down Maybe now. if pretty the suspect benefits of us I right how recurring for it's in orders this X of Lorenzo. billion of that as you you one large look stays you of on Can time that that break

Lorenzo Simonelli

or X.X billion the that X maybe orders. I So billion think number, business in an is it's that for total a at extra FX

Unidentified Analyst

Yeah, correct.

got about Sorry that you.

Lorenzo Simonelli

the Okay, - so again repeat billion to can question you please? X the relative the

Unidentified Analyst

portion recurring we maybe the to billion business, really the much X sense time, baseline how that's number is legacy and GE of what of the might large so of get backlog that the something just in largely the driven businesses, be a X is one versus which billion have in something that So if might orders recurring be.

Lorenzo Simonelli

always based going lumpiness be Yeah, take that look on to there's place. big some orders

and billion, then If the that highlight is a the digital Zoro XXX million you'd as we something you'd big say, in mentioned there X you close big look as at that to with a order international customer.

Brian Worrell

this for that's big kind about we out is, we Eni last too the point a as quarter, and Mozambique Yeah, also would quarter-over-quarter Zoro normalized. one quarter the had thing that had I order of while

Unidentified Analyst

and for Okay, that I'll back. great. Thanks it turn

Operator

you I'll Q&A Mr. now call Thank the remarks. concludes call. the for to back and turn of portion final Simonelli this the

Lorenzo Simonelli

and are you wins execute us to doing into the where joining in and we've several booked business just that key to lining much. this need quarter immediate for billion again we've of improvement, orders. created. all made XXX out, with maybe thanks that We've We're this having our we've morning. had Thank going where quarter. and to in we And We new base taking wanted pleased what for we're focused very discussion you we're be progress customers I we terrific on you of days new to close $X.X margin We're the open so that I'm this and cash generation actions. improvement forward. that's the operations today. and going very been results need we're best delivering know with

much. very you thank So

Operator

have Ladies a and thank in you all conference. may program gentlemen, This for Everyone disconnect. great you and today's day. participating the concludes

Baker Hughes (BKR) 20 Oct 172017 Q3 Earnings call transcript