BKR - Earnings call transcript Q1 2018

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Operator

Good day, ladies and gentlemen, and welcome to the Baker Hughes, a GE company First Quarter 2018 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. to host like Mr. today's now would introduce for your conference, I Mueller, Relations. Investor President Phil of Vice Sir, begin. you may

Phil Mueller

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

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

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

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

reconciliations GAAP operating non-GAAP at our of found in bhge.com other and section. measures Relations release Investor be know, and our to earnings income under As on website can you the

new to All pension this these In standards quarter review adopted we new prior standards. period relating our and several cost updated financials for have Please mainly to addition, filings been and reflect accounting benefit recognition our revenue presentation. business April closed as the financials. X prior combined to all if discussed to Lorenzo. I over for call today XXXX. a on the Similar results transaction With X, on are turn January quarters, that, recasted basis will

Lorenzo Simonelli

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

in integration I detail $X.X improvements flow Free improvement quarter perspective we today, review a call and progress with We up the offset EPS in I our we to Earnings the revenues our tier orders in closing share committed was our then was brief per in $X.X billion to businesses. business million, the billion you also both synergies. the more expectations. questions. last environment. quarter Brian give was an $X.XX. on shareholders. shareholder our adjusted call progress returned oil was results our the $XXX open will declines financial in market $X.XX to services saw cash on more is quarter the the update than will laid for delivered in million; significant quarter my we will field the first the results and the cycle by income and in and quarter line current in On in the remain operating made $XXX We we on returns, before overview delivering in results, Adjusted our company long over actions of first on give top for we've out deal $X.X billion year. since the our how

GDP I day XXXX. United improved the economic a few growth overall is to for nearly In an see take steady per global in million the demand pace, barrels a In a to alone, States market, driven expected month discuss X to by like moments Europe. and oil we would at the dynamics. add market rising the of Asia Now outlook strong

average production mostly the On cuts XXXX end more grew the OPEC X% with production barrels of quarter and committed up have million day to supply for XX the of driven per production first versus Shell. US Russia quarter fourth XXXX. to than side, by

which certain competitive. of in remained activity businesses quarter. these increasing North inventories cycle seeing We range particularly prices short first subdued resulted have our market that markets, for in the The stops grow crude we're a keep relatively counts. spend where though Internationally continue factors expect forecast have drawn XXXX. US in in price recent has This resulted on a crude we growth in year-over-year operators five-year to These geo America count remain bound and solid to the in rig shows that seen equilibrium average. have closer customer will stability full well market offshore signs

However we through year. activity expect to the increase

We to on our to to this customers global is the more energy upstream decades. While roughly we the focused grow other United within both than large as make see gas see per in them States. with the and we continue we're over cash through grow more the independence XXXX, internationally limiting as investments any a discipline twice their X.X% and shifting fast their to expected fuel capital seeing operating year. E&P flows, expect coming Consumption CapEx fossil spend

We of well XXXX. part year. by demand per more tons double projected to annum to demand of X% this XXX As X% LNG million that than a growth above Growing pace to expect dynamic, in saw XXXX. per we at pace

decisions is required investment global grew final first that the coupled to volumes of The Market million the decade which mid-next nearly up early imports points in to rose again in on for demand which positioned. translate well LNG new capacity first versus should project XX% meet XX the recent quarter demand in of to significantly quarter Import supply; XXXX. FIDs tons LNG balance suggests data versus demand, As lack with imports global we're the increase project X% for the with to LNG, tightening. XXXX.

for project While our see increasingly not is LNG positive outlook any FIDs in did first the becoming quarter. we

move to through expect We progress projects we begin as will XXXX.

the highlights like to quarter. from share Now would I first some

and and our markets well openhole displacing grow our only operating fields. ESP artificial line leading a We're services XXXX. laid rigs and these in contract wire us remains for improving wins in was lines. award We efficiency made services not best our wire strong throughout of With line competitors to our priorities synergies commitment delivering hole This large in its share award and work the all on priorities focused a Gulf Permian international we a improving to quarter in product competitor. lines fields We committed but services on progress gaining secured margins also for key construction in class our by executing first Our and product and to on the great momentum in Permian. Mexico, five-year our oil large in the out In lift and the unchanged. XXX% displacing key operational continued in on field operations. lift company in customers. demonstrates to free also our Basin continued cased performance these of oil artificial due Kinder This awarded solidifies Morgan's the position with four

we've contract after Chemicals lines our deepwater was fastest of this We of Upstream also to-date. drilling for field, product who had wells one in awarded the with the strong Upstream oil expansion managed in Africa, customer million This of product large for displaced this several the and based a strategy in major on of three-year mature chemicals. our a for international drilling Gulf In [ph]. past was the competitor rigs fields competition product other the regions performance line displaced Chemicals the the a award on line all customer's Mexico our our on services field of in with company West decades build $XXX

We automation also Basin. record strategy well setting progress significant and another by construction in our on made the Marcellus

engineers feet office. recorded our this competitors. we customers their on MWD extended Based completely drove models directional we're In a displacing remote project the single-run in with focus customer's providing operation our from and performance the over total drilling Our In with system the ever technology, serve a costs. we XX,XXX equipment design multi-year and longest award operation, needs, that our longstanding customer of relationship eight maintaining reach and oilfield just additional including commercial innovative an won segment performed oilfield on multiple while days. drillers equipment

together you give few for The initial me and quarter, BP's SURF BHGE how a delivering a well Tortue In Let customers. for for feed we're SPS in examples was contract full a offshore Field and Development McDermott our selected the is Mauritania development. first of study Senegal.

in approach instrumental applications with [ph] pressure, large BP. gas and leadership securing in technical from award high were high for Our this partnership the full our combined temperature McDermott

with subsea our for preferred another [ph] the solutions We in Chrysaor in that also and our full is wells stream independent forward. company of BHGE commercial allow Chrysaor, latest partner Armada of a to and win novel competitive capabilities. and services main to area. service as customers secured projects leading oilfield and combining advantage UK our E&P move ability equipment example oilfield the design provider our equipment and selected partner by service oilfield was integrated

align have track record proven incentives deliver to a with that implementing us customers enable We our our of and models and on new outcomes. commercial executing better

developed nearly for a years For new now drilling we model of example, Transocean two with offshore diamond operating and partnerships service equipment. we where Limited our drilling offshore have and history

Our in significant a meaningful than experience the last time non-productive realized Diamond over performance has achieving customers subsea have less six months. improvements. X.XX% reduction

stakeholders all end the shift with leading relationships performance This While benefits industry and transactional Transocean at BHGE from a is awarded of reliability. traditional XXXX. driving bonus

the been that Western awarded OFE, this to project contract Chevron, I'm pleased II on the equipment we've subsea of in Australia. Gorgon by Lastly offshore announce week Phase

development continue we We XX is trees the turbomachinery today. partners. industry will solutions with phase controlled wellheads In has largest its Gorgon Chevron a months. and concept early including the of our and subsea subsea process over key drive and another partner of manifolds, next laid this development in and one the equipment priorities four segment, The strategic gas we systems. out multi-stage to together efficiencies XX since BHGE natural production projects supply the been

capture in the significant the we and market. growth First, opportunities will maintain the position in our LNG

capability service schedules our for pick and transactional outage maintain up. and optimize will we Second, services

aggressively will the drive team expand [Indiscernible] are the we we industrial simplify market space and business the and into structure cost Third, these out. fourth of will underpenetrated priorities. and the on executing such

turbine plus part three number preassembled secured important invest + designed pipeline were we the we with installation to commercial between few in and gas phases In lower two quarter. the Statoil longer last technologies will and more service reduce as gas We customers million award to $XX a FPSOs LMXXXX two last and key to turbomachinery we've the of field, the first engineering, of generators phases. America, power, in construction electric for us launch gas contract events, the PF+ to the compressor two LMXXXX reduce award introduced years, total provide differentiation provide LMXXXX the deliver simplifying This of the which to will Over our LMXXXX at a the technology In and which Castberg We large provide drive awarded turbine Norway, ownership. These help customer Johan into value generators. equipment interfaces be year. for continued an allow we gas our customers. an turbine execution some project. cost to to equipment emissions coupled for our operate the GX, of specifically North customers and GX technology will and secured module wins site,

XXX centrifugal And PCL of for We our three planned maintenance all XX unplanned our this tried will three install and customer. compressors for gas turbines aeroderivative and PGTXX+ of years. we've

continue LTXX also our to the pipeline We a with award seen four of product success driven compressors building family an megawatt gas this turbine to lower Securing for gain on in already in NovaLT Asia, project we've Central traction line. equipment. provide

and offerings these believe In their for last gaining us of on call, and our on more first earnings quarter design and at began driving well manufacturing looking we're traction In out business a business. TPSs As leaders. with our structure. technology measurement cost customers from to installation. profitable create everything better position shared cost software we're Solution as process Digital lower focused our service to and the rationalizing position our cost segment, the will franchise product are We the by solidifying also I product on future. the this controls and by our base optimizing actions regional We're we

first Let quarter. the me examples highlight a few from

NVIDIA's with The We ultrasonic significantly This partnership traction one productivity. power Asian scale recognition quicker with software measurements. industry; to see to continue using corrosion with predictive forward. refinery improved oil announced portfolio on their our operations gas and going real-time market management thermal change. applications. software, with algorithms the and oil to industry gaining intelligence operational will computing an as reduce analysis image partnership data conditions and the use advanced and help materially to to offerings capabilities as Management and modeling computing well to modeling our analytics, we productive NVIDIA As the enable combines advanced in suited focus the to agreement customer gas cost techniques disrupting lower particularly artificial convention we can growing thickness We're we our Corrosion inspection our enable signed costs of an and optimize also companies

sales line our continue double-digit our products our including markets and manufacturer. cost. Our across strengthen just industrial measurement to of oil major and a Japanese in In the one convert lines growth position accurate thickness sold gas. software selling a we technology and inspection measurement piping Technologies auto beyond inspection controls CT offering the product of In Asia end enables number of we only wall the for world and leadership our scale. repeatable, temperature reduces for product to of deployment at CT CT in first in scans We're technology

complex anomalies than detected in traditional and are manufactured systems parts and ensure other Our capable cracks easier structural inspecting methods. are faster to

Our speed for scan out times system hundred can system be a which several than CT faster applied industrial is segment. conventional

delivered integration, tremendous nine XXXX, quarter the first first a the months synergies. made we've million combined over Turning company. progress now to we as In $XXX of

first additional with $XXX We've of XXXX as facility reducing the combinations. locations million firmly to operational Our making on facility we larger for in more remains shift office locations planned consolidations an year consolidation progress total track. quarter. closed We're excellent rooftop on XX from commitment

of of the At extensive two assessment in early lift optimize respective end together of areas operation the effort of We completed ESP the set rolled efficiency market, our customer preferences, have is of a product of and quarter. customers level significant out businesses. the the we made the industry. have highest most a the cost total was integrate most focus the that market in performance companies of to new that offering evaluation XXXX, of now in offerings One reliability our of of a that this and to-date. on artificial and ESPs bringing in progress ESPs advanced included The and the first system. is an result our We've complete to portfolio

our and consolidation manufacturing to began complete also expect this footprint mid-year. optimizing we We by

priorities our XXXX Finally, for remain unchanged.

on With me share We that margins focused to improving let Brian. generating market more the and call over are growing turn cash.

Brian Worrell

into total results the and Thanks Lorenzo. with then I'll segment company begin details. move the

X% As Orders orders driven by grew X% our year-over-year. $X.X led orders up were quarter. digital Lorenzo all across down up billion mentioned grew XX%. up for strong Quarter-over-quarter were orders by segments the portfolio. equipment is which we delivered typical in a seasonality X%. and We X% Backlog turbomachinery was solutions orders Oilfield versus billion long-term with quarter and backlog or backlog last ended of growth $XX.X at billion billion the $X.X impact revenue ended primarily billion billion at up standard. Service the ended driving up quarter. $X.X adopting Equipment at accounting The the to $X.X new turbomachinery $XX.X up due agreements X%. was X% increase. recognition service

down the long in quarter our will businesses for first X% cycle standard. we under seasonality Obligations On a But implemented across the sequentially digital short $X.X $XX Performance Remaining specific accounting in not Going loss saw segment. into by the forward, orders typical report billion. billion driven as or all primarily by Depreciation we Year-over-year is revenue. RPO cycle than was adjusted Revenue for revenue quarter criteria basis purchase quarter million. booked converted and adjusted represents oilfield yet equipment. other our were solutions. for the recognition quarter. oilfield requirement million. for meets offset oilfield was excludes the continued declines RPO the in quarter we and contractual Operating growth and and of the RPO offset declines services $XXX revenue newly was X% was was which million our of slightly up first Year-over-year an sequentially was businesses, partially we due was which quarter expected by our $XX.X to operating growth driven Adjusted down of turbomachinery versus million as segments. income other oilfield was quarter was in XX% in and income restructuring, amortization and $XXX income the $XXX digital operating in seasonal impairment services down accounting D&A million. lower services Corporate XX% charges solutions. oilfield operating by XX% costs adjustments and XXXX. the $XX equipment turbomachinery

of earnings share quarter, million excluded impact per share we results. $X.XX, outflows. earnings first in were million. $XXX by over a previously includes million positive from We a quarter of tax US for driven as reform. this was taxes $XXX credit in the capital. the the our quarter tax flow yield we excluding million improvement share which adjusted been on Earnings impact the This adjusted $XX expense started first in cash quarter related Free $X.XX. tax Next per our delivered the quarter from restructuring cash cash million which per has were had the actions $XXX million cash working $XX deal highlighted free to We $XXX included strong have flow generated and of was

As improvement quarter, quarter during of accounts working increasing our you receivable, cash may the On earnings $XXX reducing time. capital of on pace generated cycle our collections third In on million call. outlined flow. receivable XXXX focused accounts several recall and I areas we're operating

We despite also up, we is balance the our quarter management down inventory when inventory on close continue to make deal. first our build versus progress typical

much I'm there quarter by sales increased Net implemented Gross improvements still part million. disposals assets pleased our While we integration the so do, with ongoing far. the is $XXX from as can of efforts. were driven proceeds more for was asset $XXX million the quarter in of CapEx we've

Since we've over buybacks closing We a total in deal, executed Next now In A of our paid executing billion quarter, dividends. our have capital progress strategy. for shareholders. update I and in $X give $X.X of Class the to over share an pro-rata Class basis allocation returned we million. to shares the and you $XXX on B billion first repurchased on wanted million $XXX both a

X% In improve. I'll land the segment increase to the services, conditions quarter turn to first market oilfield US saw we in continue Now sequential In rigs. results.

versus counts by The to market offshore With drilled fourth quarter with XX% rise. driven count quarter-over-quarter. drilling supply continue chain activity industry-wide down the However uncompleted US completed was slowed outpacing completions, the challenges. the but well US well

see X% X% Given flat of drilling QX. XXXX. East our pick $X.X completion of offset year-end was income to million driven lift Gulf largest down sequentially volume and product strong incremental progress and Revenue were for $XXX the XX% slightly services as declines and billion due in related artificial saw These Latin fourth lift. America. in Latin the up in billion partially with pressure the billion Internationally versus We quarter lines our in most Asia $X.X Sub-Saharan Operating services product America the of growth up declines lower commodity and North Africa. to was was and sales. in prior by rig depreciation primarily to start price drilling quarter small by partially backdrop non-repeat business amortization? we $X.X America America in revenue by the growth was in increases in synergies, was improvements our Internationally, the up sequentially drilling and Europe our product notably versus OFS completion by line Middle declines pumping and solid the expect count Mexico. on was offset artificial offset in margins revenue down seasonal Pacific North and

Our is oilfield outlook services for unchanged.

we We strong with through year the expect margins. improvements volume as move incremental

for unchanged. mentioned, As XXXX our overall synergy Lorenzo expectation is

but by our orders performed our the drilling of Sea Revenue Orders difficult X% the the in production the continues drilling activity in production business primarily still XXXX. XXXX increased systems lower continued business. versus in equipment down decline flexible slightly in Next We orders These oilfield volume we equipment year, were year-over-year. Equipment of declines in subsea primarily versus to was rig was line in X% lessened revenue prior by improved business. were orders loss our the year-over-year growth this North and orders in equipment pressure surface won in operate large aftermarket was and by was Service was systems was volume due by by up and only driven down equipment, American subsea driven were across expect which last the continued second begin revenue particularly quarter offset convert and to year year-over-year. softness $XXX million up half lower activity orders the partially productivity, million pressure out X% expectations by driven rig to XX% North control. increased $XXX million in pipe timing which $X environment. business. our to were cost on into in the This synergy business but was with offset Operating execution. unfavorable partially

cost We half for reductions year, improve upcoming OFE in we continue be cost the the in execute structural technology and expect challenged to of as second to solutions the quarter, but to the on business and position we it well and will our service us second products customer this as continue Overall future. FIDs. for volume increases the business position

and continues the turbomachinery, with both within in were quarter in on to $X.X and previously LNG. muted operate business Lorenzo we've the billion in to executing We're communicated. upstream the production priorities Orders environment Moving we're the the up activity mixed XX% year-over-year. mentioned focused framework

contractual anticipated driven the year-over-year. XX% upgrades. revenue higher with slightly outages. business on in generator fourth incurred no XX% FIDs year-over-year, well Our $X.X X% services was due revenue gas decline laid for was with expectations call. quarter was driven mix orders earnings with year-over-year expect Operating Overall, down broadly billion to in with performance cost did the as to a out transactional were onshore was income volume. than mainly the in services for framework and upgrades. were by perform the volume year-over-year. million see Equipment $XXX the orders lowered We first and both the lower the in line was the and negative fewer services of prior we activity Service quarter up XX% as the and Revenue wins. increase result an Equipment growth I cost year up quarter. commercial was lower quarter segments. future down line to in by down position revenue XX% in We productivity. orders TPS Service driven improvements offshore versus turbine X% up LNG our as for by Transactional were X% lower in down

half expect arise. strategic continue progress continue opportunities in they as position confident We're of as margin to the out to invest cost margin capturing benefiting higher second we and XXXX from TPS We in the backlog rates and improve market and to anticipate initiatives. our

driven digital first oil electronics million Next partially were had the solutions, inspection activity by Orders X% business which by a $XXX gas generation strong driven oil quarter space end the up China. the and on by in offset solid growth increased increased year-over-year in In continued in as was gas market across well the activity power and sector. and as industrial global end the automotive technologies, sector markets. in in pressure

product partially controls East business. America by both and offset primarily offset were realization North saw pipeline up income with increased in due synergy to was our partially XX% lower volume business, Asia, Regionally, process pre the negative controls we growth pipeline the technologies Our to offset America. and generation growth partially by offset due the Europe by down this process and and year-over-year the business portfolio significant our Middle Sequentially improvement which Latin and Operating saw orders by across power seasonality. productivity was solutions declines volume overall lower primarily in pipeline $XX driven million volume in sector. business declines was driven inspection orders, the in $XXX in typical solutions activity commissioning X% X% by increase year-over-year, were million and in Revenue mix. was up was in our

the markets continue gas and remain to oil and expect to throughout muted. to and We market power the for improve XXXX

over stated I'll by previously and in over operational expect revenue margin course solutions digital back and that both improvements turn seasonality improvements. we've As XXXX With the we you. driven Lorenzo, sequential it to of

Lorenzo Simonelli

a further we've our we've for is of favorable secured. progress and on and growth continue macro Overall and the to The we the by outlook performance key the quarter. Brian. position profitability. lot made the wins commercial encouraged in I'm Thanks synergies company

Phil, margins me over unchanged. our to on deliver We're Let for are cash. questions. commitments and executing on now share, that you reiterate focused our priorities to on

Phil Mueller

Thanks. the With open for Sandra let's call questions. that

Operator

Evercore Instructions] our James ISI. from the first of [Operator line with question comes West

Your line is now open.

James West

you up and looks your looks about are sources projects and the on subsea so is all I and Tortue like flow think in be the awarded the typically cash It here good more wanted delivering first to commercial it to with well guys I those intensity offshore fronts. ask, coming synergies, you now see the of like do you that finally in like pickup I'm there to How pick term. indicating could kind near Lorenzo It what in you and business appears starting see evolving? you that that if we're comment right, see me kind to the on have And in outlook - underway. that if business. of is

Lorenzo Simonelli

James subsea today. we the have mentioned position before, we within like we our the as subsea and portfolio

out project to then XXXX. back the equipment, Gorgon subsea key and is still be levels mentioned I We're commentary, really low critical we there, we which have going manifolds, we're be about the high Chevron systems. project the control as base going been trees, awards is you large and awarded to continuing BP some coming Gorgon the the gas other market, the subsea we've that at the XX XXXX the XXXX applications it's relationship. Regarding to high project a mentioned Chevron of with very fairly XXXX leverages bore and half that Tortue off of as off coming but technology we have the with and do and expect in with partnership wellheads supplying to long-term which to We're on on production build on be going temperature saw a in pressure, we up extending good also, be

pick encouraged. go, start to some positioned way still activity project where to seeing and we're we we up, like So we're feel but

Lorenzo Simonelli

Okay, broader a as question and more then, a great maybe follow-up. just

I their the are over on know the understand especially NOCs business the and the market business what stage XX is balancing the becoming now, guys for margins. But international more regain or with seems wanted seems me that On gain market market to to it IOCs, share to you Brent also to are views constructive improving it international about that desire share underway? here, much how outlook, the thinking your - now like that is given international recovers

Lorenzo Simonelli

James on market as down. break it international the you

of to on with you So our we flat the pockets expect with the be activities, regions. overall, margins certain and remain relatively the year Pricing competitive construed synergies. look will at focus

the break expect much growth more some you pressure. XXXX of Middle regions, first don't in material in East really with half that the in down pricing activity we the we back see quarter, If some

the really gain Our in region. to share there some strategy to be continues

As see you in we're and relatively the increase We look so missing in modest with countries. the Argentina year, at political economic stability Latin flat through partially America, international growth there some and through year. Venezuela is offset

James West

Okay, Lorenzo. great. Thanks

Operator

And from next line of question comes with you. UBS. the Sedita Thank our Angeline

Your line now is open.

Angeline Sedita

a I opportunities maybe could award. side compression on more GE Lorenzo Baker the LNG and clear your revenue and little you the leading that the given that for MTA market very maybe believe XX%, bit that share. the about and timing So size opportunities of talk scale, what XX% per and

Lorenzo Simonelli

XXXX. expected for of that's you increasing XXXX - place and of LNG at at So that's by We've at place. if market over the annum million mentioned I demand the some double course XXX Angie per of the tons taking look and activity start we been see take demand let's to looking LNG the the

So of the XXXX start back the anticipate long-term look ready outlook investment to get that, for final remains project decisions also positive into at and going to the we half XXXX. do you over activity in when the

very TPS customers. continue with new like we've been LMXXXX from continue the heavily I've the our technology. investing with to mentioned the some business, We the act those in LMXXXX, of LMXXXX, we closely our and got you've to position

opportunity forward, we've to investment final So got going continue is positive that industry XXXX. quarter would and didn't XXXX decisions an decisions through. this the through coming investment we second an upon feel I to as beginning see about outlook come the these feel any and say, space half we in improve we those final of again, that first see

Angeline Sedita

side by about LNG the awards cost can little Brian, on think a TPS XXXX maybe then then in margins the more as half cutting in back into driven you little talk part the and helpful Thanks you bit how margins, a XXXX. about of thoughts year, to return a transactional TPS and going maybe into and that. follow-up

I today. the think mid-teens on into back thinking could potentially from X% we TPS that you're be

Brian Worrell

Yes, we'd and into the we the the half portfolio. call XXXX and see see the Angie around - what second in services coming backlog medium quarter in the fourth a and with couple be XQ reiterated you in we term, to we levels the have up through the here pick points visibility earnings were in a expect highlighted we do

did getting really back see XXXX, If that. you said couple a rates we things mid-teen forward roll and this that of to have us we drive there's that into

that's First about is, going in cost business driving were we talked they to the of op to cost clearly the million margin $XXX you op, impact rates.

a as so into that get year impact roll XXXX, recovery. self-help we full big You there a of is piece

the really rates items XXXX that's to those we We so dynamic margin since with and LNG the that we've to the mid-teens rates into transactional see for side, the contractual both of of we next are as long line those schedules in projects, year in that in in the playing some the get the that's the for TPS. up some the half this year. On year should XXXX. out and next outage service out through favorable to services know, up got outages the there with highlighted half start sight start starting FID and year, see look types margin back see good and to some early you into market then of lead and this revenue back of pick that finally you come in back to late we're starting of We'll associated

Angeline Sedita

it helpful. over. turn very I'll Thanks,

Operator

Fargo. our Thank the line question next with from Jud Bailey Wells of And comes you.

Your line is open. now

Jud Bailey

Wanted to of follow-up on kind business. TPS and specifically ask about services LNG

You've business you're ultimately of visibility us maybe LNG extent growing, has growth trajectory talk if services play on, that's has been is seeing really, XXXX. we few comment could flattish in improve a there guess of quarters. in I that to of sort this could has your wonder the tell could catch the capacity noted can and drag it's activities and up any and because been effect any on through for while relatively been you service that out, think best year has bit been disappointment last the on about help starting a opportunity visibility I some not to bit you

Lorenzo Simonelli

some Jud sure color Yes, on give I'll you that.

a So well it's of the as outage today terms it the as stock and right, you're reasons installed we the down services flat. business in relatively going big look there safety at destocking timing the And if of some you part base. has been talked in about of

about think installed equipment and the services then total, in the we you operates. equipment If

operated. depends lot generally equipment see come a it's service that the before is, is lot of how a there a where being [ph] through, a of start calories you So lag to on the

have So that contracts typically way and again year the some service that good with and equipment we installation installed one you and XX-year agreements the into major services lifecycle start two, The depending into rest types of about four, are and years base the a into the but through that are come on LNG get where we pretty going [ph] to have have XX outages service parts three calories to contractual the the that years contracts follows the large those, then happen operated, service LNG and visibility you five of those. are along under events, events you and of plant. lifecycle out to of is provisioning the think

addition will in phase been and to both you outages LNG in the more go them primarily and have productivity driving for back calories they where the cycle enter that really through years so years tailwind some we've that's build to output from in after few year, portfolio. we services LNG we the pick them service over profitable next contracts will the this next well. LNG more make that where happened come at we're contracts as more you early can services to with events and so start customers the provide customers commissioning. for start early the [ph] progress been starting our these look up these service year if another a as benefits that's in you'll for [ph] we and a So revenue coming see these the in through larger into visibility revenue to well, calories better ourselves, year our as the see and expect last few sooner, we've with bring late we built

outlook terms just up got XXXX what the and good there. XXXX consistent into expect and [indiscernible] pick it's said, So with in visibility of to into I

Jud Bailey

about as think magnitude and I I'm we LNG some Should maybe see this just mid-to-high follow-up to we to double-digit you're how of could some to think trying about try services, grow is talking it numbers. single about the about maybe can that Okay of if growth plays they some think stuff ask growth thing and reasonable could digits, point. out. at

Lorenzo Simonelli

there and part growth Yes, back I commissioned really installed cycle decade think the plants on when good started running. early if and there is go best out and you look when where of at indicator a base in this started LNG our that there's data

on two is depends lag I of and growth. that versus it, to is the track wish could it's a the the equipment will [ph] to years where tell again lag start TPA see roughly the base really and with growth But in operating, equipment. it I you, but type generally there services exactly Our you'll half installed

Jud Bailey

second All our above the estimates. was may And question right, I appreciate that. I is, free if quarter during my cash flow

us cash [indiscernible] and you working you due go help assumed cash the progression us lower the about flow capital. but largely I restructuring to [indiscernible] flow couple as over think obviously grows, probably over the quarters charges and Can free help of cash next about maybe I next could restructuring. think we think few free quarters.

Lorenzo Simonelli

on we the pleased improvements make we're it flow the call XXXX the really going in cash with to here. the We're kick stated quarter operations. and to third off Jud made on progress we've

You're more seeing the focused fruit, bearing it through expect operational and we come you fully you the through and on work those as the improvements. can those see do results can is team year to

Brian Worrell

good around on highlighted earlier some have did We working I receivables. results capital as specifically

half there at out, will point be through in $XXX second versus kind as about said we down see and early going in spend And the cash that did cost look exit restructuring into typically the small I expense forward bulk the facilities, some million quarter, quarter. flow was You will exit those with the things. these the product as you but the ongoing the if in proceeds, second relatively of of I expense people half as first all projects, close the what lines year.

We've levels but in we still a in to big the the an to cash usually in make generation first trailing and of second So a from look Inventory third flow cash you we the we the leadership And working up restructuring quarter overall the managed the we the spike close the focus in standpoint, in in quarter, and here uptick off closed capital about will call. versus here. It's down quarter an since deal you the to for inventory. earnings the of team quite started bit we generate are when half progress. have a and see cash deal second again third talked year. free

So we're work do. to progress, the with more happy some but

low rest you about bit an is, talked proceeds sold some a there think a that year. the a flip to properties integration then some that as I some I we drive there's And this build over deploy then CapEx we standpoint growth. in of had we're see CapEx So and revenue we and the as tools first opportunities and we the we One inventory lot will some of those quarter generated from the the go were through activities driving quarter.

Jud Bailey

Okay.

Operator

JP from Megam our comes with And Morgan. next question the line you. of Thank Sean [ph]

now is line open. Your

Unidentified Analyst

trend. aside been XXXX you've pretty your margins and synergies includes in So prepared generating your but of are market improving more Obviously mix, share, for comments big leaving noted about taking synergies Lorenzo, you the cash. vocal plan part

be these gains can out of to of interplay the broader in scope just between of companies, larger often margins there, on aggressive the share trying and projects some You're times advantage combined be conflict. that take

the point companies share growth versus So cycle, get the I driving margins point are was of integration. how more from prioritize just at together a you coming little market you, through via clarity this top the to hoping versus line

Lorenzo Simonelli

just again. Sean reframe Yes, to [ph]

it's that Our synergies to oilfield mentioned starting seen you've think really across propositions the that, we're into approach we've stream really from the strategy got and exist services before. the is we award that back combine the and that see a marketplace. those market coming product take again by capabilities again, offering across and through. and new combining We marketplace way oilfield and full capabilities commercial in Chrysaor a the another we're didn't of new in that we we offer if I developing we aside which equipment, you're got a new you introductions Also offering the step when is businesses which the

better which we're those going to put capabilities, space XD seen we're to a utilizing printing new are technologies, at standpoint. in a able a Lean cost You've be from position us product where

also obviously return the So the premise we're executing profitability way to of and up able to share that and strategy laid cash. margin you how at we're look that's the was strategy and the gain and generate and

very [indiscernible] towards feel So executing we're which about I good those.

Unidentified Analyst

Okay of fair and clarification. one enough point then just

as the is EPCI progress? reallocated to EPCI obligated on opposed On debates contract use, that for reinstalling is work today still is BP how for we that the fair to work just for and have up that the BHGE project, that things or Tortue the feed betting is

Lorenzo Simonelli

to so study the first feed FPS for well [indiscernible] the and development. also clarify just [indiscernible] so initial and for for the Yes, contract

Operator

our question from comes Bill of Herbert next Simmons. line with And the you. Thank

now is line Your open.

Bill Herbert

on this so came you may question. I call, answered late to this have

mix in revenues base expectation with the and into unit for some the inflect the Can coil, your spend expectation installed to get regard commentary agreements. provide continues us and services? what's margin I your with So driven Your but declining growing of you TPS shift service so to on on transactional is LNG revenue starting eroding safety that generation. spring a is business is to

Brian Worrell

reiterate the as outages We by are little about a inventory know which the to that second working but just installed year-over-year into year slight you with in services, talked a transactional to do see for we visibility the XXXX. picking increase did as is we're need constantly the with so services. predict see with have but an it's Bill Yes, difficult the contractual they the space on half from transactional that of when have good to going customers outage, we bit, We services we exactly see so decide sign base them. in well in the up the what

should the So generally in at there quarter-on-quarter be base macro are between the can things you see over growth movement, the but a years quarter the look service be It movement some you if that. again some cycle. one and where installed general few but another, and is tailwind pretty could last for and good

Operator

line from Thank Merrill you. comes our America next of question Tanners Bank the Timna And of with Lynch.

line Your open. is now

Timna Tanners

a ask to and believe wanted uses if really to less you pretty that worth have on even sustainable Any $X you further wanted Cassius [indiscernible] thoughts we the I I this So again refresh cash current if about cash generation, billion authorized [indiscernible] beyond first authorization. of forecast and for that by pace flow further just high quarter. could performance in [ph]? is free

Brian Worrell

free increase we conversion, so free the XX% to to to XX% have cash outlook like shareholders. do net we cash flow income strategy the communicated We look Timna, we of return have like plans the flow to here.

in terms million November to back to In done, terms in launched bought months we've dividends, $X program share pretty of there what it of shareholders. returning $XXX so the returns and cash billion of it we and in returned buyback solid four in stock shareholders

is rate is stock attractive investment. the still today think an I

have should We expect continue work we stated are, to execute But authorization objectives billion right us pace you're here you remain the and returning of left and shareholders. our to the here. to committed to cash continue our buyback of do with $X to on board

Timna Tanners

laid was that EBITDA about seasonality progression. reasonable Thanks. say just then if quarter the I Okay, just your and thanks were like out, what to given for a XX% it high possible if you level and second wondered that. you for eyeballing mind, just wouldn't seems And consensus current trajectory you

Lorenzo Simonelli

again don't what perspective there. in the industry. to So about Timna a committed out trend the talk We're again consensus from we really we see

When given business digital you the is activity industry, momentum story You've think oilfield positive solutions. cycle a [indiscernible] year improving. got the America at of as look the in looking is if the you through. that TPS sees final come tailwind services, This North you're of these and short back that activity about half decisions the at some also projects businesses longer investments cycle the equipment of larger really so

Brian Worrell

Lorenzo at dynamics I think our is Timna unchanged and the year And pretty this well. outlook the for product in Yes companies summarized the time.

Operator

line our Wicklund of next Thank you. from James And the Suisse. with comes Credit question

open. Your line now is

James Wicklund

turbomachinery by many over if could. significant on XXX the you million the about next Lorenzo tons that [Indiscernible] demand years. XXXX I talk

the historically. that we're in wondering and past You equipment potential the be being of per range really what of because somewhere like guys on over that is judging just gets to and to It is $XX sure way. revenue about $XX I'm is potential the the just I of what have gaze current is we the it turbomachinery a missing talked make been going $XX $XX potential revenue But to couple want next have that just in years. trying when all same your years to are couple the closer $XX the between the revenue historically in in component back component looks over opinions rate to and FID ton we the can next the and we service I'm look of side ton about and service the

Lorenzo Simonelli

Yes, Jim.

take and step a and really on perspective lot look is actually opportunity on and to project-by-project with going scope to revenue I of project. we the that to the the technology depending from we're think back at a we need this a have really vary the playing

type going the or motor So and a of driver we to are the revenue compression, duty what is, equipment turbine gas the large using heavy potential electric really dictate it's so.

actually as we got through you revenue the to scope It's go scope the through that's range on project-by-project. this wide look projects, of opportunity by this. from perspective. do go think to We've go a a I best each and you as way

James Wicklund

tail year a I model to just mean the this, I guess trying part know always and component is starts projects have kick we're both and talked kind the equipment GE. fabulous in. done service you part delay we work the to kick the service of some the last revenues up. what looking it these on really does are great the soon service about service start to been I really how a has when generally follow-on and I that and of - in, But and just Okay ramp that's guys service of wondered before at awards

Lorenzo Simonelli

some Jim Yes, around and really bit range equipment, you service of project when on size spares come projects work in operating. depending see installation and initial little actually you the of again a start and to the it's depending but where are to material type the the commissioned there three four-year provisioning, get on

to the XX-year life the is there to there that of tends like so XX So guide. lag said and there spread be out then that's years cycles earlier other contract, are to over a and it a I three four are rough

Operator

And Barclays. you. next comes the our of Thank David Anderson with line question from

is now Your line open.

David Anderson

guess of some on I question international markets. the

traditionally see You been a It's is out to there. start turnkey lump-sum something models very active. not lot Baker contracting more

going you you could this this risks and model? after Just wondering of for the your about opportunities appetite talk for how type work if and access

Lorenzo Simonelli

years of as in the been here in project-by-project and important I applied at have look that actually it's the they've back you're changes of LSTK. can question East Middle looking now so activities it, and think right returns you at aspect really taking and a America mentioned They've the tried number and around seeing number in a time you and and go returns. that's most we the been a turnkey, is Dave and see when Latin for before then where lump-sum of been

there's the way discussed at we look We different is are also in that potential other and only can as potential and that for be that one contractual through. to it's customers to industry looking which think we that's LSTK we've the leasing, in in applying structures we models which them at services to going think with evolves continues ways positive new what come with model, work that important innovative our continue

Brian Worrell

change We Dave, risk make model selective portfolio I just a if we execute is given have and on that here here. within I we've projects. capabilities house we the we've and understand Baker one look both sure the think in of going capability But the within competitors sure that. the understand returns at the and to the to want balance we're needs think and think larger history LSTK history we I we'll that that some got of think - on we're to that you to it, be customers company, retrieve the we if thing taking risk. the make the But reward got adequate to and incremental for understand who the

David Anderson

did do the you to you by what model that Brian, by that? needs What mean mean that, change?

Brian Worrell

things make have have there some how upon to that looking customer place if been the work at sitting think been and and interact, for the the loss Look contract look performance that at together. beneficial the historical the have and you been Things made some making how customer here work. with contractual them of I think have it I nature, there are that in here, we not dependent down we

I you there. dialogues basis, daily is what you about constructed and a how there think I'm talking contract operate on and how

relationship key much that. think more So it's I a and collaborative got be understand customers to

Operator

our with today And question Mulvehill you. for comes Thank Research. the from Wolfe Chase of last line

now is open. line Your

Chase Mulvehill

the for this we to full or about are strategic separation? prepare and Baker what Lorenzo standpoint, for be from you doing think from you a a done full needs Hughes potential operational question of what potential separation when GE, to

Lorenzo Simonelli

nothing to and anticipated The you. committed to on business of place shareholders. is got at from you our BHGE. what opportunity for the creation conference this as in early Look majority to GE, running delivering stage - there this from hear have and matters Chase, GE control, our know for year We've restated a at our most and the is we that with good everything within value regards customers we're CFO the

we the going we of through we feel synergies forward. good hand have and going we're the about So need we've what got in aspects in integration, place

Chase Mulvehill

the pricing? Okay, kind of I next bit. all helpful market market color. what little How see turning customers see integrated few guess years? and subsea more more you of over the right. the the to seeing That's you're your evolving on today in do Do a then model you requesting maybe market comment subsea

Lorenzo Simonelli

We're different also deepwater wins still and clearly an the for that discussion. that think area market seeing are some it's So open being and that I segment is offshore next increased course we've challenging activity applied, think models XX We seen think do the also you've indicated. pricing models recent an in over the months. and subsea it's to so we're I remains industry of looking XX and different perspective be long-term necessary and playing the from out going to at

Operator

you call closing and conclude Q&A return Thank and like does that would any remarks. I today's for session to the Lorenzo to Mr. Simonelli

Lorenzo Simonelli

environment joining remaining the all to we're us strategic thanks on priorities is out. making we're key for shareholders. lot. and mention We're and see the quarter and third We've good also cash we've they've shout us. wanted the I to as to generation our for just progress focused is on The progress also the and We and priorities. we've during the margin a cash hard work making positive. to our the the integration. a returning tailwinds the great Thanks all some out I want everybody laid give this mentioned today. BHGE employees Thanks joining all that share; mentioned that endured

Operator

participating all Everyone a day. disconnect. conference. great in you and the program may Ladies today's conclude for and gentlemen. This you have Thank does

Baker Hughes (BKR) 20 Apr 182018 Q1 Earnings call transcript