BKR - Earnings call transcript Q4 2018

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Operator

Good day, ladies and gentlemen, and welcome to the Baker Hughes, a GE Company, Fourth Quarter and Full Year 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].

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, and Daniel. the conference Baker Good morning everyone a call. Company, and GE fourth quarter full-year earnings Hughes, XXXX welcome to

are just our having Florence. XXth London in concluded Meeting hosting today's Customer We from after call Annual

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

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

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

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

Lorenzo Simonelli

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

at I our the the $X.XX I in largest revenues. set the achieve call quarter. quarter The In quarter, employees looked in of portfolio the combined for will we our market, in fourth throughout will and results income I view for then take order in our how in for quarter the years. thank goals was the booked were for $X.X the more the $X.XX. our we a we some XXXX, business in total a of with our brief $XXX before in and quarter questions. the billion year flow today, as the orders, fourth When up to million. operating detail you executed our quarter call quarter open We strength of Adjusted am quarter the quarter. the their in $XXX On and and $X.X was billion through adjusted three company. fourth quarter Free out. I you on market. our pleased our highlights overview evidenced of results, share Earnings cannot challenges of update dedication give Turbomachinery cash review Brian full-year our priorities our in EPS million, cash results flow was fourth we best was the the work OFS results hard offset year. enough Strong per on delivered

At company environment first the their this process GE majority announced strategic on. by later to focused operating reducing on of agreements change, grew market share I will XX.X%. For remain more a equipment also the generated total that we we We our the market year, We of cash into year flow. to ownership through in change for our billion our we the operating next on our critical their the exit and GE's stake for November of progressed in these backlog. of as you agreements We priorities. with commercial provide re-built delivered combined $X.X position same beyond orders significant Throughout the environment was billion company. our we shareholder detail $X.X this moved change chapter XXXX future. and were initial saw the We $XX.X took billion a free and in as approximately as company. step significantly year the phase and BHGE, time, for reached us. income intent integration

call today. progress through We each on have made will significant of these the details and you on I take the

XX dropping both market. share our to with and the spot Brent was North industry. Arabian the Oil surprised declined WTI and the activity November. a volatility specifically our upside sessions we and record hit take Permian for The XXth in and prices saw oil view quarter the prices in between production in completions online me production supply consecutive in America, of significantly Saudi declining XX% on remains fourth a nearly highs U.S. XXth. dropped and November Let moments October WTI few significantly. Iranian reminder

known. Although million lower to prices time of in than the crude X.X beginning marks the XXXX cut at that December, since the the year. of macro day are barrels These OPEC year XXXX agreed factors per oil production first well ended

prices in traditional and let crude and impact XXXX. as move changes in steep impacted us the the decline Canada. we areas the recent describe So markets environment into more transactional me by how our The U.S. are these in outlook most the

expect XXXX to pricing of the construction in well activity half and in slowdown deteriorations negatively markets first lines. the We our product impact these

the expect lift market remain and We production chemicals for to artificial stable.

for unchanged, the key and Sea. East like outlook international XXXX Our solid North growth remains in Middle with the regions

XXX Our outlook Tree to trees. for around offshore for is unchanged. expected XXXX be relatively demand is Subsea

their We our in the evaluate closely as budgets are environment. space this customers watching current

are change We in market. LNG a the positive seeing

now end generation. anticipated. Given our project increase capacity the share XXXX, running of we strong opportunity the cash solutions, and be for on in focused with new the announced recently Irrespective we including improving likely of dynamics, more better prices, continued rates, annum technology per margin Canada previously than sanctioned the reaching an remain innovative XXXX. potential for our commodity is the project We and to FID of tons LNG see faster we to company accelerating considerably market see demand up gaining sanctioning LNG million XXX by to projects

Arabia, Oilfield with with our the by foremost and in solutions strong Permian. objective being in year, Baker was closer our our been Saudi want Morgan fourth provider. a and in customers Equinor lot of wins share how to time our Qatar as year specifically and important like you. receptive Marjan me our spent Petroleum, we in base solutions proposition. and a XXXX. Throughout customer I've Let the some meeting to world. value customers Hughes is the partner highlights the share Norway, I've of In Services, They gaining around and the struck quarter secured Kinder

North complexity, we XX%. technology. XXXX leading growth the to count and large as as new records. provide to we These in of Latin international. portfolio Starting have the in records Aramco where East. cementing, wins in solution. fields position artificial of services, ability technologies a business were involvement signed leading awarded By fourth Saudi set rig direct In will BHGE of will a contract campaign solutions to this with time, year. the in capabilities, our introduce efficiency. provider Resources completion In Internationally reinforce with while award, we continues number in quarter, we lift operations. quarter, OFS services and and comprehensive including helped and our a costs, the as services, America, to new long-term drilling well contract our increasing conventional American artificial provide into In growth Oman rig single Resources North of fluid, contracts We leading help revenue products, Through secured Iraq. key will best, the major growth the versus count offering, four-year a drilling XX% fourth a Range reduce Saudi the for and X% East integrating BHGE conventional drilling versus X% well customer set a our a such support for Eclipse drilling Colombia. saw North lift grew In Arabia Middle as we in customers America, in Our

consistent We sustainable on demonstrate results ability a our continue basis. and to to world-class deliver

running record rate the Expanding advancements, another setting portfolio. technology Our contract XXXX. the a of basis OFS the performance improvement and objective fourth team. OFS better continued margin business quarter, our XXX wins, X.X%, was point OFS our the rates strength a of for priority margin a critical delivered margins top and for remains year-over-year. our demonstrate business In Improving

costs, delivery We XXXX. quarter solid utilization drive oilfield are focused efficiently product fourth equipment, strong improving more the saw to assets and out orders high on in managing rounding In our a improving cost. our we service

to backlog We critical in focus on very the year We to As success you core future. the the the know, the our this $X rebuild The fourth set of executed number over a a $X quarter the that the year business quarter bringing awards XX in three the for first trees represents and ONGC. won subsea projects a We tieback four North in major as XX/X. the trees in up in ONGC awarded beginning were including was was time XXXX, by second through awarded plan. billion total we at a also awarded quarter ever the years. and of largest contract orders year award Sea since international in OFE includes Gorgon, were for highest the which success XXXX our the XX single the well This customer Shwe, in billion by orders built total saw over trees XXXX. the We with total of region. fourth on

for ratio quarter book-to-bill our was full-year ratio book-to-bill X.X for Our the of and XXXX X.X. the was

economics we an in in two quarter, momentum projects additional offshore XXX As Subsea from barrels the launch lot has globally. the potential mentioned of the months reserves previously, a attended and in Houston, launched have improved XX partners. and Subsea we a unlock oil customers event customers Connect. fourth our of Over Connect to billion the seen of and last

Process Subsea the It XXXX In a Canada's LNG forward. project position modular competitive especially cost Christi cut trains in the about to with British large of of In several project the about to four in provide excited FID trains. to clear path subsea on the scale Turbo to and We Columbia. use of North secured plant first project LNG and in positive lightweight LNG subsea annum LNG for compressor We & globally technologies per our modular achieve is see evolution in expand Solutions, America a Canada new space. liquefaction ownership market. total XX since BHGE sanctioned the liquefaction Connect awards quarter, our to Turbomachinery expected saw re-emergence as brought Train deliver a to future. of the portfolio first LNG X new strengthening modular This technology tons to it largest LNG to XXXX moving fourth with TOTEX-lite are years is a Corpus we in up potential in million half. the incorporates Aptara™ We to system, the the the designed Kitimat and

aeroderivative Also future three was project, BHGE's lower gas selected project. and LNG to LMXXXX technology trains in maximize very The of of well is the our technology. the footprint for final us LMSXXX and investment turbine million December, a X for per critical selected the element carbon X.X project LMXXXX positions This world-class supply compressors turbine for utilize tons agreement generated and the gas includes expansion. annum the liquefaction to driver first Arctic efficiency Our of its Novatek decision.

ability of BHGE the start sanctioning LMXXXX capability, is availability With pressurized the total project news good cost of requirements. for engine with their swap to and customers LNG and our fully can a XX-hour expected to best-in-class over in ownership. reach XX% working meet condition are closely scheduling for teams our acceleration The

up to the needs and efforts ramping meet testing. engineering, Given our project configuration, we customer acceleration, are for

an in we While well production drivers win the up the secured will of this by secure continued XXXX, project on market provide have are Canada. constraints key awards. growth impact underlying Turbomachinery pipeline projects segment capacity quarter We as results, ramp throughout the gasoline for pipeline for a as to America and year GasLink project extremely associated grow of the contracts as demand XXXX growth. driven in production major the continue LNG, fourth positive pipeline North in Western to an including Canada number important Coastal Outside equipment Turbomachinery our to through our Permian

quarters, award have fourth product gas as NovaLT used been As in well the quarter, for Istrana is the prior project sector. for for This turbine traditional pipeline the gas we the In turbine will oil NovaLT the serve XX LTXX pipeline a won Europe. as fast be we've to expanding time compression. we our line in and mentioned gas customers industrial both on

the TPS. in Malaysia. addition, XXXX, turbine for will we progress FPSO gas awards NovaLTXX demonstrate for modular on priorities vast the family made turbines. two significant NovaLT These out of provide facility trains have of our gas pre-assembled In we we an In laid

We forefront the technology continue solutions for be LNG market. of and to at the

into recovery activity XXXX. Our seeing increased moving of signs service business is and

costs both Early reduce the the very control the operational Nvidia in the we launched intelligence and in XXXX, computing We artificial traction range. Digital gas offerings our year and and XXXX megawatt lower industry measurement for and business to was In advanced are Solutions, lines partnership oil to simplifying and businesses. productivity. gaining a product software with with strong our improve use help and our

asset offering for software with securing enhance maintenance downstream America, strategic technology. North improvements and for our alignments our downtime from development agreements solutions management the our to These SGS and we In leadership industrial commercialization performance expanded awards reduced quarter, drive in solutions through Europe, centers in asset reliability of deployment customers extended joint fourth and captured in and by IoT also We data use Latin corrosion strategies management America. Industrial efficiency. from for predictive several

ahead offerings to and industrial In XXXX had the in Europe. approximately synergies, continue in our of we in with We target. aviation sector in Our synergy sector another traction inspection achieved of quarter strong fourth solid gain $XXX in execution. growth the of Asia quarter, automotive million the

Our on for XXXX firmly synergy targets remain track.

our of agreements position company the where with areas GE a announced we technology in we commercial work and that on agreements focus on leading the for fourth Lastly, executing with customers. GE most The closely developing for quarter, future. the number

the for rotating technology. with First, on longtime equipment and collaboration we GE define partnership parameters critical

applications. for digital the will and Second, digital our we of exclusive gas oil GE as quo technology software supplier the maintain and status business,

considering enhanced were from stream our number intercompany services. reached GE taxes, shareholder business, is full the of important At the we this preserve The core differentiated including strategy a on separation a finalized and have through Finally, these our agreements areas agreements initially full we controls agreed. the we of protections, portfolio deliver which process. public and to other they pension, agreements eventual

and agreements a XXXX employees, shareholders. We out finishing and are closing, for resulting BHGE. They certainty we and a for us for the strong solutions mean long-term they BHGE. to and with value what maximize pleased our very solid fourth delivered provide quarter customers, In

on navigate we remaining As margins, environment, to focused company of share, dynamic and our macroeconomic XXXX, look are forward priorities we the a positioning cash. to while

as is unchanged. mission a company Our core

With productivity We turn to technology and continue innovative will the me deliver models. to through the differentiated over oil and call commercial to solutions gas industry let that, Brian.

Brian Worrell

growth $XX Equipment was in our were cycle orders and which up versus longer quarter equipment XX%. results $X.X with in Obligation Thanks, over flat up quarter billion, Year-over-year XX% quarter at company ended largest services. Oilfield Services Solutions in of Lorenzo. with up Turbomachinery The up into RPO the three sequentially segments. XX% by by $X.X ended RPO billion X%. fourth The begin quarter equipment X%. Equipment Digital Turbomachinery XX% the and fourth quarter I driven Orders billion, $X.X or was XX%, orders We was Oilfield up years. down up X% businesses Remaining our fourth grew XX%, Equipment then total the XXXX. Services billion orders up $XX.X were at up X%. billion was details. offset RPO sequentially. all up up or and Performance Overall XXX% up segment Oilfield was was move sequentially year-over-year. year-over-year will XXXX was billion, and RPO X%, for and $X.X the up

XX% and and income X.X quarter million book-to-bill segments. $XXX Operating equipment which by sequentially We year-over-year. in XX% partially sequentially machinery was which in was Revenue was charges. Adjusted revenue by of income Turbomachinery quarter income was up and $XXX million XX% Equipment Solutions X%, was XX%, ratio offset XX% up XX%, Equipment up up million XX% all X% up Services sequentially. X.X. quarter for up up book-to-bill Solutions and operating is Year-over-year Oilfield X%. was our driven million $XXX $X.X the with XX%, Turbomachinery Oilfield the down other up Digital which operating up billion, Digital revenue Services up grew Adjusted X%. Oilfield Oilfield was restructuring and was excludes year-over-year. up Our up the $XXX and X%, for sequentially

quarter was points XXX Our XXX adjusted up basis basis points operating income year-over-year rate the for and over sequentially. X.X%,

the amount million amortization $XXX million as reform. at to delivered fourth of XX% a Depreciation merger. related the ahead expected synergies. result approximately $XX million. We from year-over-year In synergies XX% is cost U.S. the our quarter was total were million quarter, of accruals. on and in from quarter, plan XXXX of from true-up are revenue. impact these costs up sequentially year-over-year. for the includes the higher year-end and to of million incremental $XXX Corporate time quarter which tax This for the goal up the we year laid brings flat $XXX are we to the $XXX million continue XX% sequentially and make of Approximately down $XXX $XXX of This Tax rates. the expense expanding out margin synergies and our million of progress million was $XX the

we was minor could adjustments As detail. to time the at you passed have initial legislation estimate our worked and had the as the booked recall, we the estimate we that some communicated best through

We fourth be expect to than our quarter first effective tax quarter. rate in modestly the higher the

included time. $X.XX performance is cash in from million Also quarter. restructuring, drilling As was $X.XX, from gain highlighted quarter. This before, previously in free expenditures. we gas up we sequentially, with share. and year-over-year. million quarter very we flow to business. in of we the progress flow were net $X.XX the has when $XXX share $XXX legal, announced earnings were million the ADNOC tax share earlier transaction Overall, related share our year-over-year. the the $XXX to sequentially as be Adjusted was earnings capital a our the million low pleased structural natural quarter we payment mid Included Earnings per outflows, are have up $X.XX per Free and XXs fourth a per and sale to solutions per which earnings million stated $XXX cash the over of expect and rate excluded in cash adjusted for in $X.XX included the $XXX in been deal-related of gain cash announced $X.XX,

cash optimize working we X.X capital to our improved sure cash days improve to points. XX cash and continue on have with $X.X position target. of by billion. buybacks after in $X.X is focused increased we XXXX operations. processes the are and position over our to through a debt turns Year-over-year net have returning eight hand We conversion of $X.X days our make strong ended billion free This dividends. processes continue our We in receivable and up of billion cash We and deliver inventory days, flow days, on our especially working on our capital our a to payable remain shareholders year

to continue balance key sheet our see cyclical the a strength as We industry. differentiator and in

and Next offering allocation, we have the markets in share million to a buyback offering of price November previously which offering, In offering offering shares secondary billion executed challenging capital we equity XXXX. per quarter price share. GE BHGE at XX total was the net are completed by items we line an the in secondary this completed for executed backdrop. at X per we repurchased significantly very strategy the number owned oversubscribed authorization The the a previously announced shares against transaction to from with of million Concurrent $XX.XX the we program GE share. outlined. repurchase of on a pleased November, we price was The $XX $XXX.X average

the The with fourth X% quarter of secondary ADNOC XX.X%. $XXX stake reduced ADNOC the closed buy during approximately back offering purchasing transaction drilling million. GEs and for to we Also together ownership

from down a capital received we quarter, the requirements. initial ADNOC during drilling fund mentioned our I to payment As working

the of we orders XXXX natural billion, year, look Lastly, million. total $XX.X business our booked XXXX. sale the approximately of our consistent on proceeds set out the from results of solutions up of and pleased we receiving the at beginning $XXX reflect We XX% our I'm at financial year. with When priorities execution closed I they the gas

cycle As enable I longer was growth critical this and said businesses beyond. earlier, for revenue our for to XXXX

shorter from Equipment's in focused the was up and and year year XXXX. XX%. the Turbomachinery and revenue cycle total X.X year businesses grew Oilfield as X% book-to-bill We opportunities. For market our in book-to-bill ratio was total orders $XX.X grew by orders X.X by for delivered on we the of XX% billion, year. share Turbomachinery a Oilfield Equipment growing capturing Revenues grew

in adjusted XXX We business Solutions business. was by partially the line was up offset up was at cycle shorter X%. billion, framework income growth Service each the of Overall $X.X outlined the the Total year. over beginning income our margins from results businesses. by by XXXX. Services and and cycle basis points. Digital Oilfield was our of Our Solutions XXX% up companies up product grew Oilfield our was up for was closely year Operating XX% we operating XX% XX% driven with longer Digital are

in that $XXX growth. and X% and in million level we portfolio think up net payment cash revenue optimization in in ADNOC. result our Lastly, flow when still billion results deal-related of and cash revenues. expenditures to restructuring, flow approximately to working for to We continue $X.X from cash of on we generated will see from We Despite be to CapEx implemented XXXX investing excluding Included free was XXXX legal, the This benefits cash a source year capital we the of right have are we XXXX. while the million the of growing $XXX initiative improvements. free capital outflows. expect in spent is even our is of a process disciplined for down continue these

restructuring-related in As XXXX. materially outlined, cash lower we expect have outflows we

the move to we generate separation will in to feel to good year our results of strong cash through Overall our we cash billion flow $X.X outlined the activities of XXXX, which ability As outflows GE $X.X the incur related free start some to XXXX. we in billion given in we about November. the

particularly material fourth the income $XXX drilling the our related and to in billion, while X% completions down lower million in North and in Operating Mexico North up artificial East markets. in growth We was the product revenue was lines segment the X% due sequentially walk XXX of Next sequentially X% line versus Gulf solid was the unfavorable onshore basis Services, markets America the growth points services as in in quarter saw revenue growth Asia-Pacific. sequentially. Canada. X% up revenue fourth quarter cost strong as offset In you America lift, by in the was softness margins Middle in was OFS up in $X.X product prior International Oilfield land for slowdown driven the I sequential will Despite quarter through results. challenges and year-over-year. inflation. the higher volume were mix the up was market, offset by the revenue

first to in construction As Lorenzo our in be we lines activity mentioned, the America. XXXX, of product impacted half by negatively expect well deterioration slowdowns and North pricing

continued expect also and cost. up We ramp headwinds from inflation

in the outlook we international as XXXX. the these In expect combined unchanged to with wins remains prior in regions result be first drive the expect years. East sequential Middle expect up first income impacts, the to quarter, versus still the revenue a materially Our decline versus North more We in pronounced operating of the and we contract quarter growth XXXX. major first typical seasonality, Sea quarter into key like and to

we margins year and we For remain through the in the expect and constructive move improvements XXXX, as revenues total sequential year.

on the Equipment, just was the second order year year-over-year in more Next up billion $X billion XXX% and in this quarter. the than intake quarter our were over time exceeded orders this $X Oilfield

the was In demonstrate to increased pipe rig to equipment driven book-to-bill strength models, OFE $XX pressure quarter, by the of commercial better products year. the last the Our and was provide year-over-year our was OFE's equipment fourth XXX% in up year quarter. cost versus of continued by year in in million production volume our XXXX, the wins driven we're Revenue subsea in customers. our the up half businesses. subsea successes up were variety OFE driven driven activity and In showed in in OFE the quarter, business, the able XX% systems. by orders in flexible and by in of the systems, systems drilling year $XX modest up absorption the the increased year-over-year systems Service by business. volume drilling improvements and lower offset our production were and orders X% million in X.X improvement growth business flexible subsea second in rig income Operating systems, our surface million, partnership production $XXX partially versus in prior increased control revenues pipes.

Looking the offset in business forward from expect first to than to pipe the we quarter revenue be of by In flexible we lower higher benefit slightly OFE first volume XXXX. quarter, FTS partially the business in the to expect XXXX, systems. better the

team in Turbomachinery, and to the the year were driven was was in order driven Orders orders $X.X were quarter both the and up Equipment a billion, in the versus quarter. by up were with strong across was XXXX strong delivered Moving our equipment strong fourth flat. up XX% order we quarter services The transactional services. TPS revenue billion, and XX% year-over-year prior for quarter year-over-year. by LNG revenue on by margin and up $XXX X.X. well up both and in equipment as growth mix, margin book-to-bill better Service Turbomachinery our were was converted was million, up rate higher Equipment points driven was basis were upgrades. for driven by orders income as contractual increase which contractual Revenue productivity. X% by quarter which X% XX% Operating highest was the higher up $X.X volume, the services quarter in XX% The primarily year-over-year. stronger two The higher the as XX.X%, intake. XXX driven up in XX% the service intake years.

as TPS improved progress through outlook Our XXXX. for we

we more As expecting significantly FIDs LNG XXXX. Lorenzo mentioned, in are

and technology, customer meet to growth a engineering, demand. our we accelerating As are investments result

additional in LMXXXX million spend $XX solution. we to on latest validate to million XXXX, for the expect these example $XXX We as investments an technologies and test our

strengthen actions will forward. cycle going these that through confident and are leadership our position We this

we quarter, second the business in Turbomachinery the by half. half flat expect the in to core to see be spend are of LNG higher in XXXX, dynamics first in roughly the than we year-over-year Similar and significantly margins first as Specifically our on revenues XXXX business better application. stronger offset margins the

Next quarter with execution. quarter another $XXX a strong million X% of were Orders for Digital solid finished we down on Solutions, the XXXX year-over-year.

X% our automotive consumer impacted the year-over-year to market by lines. Industrial what Regionally power businesses we our income continue our controls dynamics the sensing Asia traction. down year-over-year Softness growth product than in market driven was lower by power driven business the more down IoT million, was communicated we quarter in had as which Operating electronics million, $XXX measurement X% saw and end volume. $XXX Revenue growth for and and previously. line software offset with in in gain

strong For million, by income business. process operating solutions and driven $XXX was year-over-year the XX% productivity execution total year, cost in up pipeline and our

expect and XXXX, the to grow. move continue for end As into our soft to power end other to remain we we markets market

business first the Specifically over I we flat turn year-over-year. you. roughly the that Lorenzo, it will back for to With be quarter, expect to

Lorenzo Simonelli

Brian. Thanks,

We pleased price challenges commodity the the in North BHGE volatility, of capture the market benefits LNG XXXX our market, resilient is positioned a to growing America. results. while are Despite and well a international recent navigating with

priorities unchanged. Our remain

We focused share, executing over on are on margins, on and now, you questions. our cash. commitments deliver to for Phil, to

Phil Mueller

let's for Thanks. call Scott open questions. Daniel, the

Operator

[Operator Instructions]. Thank you.

Our West ISI. Evercore with first from James question comes

open. is line now Your

James West

flow. rebirth that but several and I X,XXX I'm the international EPS, are your of see Annual Baker. top Event clearly was time you the feedback? think wrapped you this cash so highlighted Florence strength I have as but curious portfolio demonstrated of in kind What clients the guys recognized what and you one they just America Lorenzo, environment major real have offshore the orders, this of developing of the that's choppy growth, times in a solid the the and we solid what that the are you course that solid markets, with quarter North or up then to get three themes cycle telling of the LNG about markets,

Lorenzo Simonelli

we're focus our talking as possible, out Yes, on I about And things we as Florence you ourselves technologies in making came had a thanks, and were focus James, on customers we're with productive say energy focus opportunity the the customers as X,XXX about productivity, the that said providing way XXXX forward needing the our lot a key an really customers. Meeting a on technology. to pleased lot Annual still panned that the of to the had would and are out. products new about there. got we new of theme and We

the and including capital their that remains we customers the had more to a that there's out as out see at look But remain fourth than and the you opportunities in in trees of area got XXX International unchanged lot about for budgets they're by we've tons the that North and in that during relatively others XXXX. North see the of and of the XXXX, happen year-end East America momentum and sanctioned We the more see good saw we Middle with we've opportunity you LNG. of to the a one the As unchanged. offshore, as million some still be view interest We pans up seen annum with first XXX definitely also XXXX that an finalizing. market, activity as we'll LNG And And half an quarter Canada. is challenging. increased continue on per how to conservative expecting Sea. well where course point

it really So to the conference good great the was be and customers. with

James West

on likely because three you sanctioned are so over LNG just million, looking million XXX tons guys year. couple get side, million next our numbers XXX a playing this out of tons probably Great. how we maybe scenario bouquet And the years, just the out? the that two, about thinking years we over could to What's next as follow-up your XXX look

Lorenzo Simonelli

there CAGR some to then there project the the towards hard evolve The about will sanctioning of of it it to a about million look tons tell is how XXXX, view in will XXX an you see again power So the really activity by XXX James our annum. of sanctioning in we until really XXXX cases, and all it generation that we to expectation is from markets, and emerging forward of look We XXXX that's function now China. tons potential why we've the at growth increased XXX. India, lot going step happens growth as driven in longer-term of if X% and consumption from per see aspect an million out

Operator

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

is line Your now open.

Jud Bailey

for orders, the in us we ramifications those if margins can would about help I you it year. perhaps would about Lorenzo pretty Can how evenly or that imply TPA and TPS more obviously the think on, in year, know you there, is and morning. TPS this sentiment obviously a wanted XXX I more good it substantial of to positive the business pretty that help don't the TPS this about of that Brian orders is follow-up million in think think timing us on commentary improvement Thanks, increase back-end And loaded, environment. distributed? then

talked of thinking us exit and the at lot of think in the this about in an investment how I us you incremental change order previously TPS help helping against mid-teens; about the stronger a could Brian in about there light that all but think outlook? you you're does if balance that questions rate

Lorenzo Simonelli

stronger they are we've off break we're Yes, clearly substations products doing customers the clearly Jud so. the got getting great our it let's we're market down to capacity and with aligned what is in in need and and finishing place, be seeing we What go and forward. LNG our there

We and grow XXXX XXXX to for revenues half first stronger significantly the similar is to half. for the of expect than second earnings year profile in grow the TPS

Brian Worrell

unchanged. and equipment Yes, The put per million expect drive with booked to LNG We for for will XXX through well installs XXXX. into came team higher through roughly that to perspective our general we TPS market improve some -- still And between is Jud, to offset to partially XXXX year. as as transactional that tons lower I to basically it revenue the contractual. framework financial MTPA continue the we've already as XXXX go annum represents come continuing mean services have the and we both productivity is

in mentioned protecting we've we saw deliver as so increase is an capacity could here, LNG before what have been we we our on So demand here.

basically it's really coming, getting resources here. new and the what's more quickly offer. that the solutions ready So coming that's ready got in investment into pace of the we've and that the for as are customer for projects the really This about engineering, redeploying application the that's driving is products to incremental volume how getting testing, and

So in LNG And are FID. as half expect customers incremental this the expect a given the and of generally as Overall second see out and half, would increased for we're is margin and better. be expected dynamics about is we mid-teens stronger BHGE. we the the be we to good obviously I much a the opportunity and for weighted Lorenzo dynamics when the volume outlook long-term investment the mentioned, playing what great on to they XXXX which but rate first investment to heavier the hearing still there cadence from obviously want depending I feel

Jud Bailey

booked the a and that about been Okay, helpful. if talked X that's I that not your to clarification, the Arctic for technology clarify that's could And quarter, in want has just not Novatek I just one you just squeeze selecting still though officially, in follow-up FID correct? fourth something was

Brian Worrell

not that our been right is orders number. not That's yet has and in FID

Jud Bailey

just check, back. thanks a it Okay, to lot. turn I'll wanted

Brian Worrell

Thanks, Jud.

Operator

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

Your line is open. now

Bill Herbert

of up WTI conservative we're with Good to the that for conservative expected to half? your half stronger and or is regard first for XX year-to-date understandably hence developments is to a does late gain first and XX% the drilling to flows. January probably pertain regard set lower XX% XX with witness in that waxing E&P with frac an ongoing up up think significant that lows XX% and your deflation XXXX even completion December with in Do strongest you yields to regard the half industry better too outlook, than years second morning. from and you cash of coupled waxing activities that Lorenzo, are collectively these peers cost to in XX yet light

Lorenzo Simonelli

clearly to America, what to October So December volatile. the I continues the And think you market markets that be North course the look saw the showed half. and that we of product at saw over on within it reactions, and exposed for volumes happened in least the to but we continue construction obviously expect do us lines we lower side not first we through are pumping as at well impacted that XXXX pressure

see. out there let's you wait that and to is customers half but and to we'll close second see staying encouragement better, the As half mentioned we're relative pans second be how could our

Bill Herbert

that you in mean can your you is capital remind XXXX? terms internationally And mentioned for the does of largely for in E&P unchanged, that outlook growth basically expectation us; spending international an what

Lorenzo Simonelli

Yes.

Shelf, wins also in lot the Marjan As those of drilling. our unchanged for Saudi, Equinor look were and we if in the of we a remains that you announced outlook at the Continental international mentioned some international XXXX, with on Qatar Norwegian

those there from So we growth seeing be execution. will

Operator

our next with question And from Scott you. Citigroup. Thank comes Gruber

Your line is open. now

Scott Gruber

the post to gains sit share realized, latest once side share to to a of the certainly XXXX been in is with have was international company want stay wins satisfied growth in fully order relative which gains on and the additional your merger. growth Are initiative international you measuring the performance? count of where these some side share the international clearly you've the share mentioning targeting So on are rig you will key in you are taken contract how that impressive,

Lorenzo Simonelli

Yes, countries in to there. we was many just for regain always they opportunity in of an is can and come Scott, there's territory the lot some on international and what side clearly use said activity there a lost

there. person got in as to sales to you're The OFS now by us going as made we to dedicated progress think we've is And to within XXXX. that's the margin accountability continue We've share good intensity business. again the in I well having opportunity going plans in gain commercial continue see XXXX. accrete I the got and think

Scott Gruber

versus business U.S., the was kind And in in little driven by expected completion on just Great. U.S. OFS, international? in XQ, than in the primarily the margins lighter what trajectory the that slowdown in the of are they we was

Lorenzo Simonelli

in at standpoint, we look if than others but was Yes, are on North not in take more Activity America. you quarter from clearly to fourth going a was a completions. what macro immune insulated lower

there. X%. mix. we did they did quarter. But was through strong and did as EMEA in Within was fourth and through the an come international come expect we artificial continue see line the remain One saw to do a expected than bit. see fourth we thing we up X% impact North up of is -- and America, quarter the So we on we in in impact in see had lift did that profit completions did But the see we North revenue that chemicals the pricing softer America was to

have OFS, pressure pumping on margin we in that has did lower rates. obviously some international an Additionally impact utilization and

cost inflation giving there so market I did some of the dynamics with business the more were that higher on see synergies but come We come how we out some did Claudia have of executing ramp team through, us very taking through happy see material and some Maria executed So pressure. about did side. on talked we up on call associated on the positioned quarter to costs third the And large international the end with resources as start those. those it higher we the wins remember some was we that at

come we'll but ramp later obviously margin those to So you'll start of through in costs on come some still those through have XXXX. see

Operator

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

Your line is now open.

David Anderson

two a side you artificial over -- about number maybe Thanks. it's being we about seemed like a been talk you but OFS on more of North you've front Hi see artificial has going the hear be dig the yet good just level, versus NAM just talked of sort take looking least of give opportunities size get on don't talk sense addressed lot a think us America on about down number of North to And dynamics subject still a kind the competitive that international. could talk going the morning. there, maybe wells about then new just business to first on the wins versus the could really lift the the lift at that perhaps I used, the was same you of I about for of kind of a is at bit getting a could internationally? market, international America international pretty

Lorenzo Simonelli

it just So, be artificial North around lift expense do is internationally also precedent XX:XX. clearly increasing very the in America. see Dave, market We

especially pumping as ESPs at look as as will internationally new relatively in take into we the go are wells. America new you stable If of to of and we're the the and pressure the opportunity North We think capability also we in some not the be and side. XXXX seeing completion our impacted some

David Anderson

gets LNG dig headlines could I in different subject if the maybe all the TPS And obviously on there. certainly side,

think number a we projects, of about part of you kind for the part the margins you of should lower see those, those I can of would talked do also do pipeline talk prospects of the of non-LNG think equipment, pipeline a be versus of, some about this And LNG as about little you how I about kind markets, how can we these talk that margins technology mean about You end more it the projects? assume business, bit? would secondarily is and did

Lorenzo Simonelli

thanks. Yes,

historically new the pipelines we So a going There's see is got across pipeline that the that growing. presence clearly a opportunity for actually and We've opportunity strong globe. number of the required us. to are be

America activity also Europe. across the You've in America North of of Latin the in seen some discussions some and

line we new pipelines is the but so as and of If is the great got our NovaLT good as a PGCXX slightly the technology we Turbine at LNG presence. lower we've a It very which you got being see well margin look space than amply strengths. to applies the one as core this of which

Operator

from JPMorgan. with comes next Sean our question And you. Thank Meakim

now Your is line open.

Sean Meakim

what how prior about that how of these conversion all in impact as of some to cash just appreciate on help within I environment projects can cycle cycles start commentary that TPS moving will cash flow may the and Thanks. in to through this in you -- impact contract about think the like all also advances XXXX? the maybe versus pieces TPS thinking come also us ultimately trying the think flow look just P&L, in, cash XXXX,

Brian Worrell

Yes, as some start what LNG, relates you Sean, this to large on about execute payments it we you typically cycle it money think spend for do have projects, in that come projects. in have if those we specifically we will the as down to

higher dynamics look to with be payment would cycle slightly overall, neutral the that with strong down So some with so I side But this we the spend to I free expect year to talked equipment X% would at coming flow about that there processes, to getting that we level. CapEx. will positive. have to think the cash we with will conversions getting and that the up but we and I overall positive. them would given cash we Do better, but restructuring we're have growth that net XXXX, but of GE some separation we'll that, million a will revenue anticipating booked at $XXX I lower as for to TPS orders continue of actually year we relatively expect continue flow we're for some from much money income coming $XXX we million our benefit relatively, DHC revenues the the in capital outflows in the the cash are services cost year general we have again this working relatively the metrics the through And to about through of well from to next our expect may growth have invest of on talked in improve

flow year. we feel disciplined working in been be we've as backdrop our but generate disciplined investments think the Turbomachinery we've there, that So what our good we're that I overall free in come metrics as specifically seeing process capital well with cash about to operating through this continue about to improvements seen in We'll and made strong XXXX. ability the

Sean Meakim

as press earlier comments cash orderly about today, a from appreciate exit GE's consistent a its in you of think flow the a on that. really own the your about, just a know exit improves free way to about long- over cash source being think as stock that respect within call context desire position there broader how and were use of cash is and then as with goals? comments using That's to alongside cash repurchase again kind -- you time to flow GE helpful of with the I Brian. curious you good Thanks, think to stock just share do term their and as prior time, your marry BHGE, how then of GEs perhaps and over

Lorenzo Simonelli

changing isn't BHG. indicated our take XX independent their BHG public in to strong the November continue to GE that. that XX.X%. to is do macro always We've and taken we've a Yes, as the Sean, from back company We we'll ownership down and with actions separation they that has side, allocation be maybe run will just again capital exiting on it started and the

As again as it strong but like we go we good continue we we'll look though balance got at our review a we think where to forward and capital we've sheet we allocation are.

Brian Worrell

that committed of We guys we couple net volatility like We are there. So current think sheet and balance can shareholders I do remain our obviously time the ways returning to with rating different strength do things to credit the especially a this of and XX% in that. income Sean the XX% our of there to do over marketplace.

free that flow opportunity strength, So it's but with this capital outlined here lot a we've think got allocation cash we've our of with profile we how priorities.

capital in here to So into and stockholders certainly I that terms and back a and sell you think allocation and best prudent our consider that of look we us GE step consideration. take should for expect be what's at down what for means take

Operator

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

now Your line open. is

James Wicklund

of deal have just a guys. Good could there's of bit a over different down commentary been to just bid the the regain if could and because this great aspects these the awards you of one this be Baker now just it, of market what you the East contracts working perspective with these U.S. kind guys about to mentioned things some And in Gruber in be share. where awards awarded XXXX these you two in but the around Middle are that little particularly this those cities, impact If the margins all on you highly already current they I a to ramping you lumpsum really going percentage along is the business? drag of about from morning, the on turnkey do you East that on projects and drill talk lumpsum the talked margins, beginning industry of finally duration, and are Middle competitive have and areas big is accretive year through missed and hard revenue margins? of last to We Latin mentioned been these OF what America Mace in is could projects winning were XXXX of bids, up,

Lorenzo Simonelli

Yes, Jim.

have some a of haven’t in had LSPK look and done lot We clearly there you that maybe been the really is around models working our we for have in Just that is question. a customers. participated commercial LSPKs in wins we've innovation are closely at there much time. comments and the And new from as with that past, the long the

Marjan and been framework fields our the continue feel the in the in total ADNOC year it good will place which we that have Arabia, at look also new the in you feel to up for in field. of at you again the ramp CapEx capabilities capital we And and Saudi proposition be full about confident and of doesn't and we drilling that's with look successful. the to a the change allocation ways transaction, we our use If it's able portfolio breadth come we

Brian Worrell

business assets look we to up about place talking have new baked so I the year. both markets we the think in in we're redeploy to framework really book about of that we is didn't terms OFS though margins talked say that what to I'd type of at we some have in general international and have there, won looked think progressing that talked of the these the that we're and and win during Jim, you how going needed costs resources we into where the have about at is is there that's if cost ramp what we we we about. people Yes, say cost, would we of and in business all

pretty we've you'll and that framework do disciplined international we've and been been what pricing we markets considered and So that putting been in the continue that. in certainly will see going to think in forward that I we've our after we've

James Wicklund

margins even going kinds through of projects they versus can where project upsell right? then technology course where improve are you the these ones So be on possibly of to and the start,

Brian Worrell

that in aligned customers as in win that if about and Yes, about way terms be talk we the well. the structured Lorenzo from upside win, get the with we such if we beat of We traditional perform are customers, and models a LSPK. performance them to expectations, help talked they talked alignment, to it that we we about need

us a contracts that we're upside. some structuring getting help the trying way completely to with So and profitability to our we're align better in productivity customers more and they in what that of need generate

Operator

ladies and And today's Simonelli would further for you. question-and-answer session turn over now that any like our Thank concludes gentlemen, I Lorenzo to remarks. for call call. the to back

Lorenzo Simonelli

the business committed lot our up and Thanks of is the footprint and We're the customers, is Customer and you around business to that up on thanks reduce company. going our our to footprint and we're its by about compete also keep it great was energy customers a sense our Meeting, it motto XX% the for soon. items and to in We lot our Annual a a for announced we the focus been we zero speaking a the aligned we're aligns today. with look really the BHGE the one change products good did the us Thanks makes industry. wrap excited also outstanding that again that released emissions, they driving future again XXXX think net for as XXXX. feedback XXXX brand of top and and the got case climate is joining carbon from lots and of forward industry and of customers, I on just important is get environmental footprints whole that a and it also forward by it it's how We've by and new with carbon conscious at for customers ready carbon have of very BHGE. did We to of out to mind this to that want point

Operator

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

Baker Hughes (BKR) 31 Jan 192018 Q4 Earnings call transcript