BKR - Earnings call transcript Q1 2019

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Operator

Good day, ladies and gentlemen, and welcome to the Baker Hughes, a GE company, First Quarter 2019 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. I would now like to introduce your host for today's conference, Mr. Investor President, Vice Mueller, Relations. Phil begin. Sir, you may

Phil Mueller

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

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

guarantees predictions, of of forecasts a risks during of reminder, filings cause call, conference to could a statements involve this are performance actual for that the These future differ course materially. not other and number and and will review As forward-looking assumptions. some statements. provide our results factors we of the Please SEC

measures I found With can earnings release. know, turn Lorenzo. will our be and you As of GAAP operating in that, reconciliations call income over the to to other non-GAAP

Lorenzo Simonelli

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

overview the adjusted We $X.XX quarter revenue. first million. was per booked for $X.XX. questions. update our the before On a quarter negative the the give Free financial the billion was quarter the first open $XXX brief in you Adjusted review take Brian some view share quarter in was the and orders. more of results $XXX our cash quarter we today, Earnings call our we through highlights. results, will I In call million. market billion themes delivered operating $X.X and was income on quarter, then of first for quarter the key and detail will in $X.X EPS in flow you for

from at XXXX. end the quarter total of outlook the financial year what XXXX second our quarter Importantly, unchanged the is fourth the communicated we and for

market. few our moments me to the share Let take on view a

impact XX% are oil first gas up Oil quarter quarter rebounding markets. our customers Venezuela rose in and or production hit U.S. on quarter, Rig U.S. global growth cuts up DUCs. stabilization in first term. all-time medium a more inventory the than balancing lower slightly by the rigs production DUC U.S. a high X% XX with and remained production proved was expected. XXXX. at in less and an supply the fourth during barrels February Brent over WTI in have strong, from over of new continued and up the U.S. million challenges per lows. X the Russian OPEC to down announced The prices counts The period but for the XX%, quarter likely be will expected XXXX the markets. in just day to be than previously X,XXX is U.S. budgets CapEx

and their dynamic independent the flows, customers to focus most operators speed U.S. within are areas market such The on remains moving our the as While the cash with Basin. Permian working major predict. into difficult

activity commodity in plans the operators monitoring was closely The Canadian quarter, and with year. reevaluate first as up prices change through count in are the can materially X% expectations. We their our line spending rig

the assumptions the November levels international the to since Overall, robust, activity lower Iraq. international remains day Arabia million Saudi the the dropped remain X.X per and markets, quarter and of activity expect We our and continuing Venezuela outputs same. challenges in from amid growth relatively those and for markets In at crude Canadian remainder has depressed year. in remain production OPEC oil significantly second barrels

we consistent during communicated Our call. fourth for the quarter offshore with market what our outlook is

for total to subsea expect year-over-year. around be trees, We tree XXXX flat essentially XXX demand

XX by per project tons first up FID. annum of MTPA we Our including quarter, Canada, LNG million to Pass outlook reach sanctioned XXX LNG XXXX, the end the is unchanged. the of In Golden saw

and Pass, Calcasieu Global's Sempra's Venture approved FERC Port project. recently, Tellurian's Just Driftwood Arthur

the or challenges to capacity. predicated are designed XXXX, This outlook market different XXXX. only see demand largest made the need their a customers positioned. process. decide and scale MTPA of decide and LNG modular can the we in we cycle to pricing on out module. industry fundamentals a growth APCI of substantial which spot as or XXX demand the have To we beginning offer this produce complete trains LNG site we expect look by industry MTPA supply it near-term integrated requirements, either such factors, delivered refrigeration the of to to solutions, outlook. variety from a parameters. and operational liquefaction Each solutions is work our specific as impact will with They customers to as smaller Depending to not a address commercial across on the today's solution as to build upon capacity. XXX LNG can We train drivers Our approximately represents utilize LNG leader. site-built We has processes operate XXX significant and nameplate any project of the FID million are cascade. larger for or XXXX tons well most project best do From Therefore,

referenced the engineering, unparalleled have technology by and capabilities testing We manufacturing most provider. are and far

technology substantial maintain continually we edge, downturn. current in In the have a of competitive powers invested portion fact, even technology, our our To nameplate during capacity.

equipment Our technical us and unparalleled build solutions record cycle. track uniquely for advanced upcoming position the

of have in most positive end In across a We industry. a the important continue the number expect to we summary, markets. to win projects outlook

earnings projects wave for the and offshore-related those recovery businesses impact North will expecting from tailwind TPS our total positive of the are Approximately markets of revenues significant we business. of our us, the in and our have America. international we oilfield XX% across benefit markets, to Equipment Oilfield see growth our drive to company significant more next service drivers. XX% LNG our and on growth largest varies company's revenues While are a The XXXX onwards. will be Strengthening speed multiple positioned of of from outside

not are an improving market we relying on outlook. However, just

to drive continue further growth customers share our regaining initiatives market We to on markets. for introducing and in new focus existing and solutions

and and a portfolio our on the force differentiation reinvigorated innovative focused to of We sales world. the business are around profitable growth structures, win strength using

our the winning margins and We right ensures accretive the a applying at we are framework to current rigorous business operations. that is are

are international in the carbon-competitive electric Permian. Our of great good the we of example is offering A frac a products examples in range of for wins process. new are this solution XXXX

some XXX America, We toughest our businesses pools our for of and our equipment fleets fleet truckloads technology, to enable can as aftermarket million engines. amidst to are solutions and from metric XX,XXX gallons are challenges and will our X These of our revenue trailer-mounted are portfolio. Each which consume site. such emissions diesel solving profit products both XXX XX new tanker diesel and Across by North tons in customers' gas differentiated there with logistics, frac horsepower, flare TPS. based supplied service million be of on which diesel power than require up are totaling around TPS more COX the reducing to of powered annually of approximately majority

Electric of solutions infrastructure electrical-driven logistics, many flared there Against pressure excess business and pumping of gas addition, significant operator diesel range our the with the customers emissions has by frac fleets. alleviates the result constraints. basins new making pumps, turbine power this by limiting a such today gas gas handling, truck a units. our This complex use for In produce shale to oil-producing a factors reliability for backdrop, pumping generator of modular an as company as diesel-driven turbine of or of enables gas powered support to excess several that hydraulic is associated gas switch operation. carbon fracturing of from to the pressure opportunity

products, gain is prominence, multi-pad turbomachinery and drilling further our the structures infill substantial. deploy high-tech extensive As our opportunity including NovaLT to solutions,

context, horsepower For translates to XX of XX a potential gigawatts market power. million of

Over frac example priority markets an where entry. number fleets growing our in of be customers competing the recently, on significant the low successfully these More gas are versus in technology operating with in and eight will we TMXXXX LMXXXX providing markets Permian few with technologies U.S. a our technology been for focus a barriers to past our continue customers. we deploying have market of years, to Investing electric how This NovaLT in we the differentiation. provides to turbine high-tech to is

Services, improve let share me of specific share In quarter the grow some are to and with Oilfield we you. Now margins. highlights first executing

the and critical markets and signs the is with across OFS showing in portfolio offerings to completion customers Our clear utilize reengage drilling strategy our of of strength success.

our While lines. we in are executing we core driving focused remain product on these initiatives,

excellence We continue growth services support to with deliver in in our profitability and business, of offerings we drilling performance core To America. new record City early Oklahoma sector in motor further the opened a in April. North

our and company Following is aspect At innovate, BHGE processes. fine-tune all our manufacture, motors. of in of in-house. the monitor the closely North repair be designs, center its and motors and that the opening downhole proximity to this can service only every close built center, to in American aspects manufactures performance drilling motor to customers. location, collaborate we of service the We Oklahoma develops We

this us, reduced means product costs. For

For it and reliability. motor superior our customers, better means quality

our As the see drive our customers opportunity of growth to core to I we component with mentioned share strategy where growth our company. globally earlier, is profitable reengage for

engagement large with for with the revenue, with BHGE. completion Asia years. clear. a and These the also awarded customer, our several margins. market wireline, number technology meaningful and service share, contracts after in America In were can and strategy OFS our We competitors consistent For quarter, in and example, of Brazil were importantly, and reentering are in North multiyear clear significant we fluids the secured delivery drilling in Pacific, successful Middle most lead our growth contract where in strategy increases East, to a Overall, strong examples remains we Petrobras, first wireline the business. displacing driving in

Oilfield margin, Subsea delivery another gaining of of that with on enables Equipment, had Subsea grow engagement will Connect quarter, reduce XXXX. our is share costs. successful customers. In commercialization out building is market orders the traction. to The our momentum cost products early from and drive we strong accretive service Connect We

Aptara We integral played in partnerships value chain new outcomes. across are and Connect deeper the Subsea quarter, deploying product a In our to family deliver first number OFE. an improved role last the Tortue BP our offices London. XX months wins on in collocated our spent of partnership in McDermott the and We example A McDermott's the project. with with is good BP and driving

Our to and efficiencies times. the will reduce holistic allow and collaboration drive unprecedented planning space us during dramatically project lead FEED

in We also Beach quarter. great had a Energy win the

Otway natural Australia. South project, for subsea production a We the gas supply offshore field systems will

We are Connect these to wins customer Subsea times. and our in our of modular leveraging lower improve engagement production cost Both cycle demonstrate early technology action. and

drive execution. our contract awarded for activity to the to drive customers leadership fast we our early supply enable Flexible Ichthys These teams production that line, in progress and of world. in We also combination continue leverage over with designs confident we are project and engagement our We and and awards increase subsea standardization pleased a around existing and to product leverage past experience key on be made to around and have our the year demonstrate field. see system able markets advanced materials. global to In experience the We gas production were an offering local will change world. technologies subsea the new tremendous as in Pipe with were flexibles technology the

the of focused actively on are We new our program. commercialization Aptara composite

ExxonMobil orders Turbomachinery to quarter in saw outlook provide East. the projects. per is LNG export & Golden In the first unchanged. for other flexible first quarter, In regions with Latin America several on Qatar in Turbomachinery growth Our Pass market both significant continued LNG the We XXXX in million business for award secured Solutions, further we in such the Petroleum's facility. equipment opportunities XX our see tons annum progress as and the Process XXXX, and of positive activity Middle

driving centrifugal turbines plant. for the We will gas provide XX heavy-duty compressors X

to deploying in quarter, are technology, utilized the is gas compressor gas for BP We won the MSXXXX provide provide FLNG trains. Tortue LNG technology Also our for project. X.X industrial we during MTPA the BHGE will award the turbocompressor turbine technology most market. four which turbine large the

strength our award, and best-in-class were win design. their Our the full-stream and technology by pleased Tortue gas aeroderivative mid-scale the breadth LNG rates. facility standardized gas offshore to project, KBR the for together This in subsea We turbine-based reliability solution selected deals. applications, achieving FLNG in of availability is on with recently similar to include be well also proven portfolio demonstrates BHGE

production maintenance Berri flexibility, Our facilities. the in industry-leading intervals the In power turbine Saudi ratings, will and Arabia Oilfield. upstream an speed business ideal and also power secured important KBR-designed we for quarter, long technologies gas LNG in win our efficiencies provide with

see win to barrels low-pressure is Our a plant. technologies. Solutions, Arabia's and as to driving equipment gas Saudi also across to IKTVA produce industrial are help a per additive additional Saudi transport Digital leading additional with end will day of growth business, to oil program. across Aramco help manufacturing. an our to of gas our we aviation XXX,XXX electronics, further markets nearby This continue customers commitment such and crude inspection In hardware growth automotive, In we example

As Sullivan CT industrial this evidence position as inspection announced presence. win for products of a in new we great To applications our and local developing this are XXXX, continue global Frost leader & in success, team. market expanding technologies our the success,

As some support our of the opened solutions know, in Cincinnati mid-XXXX center customer we nondestructive first major testing. our to for growing you need in

to system and the has for Our we and our quarter, in surpassed operators. center increase technology significantly By dashboard. XXXX. launched a of includes open are a centers and mainframe from reduce suite Valley of solutions, are advanced data Also expectations, emissions Lumen we and software which Lumen, Cincinnati analysis, using a streaming inspection capable new full sensors monitoring to helps digitally in to methane for Asia initial this planning needs. safety cloud-based live integrated Silicon data in monitoring

launched support Lumen continue part solid will example a we customers is portfolio, a use introduce and of to of have to quarter. to solutions zero leading closing, individual a software and is carbon we commitment net future. globally. this first sensor pilot perfect our BHGE's technology more In which We develop than delivered to projects on XX it

pipeline. prices, by year and strengthening we is robust project total stabilizing and a outlook LNG are Our markets international unchanged, commodity encouraged

positioned margins multiple growth improving is me We With from flow. turn to call drivers. of over that, generating on priorities strong benefit gaining and our focused company share, cash to the remain Brian. Our let

Brian Worrell

by Services down begin were total into which the growth will to which intake $XX equipment performance orders was delivered We details. both and all typical and across billion, billion, by were were with seasonality RPO and The was year-over-year RPO timing. then X% order I up XX%, was XX% X% was solid partially service sequentially. XX% the our $XX.X billion. quarter segments results Sequentially, was services. year-over-year up in strong X%. $X.X sequentially. and decline XX% ended Equipment, move lower due and up growth down following driven across fourth orders Remaining ended the Oilfield segment driven $X.X Orders Lorenzo. company Thanks, Services obligation orders by billion. Equipment Equipment offset up Turbomachinery the up at quarter. Oilfield for at

was quarter book-to-bill partially company decline sequentially. year-over-year. XX%, up the sequentially. Equipment Operating total quarter was down Oilfield X%. both quarter for most Oilfield across our down partially down Operating by and XX% sequential Digital million, billion, $XXX income Year-over-year, X% income year-over-year. by which was X%, Our driven X%. ratio seasonality down equipment $XXX million, Oilfield book-to-bill and income X.X. down other was was This $X.X the up Solutions of by XX% and and was were for revenue in and up was XX%, Turbomachinery XX% was solutions income the offset million up Revenue restructuring, which down by is operating offset excludes segments. driven digital XX% Adjusted charges. down operating was Services $XX was was separation down Adjusted Services, sequentially XX% Turbomachinery Oilfield Equipment $XXX million up and up XX% XX%. which

levels $X.XX up in year-over-year. in quarter $X.XX $X.XX, of million, $X.XX, by associated sequentially income and and $XXX which share costs XX million earnings was higher driven quarters. was anticipation in were Adjusted expense for adjusted per well Free basis quarter and cash and million. down up increasing year-over-year. the points quarter, down as coming rate of per amortization down $X.XX usage quarter were were Our and up for sequentially Earnings year-over-year. year-over-year. a down X% sequentially sequentially down annual built flow the inventory, employee activity Tax the compensation with in was payments as we was million. was the of $XX This $XXX Corporate operating X% the $X.XX share X% $XXX XX% X.X%, year-over-year. Depreciation

some quarter. in receivables addition, In experienced resolved have we collection. largely themselves second the These delays in

the expectations cash Our are unchanged. flow for year

Services, market. on I X% segment $X the North played America billion, Oilfield our quarter results. with Canada will was revenue in In driven Now softer first walk the sequentially, revenue North was X% onshore call. sequentially. by outlook a gave through down you U.S. we quarter fourth for American out largely the down and line

lower experienced with XX% costs the Asia Europe. our lower as our mid-single-digit million, $XXX utilization than by offshore quarter, Middle Pressure in moderately expected offset Africa ramp-up sequentially. Pacific the on was income Pressure Pumping was slightly Operating higher East utilization vessels. offshore new In Pumping versus addition, Decremental In quarter down declines revenue higher international in second we International mainly and of margins revenue our well on growth prior and contracts. were Sub-Saharan expect due sequentially. as fleet to the we flat

as normal incrementals contract vessels impact We abate. offshore to the and Pressure costs from our ramp-up for expect negative utilization returns strong Pumping the levels

was Turning project our in our improvement Equipment. increased year last America. $XX and the cost as improving year-over-year This up Pipe in driven was North Orders driven the XX% Beach by Equipment in business Service volume lower higher flat Control in higher to driven million, Systems driven flexibles to XX% activity and by expect execution offering are was by from Pressure were by SPS as up sequentially. million quarter, the expanded revenues key second partially year-over-year. up offset Revenue $XXX as systems. $XX up in profit versus This was business. increase XX% In Surface offset and absorption well revenues prior up of year. and Subsea XX% by orders be were in our up orders volume quarter million, better Systems. Oilfield volume sequentially Production Flexible Subsea in Operating Energy. $XXX we the were Production service business BP successful orders increased XX% versus awards year-over-year, by lower million,

to billion, year were equipment were XX% prior LNG up of the orders, orders year-over-year. significantly. equipment which mainly Moving in down due XX% versus $X.X timing Turbomachinery. Orders to quarter down were the

benefits LNG. was partially upgrades, However, by and services to was this the and orders from which by than income on offset offset orders. Turbomachinery spend our cost-out strong The offset for XX% million, X% Overall, driven $XXX technology partially continue year-over-year. by in declines services revenue. income Service offset Operating Turbomachinery as of XXXX, very to a quarter segments we the The orders to more XXXX and fewer our accelerated higher was $X.X LNG sale operating billion, roughly down contractual were gas installations. expect in year rate for mix. higher equipment down other first be we NGS improved lower and growth. TPS in This decline business technology continue by driven be was higher transactional quarter, by prior primarily down second sequentially in solutions quarter in primarily business driven the better flat by offset The margins year. core the for sale business expect Revenue our the X.X%. TPS margins In versus was revenues natural XX% of efforts was the spend. the

remains for outlook TPS year total Our unchanged.

for and X% than quarter sensing sensing end Middle America, orders Process and in declines and more for and business income better product pipeline the power volume to in X% in I $XXX down Regionally, by our inspection expect by first continued to business. $XX Strong up impact we call quarter and controls Phil. in year-over-year. was growth Growth North on Solutions Digital revenues X% softness business partially Revenue the continues and quarter, as by unfavorable productivity. Solutions. measurement our million, offset the mix continued the slightly margins was declines driven that, will due market. million, second were the saw end partially year-over-year. market be offset turn In and we the by year-over-year, in cost technologies power With offset Pipeline East. Bently was Nevada, and was down Orders million, Solutions. the in on $XXX Digital China Finally, the growth measurement Operating only the year-over-year weak down over lower back to to

Phil Mueller

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

Operator

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

James West

one guys, the this or we but that a of in this guess, you from surprises prepared you're And It FID afternoon side Lorenzo, And see of were in point that, I you of months, the an morning in me more to number rush quarter. seems to to perhaps even your position? changes good upside last go kind bullish we've had on conservative LNG actually LNG good LNG, think with comments at that you. secondarily holding the projects. respect then, forward will the and very three Hey, acceleration obviously, about any dominant to kind last to where to competitive Do that? could projects dynamics year? of your given

Lorenzo Simonelli

feel we XXX see the you down about And Pass, million tons. tons. good it break you've can FID million Golden if XX year-to-date, that's the of you got James,

of million million far. BP Tortue, also, another put got you XX so in Canada, XX You've you've LNG X.X last at taken the place tons end tons. year, million tons if the And got that's

Sempra's through also from You've LNG number a that of North the Driftwood this came Pass, also Global America, project. Port Calcasieu approval with Arthur in Venture got as quarter and projects FERC Tellurian

closely working we're customers. these So with

So also continuing certain we course, milestones X. projects, of We've Arctic and and those Mozambique good feel internationally. Qatar, about reaching got

So and to positive. looks we I'd tons feel good million continue say XXX

technology ahead. remain taking But sure we've going standpoint from also look incumbency you proven make have. always to We the good if competitive it's the we're we been a And competitive. again, about competition and the also, at the and technology said so stay as there. that compete Regarding steps landscape, new we technology before, LMXXXX, that we releasing, has feel been to the our can

James West

period to are great. had there, of out specific That's this obviously, guys respect a sector, don't full cycle estimates is that long it a of at Great. around here earnings Do expectations. give guidance, year and least expectations, then you out I be we time, a we that full negative for revision to meet finding have know And to our you with of for at where to if concerns a kind but where consensus kind seems exceed Okay. any may is be year? way of kind Brian, that's but can bottom not shaking the

Brian Worrell

I actually where feel Yes. are pretty we good shaping about James, and for up how the is us. year

as we backdrop driving, we we course, I remember, the take current a in Sea. you bit And that and main North If that half. cost in said, see international the given we're it OFS. looks for of America that. is to segment, by and synergies the the watching and, we you growth high for the are as still watching But And single-digit OFS, -- visibility that the In areas second tailwind the a business the in more out we're OFS North the some America, that's growth look East, do seeing we're flattish at business are are into closely, growing early business in and really we North expected, the have of range. Middle a got in and and the it's

expect to services higher the backlog. the how like I We And here. cycle the and in like our ramp. activity. cost continuing get outlook's specifically, LNG the out, we a in highlighted for and are there from positioned investing this general unchanged. TPS and more standpoint our drive we then year first the team Rod the we're business LNG mix of But half for to are You ready equipment

FPS volume And are the pretty The XXXX. industrial we're then and on strong they're now. digital, as we've that's said, XXXX, end slight markets in OFE, driving. be expect a roughly seeing the in FPS volume by out headwind then versus tempered higher So the to looking in finally, that that's I flat versus but cost results business right better And going lower where business. slightly

are We we'll in markets, develops the year. power that continued the but the watch seeing continue weakness environment end to macroeconomic throughout as

So the to are sum up. good I about how feel I pretty and is where as we up, shaping started, year

Operator

Sedita from with comes Angie Sachs. question next Goldman Our

Angie Sedita

Thanks. Good morning, guys.

Lorenzo Simonelli

Hi, Angie.

Angie Sedita

targets So additional as you see on quarter clearly, shares are the gaining a talk you opportunity and revenues international where well. little can Services, Maybe better-than-expected good markets you about Lorenzo, you the nice margins bit had Oilfield and want be Service as pricing just with in set Oilfield midway commentary share. with a for that about those through outlook Are on on think your you early stages margin. you we gains? where as on you the to market in share gain share then some or still And

Lorenzo Simonelli

Angie. Yes,

And that's driving pockets remain will America, that challenging growth. growth see you in and we As it some growth look continues Middle been to momentum slower international key Africa, East. at Continental Sea, some some the markets, good if Equinor of the with at there. high there's single-digit look Pacific, we'll be to Shelf market continuing the as our mid- North Sub-Saharan that look feel about we the wins Asia opportunity. Obviously, And Latin Norwegian with see of We some rates. you at the

think, is that the at continue we've between few revenue in margins years Drilling, on drilling, and we the been as I the in last the have that pricing side. be What from of to the the projects international seeing the you're been -- won some have markets focused competitive overall, good moment come about to frame. XXXXtime more Marjan, on is what and operations we're share the ADNOC with that are making deals Qatar And feel we're trade-offs winning won gains. XXXX, really our accretive through the

focus spot be us for we as to a So international go of continues forward.

Brian Worrell

but and the we share right in doing a are seeing spend a always It's seen not do, areas trade-off looking there's that. add Yes. job right to can on these where I continue and team industry, we're Claudia would market looking What to we're And where and can really as looking across something lot we Angie, now, happy nice evaluate margin, a I us. making idiosyncratic is we're grow just share markets at with Maria the think it's on and to between and share deals from at with we the of the international we in we and of deals. returns. more we are time point improve and

Angie Sedita

go maybe with add That's you set you're about year if some Pipe XXXX into Subsea talk going the into Oilfield Then as margin even Equipment wins to be the and opportunity if seeing the rest helpful. we Flexible the Connect for could and and the go and XXXX. outlook of of

Brian Worrell

happy we're early Yes. Equipment, are, out XXXX, Angie, Neil have with Connect. lot talk and of wins costs seeing taken the team a out of of you business if that in a with that you and product volume wins the costs look taken in lot Subsea some and at did products. the structural about very where better Oilfield When we

that impact potential So out and SPS of about the we that's on softer seeing definitely From volume the here second half, and we're growth all play into start in go as tailwind XXXX an through in of Flexible Pipe we a with in come business. through projects But wins to XXXX, you'll cost business Connect. actual see standpoint, definitely some out Pipes. did Subsea talk that XXXX the are Flexible The XXXX and some we a did product as seeing see orders the in have and we having from you're more there. the seeing

a market one say can how good trajectory project as pretty and out I'd and now, it of quarter know, offshore playing be OFE positioned go the we overall, as another. business, in to you in are timings market But the from into the we're feel As But move we we XXXX. anticipated, much tailwind general. our things big right these about should

Lorenzo Simonelli

with offering would and very a to lot approach more we in pleased for lot new Angie, modular November productive a the opportunity deepwater operators. different say launched for I a Subsea the become Connect operators. we're flexibility the towards And of standardization It XXXX we're its provides of technology.

said So Subsea Connect it is would definitely doing do. it what

Operator

next Bailey Wells Fargo. Our with from question Jud comes

Jud Bailey

And Tortue? Pass you everything Could Golden on maybe us some seems Question orders appreciate Brian. of also orders, higher. It if I been can you LNG maybe like could, should more given that give down. TPS have for was outside booked color and

maybe size you on going And go should can so orders there you where extent kind could overall? given what's help up to the us of

Brian Worrell

Yes, of due segments, the still we and LNG through, and start lots deal going of We Jud. information, LNG were the have to take are that. of competitive there. down up orders orders with, that the significantly that as specifics by we sensitivity majority about other there but To Lorenzo segments LNG other were know, give did mentioned. to the look The are don't feel you you the a come offsetting if year this And very opportunities as FIDs overall at good year-over-year.

can across seeing are know, depending of timing quarters when decide more on you We run some deal as these FIDs. move But to customers activity.

market the years through flow the were others versus of softer. we of where relatively will the is we we constructive. say higher overall, things particularly had segments in between trade-offs that projects, other and we backdrop So I have about, a pretty some that, of the backlog talked higher-margin will bit course over some previously when couple as last LNG make the margins

of So we returns for wouldn't making looking a cycle. customers be the some look, optimizing of surprised business to actually but mix the during we're and and what lot segments I if year-over-year, at our time spending that are lower-margin also sure orders need we're doing on of do down

Jud Bailey

Okay. I I I if up maybe could appreciate on that. guess follow that.

that to baseline levels? think normalizes portion, bit I and of XQ So -- think about like XQ a non-LNG I kind higher to that we back Or OEM little if order is kind the do good of guess, rough come new over be orders, have unless some to just normal orders for may non-LNG bigger to use kind to understand what see the start of trying a kind we through? to estimate. Just a of

Brian Worrell

Look, in not bit of same I at those maybe I some total a segments, the if in normalize surprised we seeing do the it But year, you're think we're use down trade-offs. those levels terms to be of your make words, year-over-year. for will, and not be as wouldn't the again, that

first again, will I be look the the of quarter down are as don't year. that we level year-over-year. at the So know to in But rest we it this

Operator

question JPMorgan. Meakim comes Sean from Our with next

Sean Meakim

level OEM and exit expectations as exiting of profitability to to to out that the for for the on To how you've XXXX, the competition the LNG orders on think a that upper question put there your should teens mid read-through at year? about we bogey needed follow XXXX

Brian Worrell

to first half. the brownfield, we're that project, we types think if you that on actually post-FID. those things. about on right within XX rates goes greenfield on here timing But but months you a of through booking Sean, orders based revenue and now order, recognize in it, Yes. impact like And revenue the testing really the installation. up really win of months in really revenue milestones an a TPS going but depends converts progress, to FID in of the be six months of the The scope little the don't LNG really second book have construction bit greenfield in starts versus of six the typical margin

impact. that's So a later really

if see things. we is what from benefit and couple like expect expect do about, backlog is services the good we things you're better as year. service talked equipment you out So mix in a Turbomachinery we'd this certainly higher first expect to the of the a I in activity are year in really One the are And quarter the playing early that throughout orders transactional on year. indicator in

earlier cost had should the you about continuing LNG are of second We we drive year. the half and spend here then to really talked the the out portfolio in incremental abate to in that

a way. year that playing lot like you've really progression, out in the looks are got So last dynamics terms that a of profile and margin

orders booking and we helped half XXXX a XXXX of that plays that second in in we're half out and certainly saw what XXXX look, beyond. of of lot now right really booked the second you So

Sean Meakim

back like out called the it So what for half. the from progression walk already no first from aside sounds prior expectations around you margin

Brian Worrell

Yes, that's right.

don't I said, we're how see good now. changes there that about I and positioned anything right As that feel

Sean Meakim

metrics. just beyond little Anything about quarter? bit. curious the left to a capital at appreciate And first cash then That's OFS very that. I'm optimize capital draw Okay. the is in thinking much I working just helpful. how look working room typical seasonality And we as

Just that on year-plus. key for last the some you've those focused Brian, initiatives, about of thinking been

Lorenzo Simonelli

as quarter. first in say, Sean, we did the did yes. expect usage I Yes, a

you've You happens quarter that the a portfolio. got got in And that the the came we're build has and quarter. and increased bonus around and area that seeing week quarter compensation by collections, that one in say we now. to of -- outside the typical was mainly in the the the and working did intentionally that fixed employee-related timing, first Inventory, much volume lot coming first I'd we capital, of to that the after anticipated was pretty than lower was closed fulfill itself

continue grow working a large we So free continue we've I managing to by we better. it working flow in without working to look, at us improved and structural capital improve. there's there we've those We've opportunities turn. sales by are since and capital do help have we such focused days XX and merged. capital, opportunities to still to reduced cash dedicated I capital days, from And days look teams drag do on increased nothing mean, working being almost to on outstanding there's this, payable We've XX a days continue think all inventory and generation standpoint. by got metrics

the flow. about high out we in and there ability and dynamics of our free free that good to feel cash generate So laid the flow earlier terms framework cash

Operator

question Cowen. next Marc Our with comes from Bianchi

Marc Bianchi

fleet questions compare the talk answered, maybe that, that around explore dollars profitability? more. way and opportunity about? awards I there LNG to fleet opportunity a relative you Is little but to electric Most like the have Any guess of I'd way frac been could put any the bit help to size this of you some my some dollars per

Lorenzo Simonelli

Yes, Marc.

vary frac the going there's opportunity We going look the if it's our look again, it's you most a you around areas where gas different is logistics, to fields. by into flare Where Permian TPS and see business. as electric Just prevalent the be challenges good to emissions. if market, at for such power

to So gas within gas, utilize instead some the utilizing the frac. flare of actually electric the you're of can you and able take

at power, So if to gigawatts think about entry XX very and some the and and million offered look with to And there. it's with it's starting market be a of customers. you into new pumpers pressure now us, about interesting also grow the potential so horsepower you is packages market the starting translates metrics, XX for our

Brian Worrell

versus is you you've Nova proposition potentially, less into XX at technology. for well, a about is value gas And that operator profitable think lower transaction and we really this multiple. putting around that if equipment things dollar it, a and about you LMXXXX flare space, taking some here but technology. your our mobilize And the the turbine the that if from the of gas all in an size value selling then turbine site LNG pretty of business Marc, a think owns lot sheer field versus in people got the and less cost a projects larger that Yes. can options this for of reduction. our actually trailer technology, demobilize individual you here, much, using or much is very got And have, have we've one it the significant

customers well here So better what drive will economics us a in proposition larger there's as But as allow lower lot good than size pretty dollar that have a an economics really it's Turbomachinery sell you transactions. good from equipment here. as these actual the typically we value individual to for for transaction, see

Marc Bianchi

do of on CapEx. that for have this disposal. Thanks Okay. combined quarter noticed Brian, one gain the and you've I unrelated, more, kind kind expenditures capital of I on the the

we revenue kind through of in to of outlay in the CapEx first should as that being context different number the in up wondering if, roll guidance rest X% here actual for something that for relevant about the year the we about as and reported we of guidance? of see number going are CapEx, the number your quarter the relevant for you X%? Or to up the be think the that the to thinking Just of Q being

Brian Worrell

pretty specific other international CapEx it, than Yes, deals last way year yes, really not change projects Marc, that versus the in launching as as of to CapEx, mean, as our about here. you that’s a representative we've ADNOC drive to if like think quarter, in gross I I'd and the it the material think some Turbomachinery the CapEx Middle really is spend about new where won tools new of we're in in growth we're investing well East. the in And first there. it's products say

numbers in the are first of X% you we So to quarter up see the think the there how of that revenue. about pretty representative

Operator

Thank you.

with Anderson next Barclays. comes Our from question David

David Anderson

starting in wondering would XXXX, TPS cycle. could margins peak revenue. normalize thinking if the bit was towards TPS? you those you build also you in you a little in about think you wave functions you next lower is I into I just when kind maybe the talk over margins of have two to Can the hit and aftermarket Hi. orders path Kind expect but equipment the from talk beyond about and of interplay think could first the just just last perhaps about LNG margins hit when peak of and how you normalized convert the years. moving several

Brian Worrell

– not now Yes, orders right think going revenue isn't in is coming now to David, you're through in to if What right convert into really an a what until you converting XXXX. it's really about earlier question. start into going seeing little it, bit

improve talked about see year we tailwinds and You'll of the start rates. later to things from half in margin the in half the that some XXXX second will second of XXXX last in

being that you The installs and from a to ago. we other LNG really are in services out see contractual revenue about up we services that's revenue, talked the is and really play years and dynamic few from have that XXXX, starting

when different roll are in that the off. be these contractual services But that a can at you started was produced in take projects all revenue – and we services installed equipment revenue. got So portfolio, to look how LNG starts an as look at when upcycle really now, seeing you see to and you see to right to

from year. equipment see going we to backlog revenue to continue healthy XXXX. then and that's more start have off the next high-margin booked this You'll in orders to XXXX rolling do year a CSA And that produce the we

David Anderson

from last Is when a of on Do as kind you ones? to have cycle? those peaks that that sense side service event XXXX a

Brian Worrell

installed much. rates. have the as it you'll revenue you're what I going different No. we some times growth are Look, some on Year-on-year, to for growing. based we it continue grow. revenue would operating expect that to doesn't But Yes. and service general, services to cycle, where But where have future, the expect in in have foreseeable they that grow would

David Anderson

prior then a Lorenzo, your on talked the predecessor or reentering of, you international side, about years. And OFS number of that the exited Baker over kind markets

about about Just curious, think what think where think I obviously, where be? to about of want satisfactorily the are you Are you opportunities? you're margins kind can as of you but and gains, kind that share share, do you And OFS do gaining are in that of there this. of talking regain kind – just think And process the improving now? in you you've how talking strike balance, kind trying you about lost in prior through market to cycles? you more I'm

Lorenzo Simonelli

Yes, Dave.

When mentioned, we've heightened always progress East as some XXXX. Africa markets the Middle taking we're at intensity the the and accretive for between going on to operations. and to continuing our good tradeoffs We're in to opportunities. We commercial As looking to made we've we're share margin. there. be look them Europe course over we're say international I'd of the of Eastern also projects, and focus within see

of there’s we’ll tradeoff very good can take account But progress, making always do. So still we’re and some the margin again, share. more into but we

Operator

you. with Bank question of comes America. Chase our Thank next from Mulvehill

Chase Mulvehill

Hey good afternoon.

Lorenzo Simonelli

Chase. Hi,

Chase Mulvehill

to back going to orders. the Hey. come TPS I’m

I pieces in there’s guess, more base TPS. appreciated not we guess, I they’re in moving really can, I think if orders. So

rate will XXXX you the through year-over-year then order down do what the was within TPS? kind be And orders for So talk you were XX% Could biggest about maybe declines think of up? year-over-year. that

Brian Worrell

as significantly I up the quarter. was said, LNG in Chase,

is it obviously to and the offset varies when really nature difficult look Chase, given you projects look, And it segment. they are growth if a other there. The enough at really by quarter, segments taking down of And the that by were FID-ing.

the really how the to rolling FID. take what parts over of So which the I customer think the here, look you vis-a-vis look by really quarters see quarters market. that’s doing a really speed business and business different at But over have is at governed a few to course we’re I grow the

that said going given we be said to So addition, cycle see I’ll for tradeoffs and to a what will significantly we in the the as driven at by and I and on offshore what there. to expect are we FID make be opportunities, FID. But projects reiterate we look, the that Turbomachinery large they based and some And to is of pretty total do positive returns these backdrop we up we LNG some seeing and decide year we’re expect earlier, taking margin on- the a total. a when look here in really as hard earlier, just

Lorenzo Simonelli

But lumpy good remember been and have the orders here. it’s I for will go you think at important always as changed hasn’t as Chase, to should the and again, look lumpy LNG, year continue it’s the it we to expectation TPS be forward.

Chase Mulvehill

given your about good you OFS That’s don’t Okay. we peers Pumping. All a a right. on Pressure we America, underperformed have in basis, of little in your performance peers business surprising kind if of then Appreciate bit, – particularly just think was a but a if sequential North color. that look it bit you it. And

first of quarter, surprise the the in do of of underperformed first of moving give the So you kind some you kind think maybe downside, kind business pieces kind in to could quarter? which segments what us

Lorenzo Simonelli

by again, Yes, out we discussed, U.S., was our continue expected and it America in very decline also much what North largely about revenue good to really what feel played we at said you sequential and Canada as look a we’d would we and positioning. if driven as

be If differentiation, segment, technology good drilling from we look well our the it rig lower. construction doing that our we’ve go and again indicated about at as But you if a you well. think forward we’re outpacing systems feel as about would what count

So and to chemicals, continue I think artificial we lift grow.

in be. would first So very as quarter much we line the anticipated

Brian Worrell

it pretty we much as then And construction out thought I’d look, would. say played well

very and pretty North feel Maria now. positioned are I good fourth in and the a strong of team America We’re off Claudia about and globally quarter, where right coming

Operator

Thank the back you. ladies to And conclude over closing gentlemen, and turn that conference. Q&A I to portion would like the for Lorenzo call for today’s remarks.

Lorenzo Simonelli

in a Yes. few lot. Thanks maybe words just And a closing.

first business. with specifically our quarter the our with and pleased We’re outlook results for

outlook We look when strong improving joining drivers refer soon. forward financial and years, priorities for share, focused our unchanged. outer remain Our in for I and speaking I growth And margins on remains XXXX gaining company. multiple your you our delivering for us We again Thank see of you our to the cash interest company. to today flow. to for

Operator

participating Ladies concludes This today’s thank for and in program. conference. you today’s gentlemen,

You may wonderful day. all have disconnect. And a

Baker Hughes (BKR) 30 Apr 192019 Q1 Earnings call transcript