BKR - Earnings call transcript Q1 2020

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Operator

Good day, ladies and gentlemen, and welcome to the Baker Hughes Company First Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question 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. of President Vice Bailey, Investor Relations. Jud may you begin. Sir,

Judson Bailey

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

and today can Here CEO, found on The our are at be release our bakerhughes.com. website Simonelli; earnings earlier with Worrell. CFO, issued Chairman we our Brian me Lorenzo and

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

know, measures you non-GAAP of found other release. and to can As GAAP operating in reconciliations income be our earnings

will the Lorenzo. turn to over I call With that,

Lorenzo Simonelli

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

as challenging from quarter the of economic due the first XXXX The Covid-XX gas saw of prices. the Baker pandemic, significant fallout Hughes and turmoil rest for well in oil to the and created declines and the we industry was as

Even ongoing disruptions, businesses typical in OFS headwinds. despite and and cash these the free solid produced quarter in TPS over during our generated seasonal results flow $XXX we million with

for am apparent in The extraordinary times like the Overall, our product through most is company our portfolio of of of extremely and perseverance I our set focus and proud strength level circumstances. team an of diversity of these.

our supply the backlog chain execution strong sheet on in works and of balance and the crisis HSE our continued teams strength operations of segment. to emphasis our From in maintaining of our a phase the TPS the

demand first supply prices global global the decline shocked has uniquely quarter understatement from a Since combined last with face sudden in January, rising earnings drove positions spoke quarter. that This oil during The macro GDP on the oil an the navigate to you, we industry. fourth the we say it’s Covid-XX the as call late our to XX% changed rapidly. an Thank environment challenges in Hughes.

Looking forward, demand and oil uncertain. for the outlook supply appears equally

GDP in while forecasted meaningfully decline expected the U.S. the second more to is to second XX% quarter, side, the both year. or and by On quarter for demand full global GDP contract is the

impact XX to shock barrels second demand as is quarter per estimated million day oil by barrels million global barrels in by per day XX to XXXX to barrels This negatively and for million X million a whole. XX economic the

the Under side, proven recent supply even dynamic. events have more

and of March in in world’s indications likely of third quarters. some from largest production initial have the during We the increase second a producers

the growing cuts There dramatic week. are last supply global collapse signs the response capacity potentially that to States demand countries that the agreed production were complementing OPEC prompt production oil United Plus in by in quickly quicker storage and shut-ins now could with the threat a to

For excess the the the and activity. by encountered industry compounded the be is earlier supply natural decline LNG economic gas year to this markets, likely in

than the previously gas sooner also However, correct U.S. lift the may thought. faster that markets gas in than the we with associated American North could oil as markets production view agree decline slightly prices

for of and a as term, fuel on fuel. positive LNG’s prices gas long-term these the destination Longer to a we side Considering the of remain near-term transition and be XXXX as role outlook will months. medium energy supply demand in factors, the a LNG the outcome well as as natural magnitude likely sector oil the continue year the due the to coming regardless to very difficult on for degradation

materializes. driven will it the outlook largely pace response Looking economic supply from into and remains XXXX, be unclear recovery of and the ultimately the Covid-XX by the pandemic that

delays taking we a market, and likely to prepare sharp reduction activity result to at of multiple Baker to are in a be is levels Hughes steps for project As uncertain FID. this what

that conversations believe more versus America customers, on are a now E&Ps. contract our OFS spend North expectations This that based the announcements least in XXXX. at and severe similar our public XX% is likely in segment, to completion operators with E&P likely private XXXX view fashion act drilling our own we to waiver by is For revised than and budget recently or

lines. portfolio higher The in volatile our North businesses and production-related of percentage buffer completion-related acts more drilling to American as a typically the product

However, look not may environment, resilience to we operators would conserve we caution that cash. as as in much the see current

production and and the We believe over XX this lower wells likely XX of impact shutting next sales to declines could production chemicals months. customers ESPs as XX

from XXXX lower versus impacts America Covid-XX Internationally, by we pandemic followed we XXXX. the Sea. combination declines near-time decline oil to of North in to and see and contribute the double-digit Africa expect the Regionally, Sub-Saharan prices to the a sharpest expect that in spending Latin

In will global at crisis of the of the resilient. modestly role end spending meeting of other more East focus upper consideration a expect in North Middle versus the longer-term projects natural this ongoing the we be basis, emerging American producers we demand. that believe shale combination make could key and gas the a low-cost On

predict, it’s shift over few years next balance prudent we believe early the witnessed the over to have relative to is decade. this still we it in While too last what a to contemplate

we normalizing other near-term XXXX margins assuming of the the pressure significant before business For and economic remain cycle in short Solutions, the revenue half second in to portfolio, Digital expect which on improving the in is our activity.

have business number power we and across framed of as plus oil diversified reminder, industrial gas to with other and physically a markets. GDP a As broad exposure DS from end-markets a

meaningfully aerospace as well trends. revenue we exposure DS to global Given its like will orders for gas likely Europe declines, GDP and impacted America, oil as presence in and and be by North automotive, and expect that Pacific, Asia and its end-markets

and cash cycle long projects. likely the of driven constrained uncertainty development, the and primarily For economic are which in our will delay combination businesses a expect we of that customer portfolio, flow by offshore number LNG

trees two XXX a versus or ordered tree last In around our annually. see fewer XXX to expect trees orders the OFE segment, approximately of we subsea industry years

environment the price commodity the we fewer in XXXX outlook. uncertain to decisions FIDs expect to operators and result as sanctioning in delayed economic LNG better TPS, in order For assess

similar expect dynamic see forward onshore/offshore only offshore production move a year. to TPS with few segment We within large-scale a the this projects to likely for

In activity navigate structural taken deploy and to and customers. processes levels, we uncertain undoubtedly environment lower optimize our order can to changes accelerate that actions lower to have will cost, lead for in decisive costs this our efforts cut technology that

compared organization. our a cut savings annualized to $XXX restructuring driver by capital to over have have million prior we execute that We in begun our around on for to expect XX% also and estimate expectations expenditures across our plan

reducing headcount, manufacturing derived overhead and from geographies. These across footprint multiple lower activity cost to cost be our savings levels will

for to the cost to declines, These down as structural as activity initiatives respond are longer-term anticipated industry. near-term designed well changes

level these margins drive of acceleration greater changes and are of a order improvement Some over operating the broader in efficiency. the have actions structural quarters in we past to an of outlined two

acceleration cost In addition have technologies. many downturn to saving deployment also of the these of initiatives, the of of the encouraged stages early this

have growing is our customers the world. example of and We remote number around capability drilling One a operations. in completion of this

utilizing having lower Sea Marcellus track record with successful and customers this forward establishing to by discussions technology we operating effort Basin, North the the an promising drilling going in remote costs. a China, several are in After

string forward and turbo the a performance engineering a test, example of equipment. that is our machinery functionality pushing Another process technology ability our of new with proved to virtual run

observe string and technology the to performed Calcasieu test world recently which Global’s use in compression the the cutting-edge the for Pass We around virtual connect run XX facilitate, on Venture first cities people virtual project train to five test.

corporate strategy the Despite facilitate facing being out the downturn are the clearly executing, remains help focused on and leading technology the to energy the cost industry industry initiatives company energy transition. our the we

for productivity carbon ever, and reduction navigate efficiency technology and will environment. and the solutions than current more goals both achieve increased customers Now macro to demand our to

models to gives we coming on with and continue on and portfolio solutions an This maximizing transition, execute our efficiency technical energy Alongside improving evolution new reshape commercial company commitment years. on to and on to opportunity the to operational us the will over focused our outcomes focused them strategy engage value. new

on our objective. reinforces environment strategic market current this The view

the Given exit in levels, we countries non-core prices of the world. product reduction multiple by in forecasted declining the generate for will and be lines returns, compounded lines some around already are accelerating to activity which outlook product challenged the financial commodity

For seizing operations are also business North shutting a we in America, completion and example, down of commoditized and in fluids our completions-driven smaller full-service number drilling businesses.

areas Although to or and will the near-term divestitures some more partner to generate portfolio stable invest or that product focus our higher earnings returns. we on in evaluate exits, line opportunities and continue

transitioning higher to align portfolio end-markets industrial on energy our of the actions capitalizing These and objectives mix with chemical transition-related growth opportunities. of and a

to want Baker call uniquely to the the positioned. remains over I turn Hughes I Before emphasize portfolio that Brian,

declines stability provide services from aftermarket and cycle projects cycle encounter dramatic our longer of activity. businesses the pressure backlog strong Our while shorter in

energy market the us value across and uniquely challenging position industry currently facing. environment operates the portfolio is chain to makes balanced navigate This the

With I’ll the turn Brian. call over to that,

Brian Worrell

Thanks, will the I update as through quarter for XXXX. Hughes an an will then of outlook results walk how see challenges macro we environment. we today navigate are the remainder first provide it begin Baker Lorenzo. to positioning overview of this I of with on new our for the and our

is as protecting this After strength employees, health maintain we of and first through the the foremost manage and our focus company of safety our the to financial downturn.

coming activity levels actions necessary to we to quarters. for committed over to all expect business taking see are the We the the right-size

the first assets. we and billion approved write-down certain in inventory line and are we of have in step, actions amount workforce, this These quarter. of totaling and recorded related charges other product to a As billion for $X.X and first restructuring for $X.X reductions plan exits a intangible geographies primarily in the cost expected the

workforce across levels we corporate activity with management functions, layers. These business align our actions our taking are place as anticipate and and remove the

expenditures and than year. cash less approximately be in plan restructuring one $XXX cash expect this payback million to for total to We the

process evolve this projected conducted that overall efficiency. changes the for we to continue and opportunities and to the Given improvements a other saving magnitude thorough industry, operating additional to our further structural very cost of identify downturn,

confident position of short future. time our Hughes generate Baker savings flows significant returns ability these in generate to in and We initiatives in feel these better cash cost to and actions very that the a believe from period

These be three major restructuring initiatives into can categories. segmented

come The reductions facilities for these OFS and cost savings is to headcount lower our which will The the largest are in from OFE. activities. of footprint first, levels and of majority adjust

in is and remote were earnings global past supply category acceleration our a base, on transformation calls. efforts and expanding second include consolidating we over basis. manufacturing outlined use of our chain, The multi-scaling initiatives already the accelerating broader and These structural and then of planning the and operations procurement the shifting global two changes

operational over our service this in was of improvements cost capabilities target initial The delivery plan months. and drive to significant XX

that we of believe lower still levels will be savings. than developed capture cost initially volume many this can we clearly we Although when plan, these

included Lorenzo in of category product the this some exits the portfolio initiatives line we last are Also that accelerates which mentioned September. introduced

the in more on dilutive core of small smaller base our margins a lines allowing will some to that we OFS overall rationalizing exiting focus portfolio, our be OFS business By us returns is percentage and revenue commoditized of our strengths. to

will continue market unfolds where We not as that businesses acting return adjust do cycle this portfolio the evaluate requirements. meet to a to required to

across product simplification process, entire flattening is have and the are steps organization. certain in accelerating category the we third streamline structure. our Through organizational to this taking of identified our meaningful functions companies in opportunities The

and evolving these cost, needs ever informed changes decisions faster response it should will actions only Not to better to also lower in the environment. times lead business and but to customer help

savings Overall, to XXXX. initiatives achieve restructuring which estimate $XXX by annualized plan these million, we the late around are we that from

Next strength our turn will of balance the and I to liquidity sheet.

company years, for disciplined have of past remained prolonged two-and-a-half prepare extreme a potential we downturn. the in order the volatility Over periods or to

macro on likely be outlook, the Based current we both. facing will

and for investment-grade focus our this capital dividend on payout. in our while rating goal preservation current and to cash also to remain maintaining is Our our disciplined liquidity downturn protect allocation,

and some strategic remain While we financially may downturn, this opportunities conservative. in will arise diligent

by facility continue $X of paper which We of a differentiator. other access the billion supported revolving and is and uncommitted strength billion totaled and end commercial to view Cash credit. to cash at key quarter, credit equivalents liquidity as a the lines of our and financial $X further

to commercial end the revolver of or the program the we At had uncommitted lines. borrowings quarter, no paper outstanding under

is XXXX. Our next debt maturity in December

We a environment company taken the perspective. this actions cash to uncertain through have help navigate from several

expenditures over Our capital an of XXXX revised net by is plan. for expectations part XX% important lowering our versus

development and adjust We diligent also will continue depending we where to research our be appropriate evaluate on spend conditions. market and to

We as cost will relook continue downturn dictate. our position our this to evolves, at as conditions resource market adjusting levels

down billion, X% results. ended company total the at RPO were year-over-year. was X% $XX.X sequentially. quarter through down Equipment the ended $XX.X down walk $X.X Orders RPO billion, will sequentially and I for at billion, Remaining Now, $X.X services obligation performance X% billion.

the book-to-bill and partially Digital X.X. Revenue ratio X% Year-over-year, XX% was company down $X.X in down offset quarter total in equipment quarter was TPS, sequentially. X.X was growth in in Our our OFS. the quarter book-to-bill by billion, driven declines Solutions the was for and OFE, by revenue

$XX.X loss for was Operating the quarter billion.

first one-time intangible in $X.X impairment billion billion items number $XX of Our inventory results goodwill a a impairment, and quarter included charges expense. million in separation-related $XX.X restructuring, and including

We the of impact negative approximately also a million. our Covid-XX income estimate that pandemic had $XXX operating to

Solutions Digital experienced supply TPS volume disruptions primarily Europe impacted and in chain and that levels. Both China

as OFE as and impacted rig OFS well shutdowns and TPS, addition, In negatively to work-related and travel pandemic. restrictions, site related were the by

of was not which billion restructuring, separation the $XXX income could but helped and declines. remotely operating other activities customer-related perform to Adjusted $XX.X offset million, volume impairment, excludes efforts charges. Our

income XX% operating XX% down was and sequentially down year-over-year. Adjusted

income year-over-year. were year-over-year. XX million Depreciation amortization the Our the rate in down sequentially was basis costs X.X%, and flat quarter. Corporate for adjusted was rate and operating up $XXX $XXX million, points

expect down Tax GAAP expense per $XX.XX. to as a forward $X.XX we $XX be earnings impairments the quarter $X.XX, share million. per and quarter. result booked quarter going were year-over-year. the was amortization for We during was of million Adjusted depreciation share the lower $X loss per approximately

quarter cash progress million capital Free the by and $XXX from in performance We flow receivables delivered strong $XXX driven collections. working was million.

the the cash Overall, in first are very we pleased quarter. with performance

optimizing performance. cash and improving our capital We processes continue working on our focused remain to

OFS. working improvements expected look as been we lower the driving of largely be uncertain rest processes franchise, this we outlook. the of from as working levels see the XXXX across working for well lower progress in market anticipate of payments expect capital, given revenues we at As the the to capital release We in offset have to capital by

recognizing walk as well in environment the outlook the dynamic current on with Now and prices. the is coming extremely detail going weakness the gas segment that through you pandemic, I and in from give results forward will thoughts our Covid-XX more you risk potential as oil the significant

improve based the of that the are assume for third conditions in XXXX the expectations in prices and weakness on current rest we persisting commodity to Our quarter. economic begin

of in year Importantly, ease distancing form the our of in protocols of travel year. the until expectations health restrictions, half gradually second assume social and safety place that strict remain to and middle some and the begin the

and over delivered solid a slowdowns despite developed activity In Covid-XX in America dramatic last disruptions of quarter that Oilfield internationally quarter. team Services, North the the few in multiple began the the weeks in that March

revenue OFS revenue down by driven declining was America sequentially. billion, count. X% down International in X% the driven revenue quarter by seasonality. North was down was sequentially, typical rig sequentially, X% $X.X

extended the supply by OFS Covid-XX the shutdown. economic as revenue quarter modestly during in first impacted in well the disruptions demand related chain, lower in was Pacific as region Asia

Year-over-year basis points. margins Operating basis points. income quarter margins with XX% up down were $XXX XX the declining million, in sequentially was XX

the earlier, structure OFS As business. significant our making several to of outlined we changes cost are I

the As decline frac second North significantly response we XX% America at at rapid to the lower a prices. we rigs to look expect operators to oil quarter, in as crews pace ahead and least the release market

working in expect of impact restrictions decline multiple we low-to-mid from lower protocols Covid-XX the driven oil safety Internationally, rigs prices to and travel and sequential as number by disruption regions. teens

help soften that that cost the believe to taking lower. overall aggressive OFS margin pressures actions be that will are we will margin our believe rate We expected

impact segment, spending As versus E&P than to decline look at expect and we for XX% assess the try OFS more to XXXX, our XXXX. remainder the we of U.S.

trends drilling, and as spending have spending indicated earlier, our could historically more revenues cut production. As operators OFS and activity America North across they completions, closely than track Lorenzo industry

position spending that East believe industry we international slightly to range and revenues strong Internationally, in our that XX% is the outperform the XX% to trends. spending likely decline should Middle in help our overall

offset pressures some actions activity help in can market. For we our that the are cost margins, believe that to seeing we of

Covid-XX Orders delays team chain by Brazil. Oilfield flexible supply year-over-year the the in in cover in challenges quarter quarter major where XX% $XXX strong restrictions performance. The and million, no impacted in awards driven I’ll Europe Equipment. were mobility OFE tree impacts, from offset orders down Next, the experienced quarter, in by specifically subsea broader

Revenue by year-over-year. down offset in was was lower growth systems production declines subsea X% subsea $XXX surface Revenue million, services pressure control America revenues. and in in North

lower results seasonality Operating our overall supply volume and delays loss by and mobility-related was to from $X Covid-XX, weaker million in pressure surface control business. driven due chain

expected to lower mentioned projects As a restructuring levels. our with number implemented capacity align earlier, of OFE activity have and workforce in we

quarter, as flexibles offset we by second sequentially and pressure decline in subsea revenue was control the declines expect For revenue in to surface growth services.

SPS our to slower to conversion we of backlog the most expect Covid-XX revenue into impacting This modestly. expect OFE decline income also We of supply also half disruptions. and actions not lower year, cost due operating sequential in chain second the

As still we OFE and executes expect current revenue the grow segment for at on flexibles we to as SPS in XXXX, look our team backlog.

While Overall, will broader by services we that estimate market below results surface control pressure likely subsea driven decline levels. this in margins dynamics. XXXX likely and

Machinery. Turbo to Moving

gas from through past exceptional quarter, period operations. delivered months where We few been to the given to to and TPS the its maintain as essential has in operations first oil over importance received Our quarantine the you majority markets. TPS team due and of a have know, the the the strong Italy, especially Italian able our business circumstances government designation

X% our was of strong on/offshore up capacity saw awards. at We orders quarter operational, orders the billion, we FPSO Equipment the fluid. year-over-year number book-to-bill in and $X.X up very production situation While XX% all have our plants Orders of booking X.X. remains segment were in running are year-over-year. were a and equipment been not full

XX% installations, mainly by the up year-over-year, contractual services. quarter orders were growth driven upgrades Service in and in

year. chain to for prior delays. primarily driven and Covid-XX mobility-related due to quarter $X.X Services supply was the related revenues Revenue year down billion, the was delays, revenue versus XX% Covid-XX dispositions. down XX%, Equipment prior XX% by the versus down were business

year-over-year, XX.X%, Operating margin up XX% basis income we by Covid-XX. XXX for more was cost million, line offset saw and impact points than driven $XXX year-over-year. was TPS which Operating from the product productivity up mix

businesses. our likely second particularly quarter, and basis. given challenges, mobility-related continued as sequential macro income these decline faces in cycle shorter on volatility service a the the Italy factors, overall operating for will TPS on the as well For the situation backdrop, Based

As we challenges, at but a rest face resilience the TPS, show due record the the for look last of to to number two XXXX years. of business we over backlog the built expect

We revenue. expect in equipment growth

the that prices to service COVID-related versus operating expect lower expectations. expect and income we lower modestly on and However, these we oil could TPS gas than prior levels. be Based impact issues to XXXX flat revenues factors,

both Finally, Covid-XX chain a and by the customer was the offline impacted the and circumstances. Digital unique The team quarter. of significant base Solutions during heavily incredibly given executed portion supply as challenging was well

were primarily Aviation, notably, all quarter orders saw driven down end-markets, year-over-year, Covid-XX-related million, and most disruptions. $XXX across the automotive by XX% demand for We in declines Orders power.

impacted, Revenue convertible Europe, as for primarily Covid-XX. shutdowns slippages was and The delayed Technologies XX% lines down most by Asia North lower and were to spread. product volume the Nevada orders quarter Waygate and Pacific America in million, deliveries Bently multiple year-over-year, $XXX were as driven due

the $XX implanting lower Covid-XX. lower in current steps response to organization are quarter at volumes driven we macro and efficiently employees caused disruption through to down countries by taken our XX% pandemic we the furlough cost. was changes the related year-over-year some In to more operate and structural by environment, Operating have for income million, to

disruptions gas DS and That outlook impacted continue be the in well weak said, by the to results Covid-XX we as and as environment. to oil still economic expect near-term

operating a be the second income down flat on we As revenue result, expect sequential to to slightly a and in quarter. basis

to weighs the year, for the revenue full the due activity we weak outlook For expect declines on economic double-digit in results. current

Lorenzo. call will I over the turn back With to that,

Lorenzo Simonelli

Thank you, Brian.

care and I by communities each of to are to to move other, the recognize customers, the what around them take Q&A, few thank Coronavirus the a we doing for team Hughes impacted to the Before our wanted and spend Baker moments pandemic. they

with continue support communities kindness. of We acts our to courage great and

by safely global have respondents. critical weeks Hughes UK, the for protective Germany, Baker Saudi additive and deliver with identify, working Arabia in for been teams first and Italy, now test to local partners gear XD parts collaboratively the printed U.S., needed

already experts both Baker in manufacturing At additive in been such Talamona, our kits started Italy printed manufacturing Florence, in produced with of more Scotland. Italy will the partnership be Kits Montrose, additive production additive Hughes components, in as and adapters. respirators, respiratory for Italy, facility XD have valves and and labs distributed have masks

design and efforts We looking being labor to communities and are am committed team apply our time, donated. support unique of in difficult to of I around printing XD use this and to business these extremely These highest and best inspiring the us. our efforts are proud beyond capabilities parts the are All our time.

We come are proud together part who community of pandemic. of contribute to help to the of this a technologists have to be worldwide impact mitigate

we have of balance our Hughes to Finally, balanced want challenging and environment. that portfolio the to navigate highlight cycle positioned remains longer a projects, Baker uniquely a solid strong market I sheet, backlog

for With questions. call let’s open that, the

Operator

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

James West

responders. Baker thanks is doing for all Hey. Good for And first morning, the Hughes gentlemen.

Lorenzo Simonelli

James. Thanks,

Brian Worrell

James. Hi,

James West

Hughes this for Baker So, different the I Lorenzo, think is than downturns. downturn, previous

You situation. different are in much a

much a larger company. are You

hampered you hamstrung activity. You have type some better not by by the systems M&A – are and of or

Baker have your have perhaps perform to this time you ability how might how describe you And got versus on? – I and you Could to how relevant the know, how what detail in has in you past? looking at is comments, swiftly some prior if this really in the Baker past not how quickly, seen into much respond

Lorenzo Simonelli

business and James. lot since a Hughes current XXXX, it’s good at not believe for our say, reference you the of for as Yes. we Baker change downturn Sure, a that And, XXXX it as last is.

with could Hughes its due As not XXXX, in to you merger under XXXX, Halliburton. conditions react proposed to Baker restrictions recall, market

are systems the Hughes have past have to of Baker and we processes business some OFS transformation in on prepared the and and years remarks. react to Claudia Maria business we and team new we starting mentioned benefits in July better the place in the executing of been that that the visibility, of see XXXX, quickly in during the improved creation the processes. Since

our customers to engagement, in on close and OFS, the being was focus Also especially that’s as considerably. big a know improved you

So also we with continuous to are commercial this that in new dialogue we helping efficiencies improve apply the looking at time. and customers can offering at

that, Hughes I’d the also remind is like to now portfolio of you Baker very different, as well.

not North TPS present Oilfield pressure also in our are businesses billion. $XX cycle mix look We the you longer pumping of an of America Equipment have is and we as and IPO at approximately and

a I Overall, got pleased ready am and for strong sheet We’ve our liquidity ahead. position team I’d is with challenges balance and the say, positioning.

James West

And the Lorenzo, first to good quarter. to hear. Okay. shift operations during then, big That’s remote

this you I is getting read to me be And and Baker some how with be do rig this somewhat creating operations, is think, remote that better more nature. this going probably people semi-permanent site also of and the enabling permanent talk centers? wells Could about shift? HSE more could in you off

Lorenzo Simonelli

are doing some. We

as we’ve you and more technology are the an conversations are that utilization been virtual capability environment increased as our interested offering in the of them. we is having I and And kinds is think there the of operations. customers and right of outcomes well and that are that COVID with remote current drilling of more one

But beyond more also time. that that look factors this help actually extend percentage first mentioned time. remote of they at reduce safety drilling think benefits we non-productive are been drilling as health beneficial OFS, And the the and quarter to-date. was just rig and at – current these in operators that’s and drilling the efficient We the in the highest has performed really

We are TPS. in see starting also to

talk Global virtual for Calcasieu the virtual LNG compression a we first heard You time. about on Canada. with also that us this Pass string conducted We’ve and was completed recently for project test remotely the done test the Venture

will see So, technology applied as customers. area it the is go we forward and that we the do our we focus to with right continue expect

Brian Worrell

operations Yes. lot helmets four James, add actually has audio smart PPE basically capabilities that some And for lot equipment been about using would We’ve for time. and we’ve now remote a and a that doing I TPS remote of years video, have and that’s integrated in five to been glass. Google in

to in can matter an Google sit what’s in FE experts into up they actually that going and world. and a machine can in project the technology, access no glass where documents pull on So, the see

are migrating to it and for available iPad We that FEs. to iPhone our more make

customer into for then, transitioning are and And been we or can world these block we do in field quickly. and problems before or actual training and Houston using in are also work into virtual bring that virtual sitting where the have they environment reality people Florence sometime RFEs, employees they in a reality with wherever repair things actually solve

a quite is experience we like said, bit of got, and downturn there. I this accelerating think I that So,

the is think I there huge us industry. for a So opportunity in

Operator

Thank you.

with Angie Sachs. Our next from comes question Goldman Sedita

Your is line open.

Angie Sedita

Thanks. Good morning, guys.

Lorenzo Simonelli

Angie. Hi,

Brian Worrell

Hi, Angie.

Angie Sedita

Hi.

efforts, really QX margins did and So, around do quite so helpful and the have color around cost-cutting appreciate all the it’s you margin else additional the your prepared and given expected could the better Brian, of XXXX? Anything us color than for add give really outlook revenues and light remarks can to in I and markets you decremental in gave margin? you Services Oilfield

Brian Worrell

the and to and I look, Angie, position improve think OFS. the process of working Yes. team had been cost Maria Claudia

cost and continuing delivering environment are As calls on deliver think in to this and can environment. strong performance and that despite Look, XX% margins focus in was see. we’ve efficiency this outlined, meetings decrementals we I we good in we quarter the headwinds in all

now. is is a place. what that restructuring really of that better systems to in business ahead actions. March. not Maria XX. Lorenzo reference mentioned, for we as the taking good combat started So, think got look, to We XX better and how We going and process team actions look, already got in taking we’ve place Claudia this got and this the in started perform

on. early So

impacts So, of historically give really goal our and that you during our can a this that cost line decrementals to consistent see out more level for going in definitive any offset activity with we with forward. I what look, decremental the keep is actions difficult particular downturn declines. you tell pressure may pricing to been

the the Now, that historical about quarter, for of in can activity America. of North is may and on obviously, volume take say, full lot But you declines. I’d there second line out going the case, some being with be uncertainty year, is cost in because coming this feel quarter, the good not particularly in decrementals the the faster decline than

from be I likely look, will say, will I’d declines. do out are that will the that – impact of an the be And the think margins down margin cost overall volume believe we taking that significantly. standpoint, dampen we actions But

this continue see through if more to Claudia action. team we need Maria working we’ll and the So, take monitor are Angie, the situation and situation, to and

Angie Sedita

Perfect. of about on the equipment CSAs could believe talk That’s the if on think the are just year? about of kind the XXXX? stable. or the and through Is the add obviously servicing XX% more But it immediate can Any ratable you timeline declines. thoughts moving talk also TPS then, and of and other And the you service of revenue, part. I and I helpful. just XX% That pieces

Brian Worrell

Yes.

addition going Covid-XX some deliveries I in general, causing cutting some think and expect everything come to The also of commodity pickups. You in budgets pressure know, customers would say year, to in with delays under I the I’d revenue because services are Angie, equipment pricing. on restrictions this

some in kind back mobility things There our logistics and instances, and field that’s outs restricting is of engineers. those of some

out of as be some immediate revenue and And LNG travel. impact related services related to equipment. on FE you some primarily in mentioned, likely there is XX% contractual to TPS about services pointed you the So, will

decline some expect a you as those with minimize relatively be try I stable. be around could recall, got start to around move guarantees modest maintenance OpEx. customers and we events But, to There these to would contracts. revenues

work so, very And customer we outage closely the really when drive and with don’t those happen.

short room them on visibility some execute pretty we continue But little. is to good will that move around there and There a feel those the about to window. a I within

around servicing transactional have are spare can other these as over impacted control things their be inventory. by to services, save cash, in operators downturn negatively The area moving to more immediate likely the parts do that it’s

impacted downturn So, one stock think Angie, customers going as on contractual But as don’t I going into services. that could they say you have into their downturn. thing will I shelves XXXX, more much see versus than did this that

stocking in see new we of So saw XXXX. sort expect to large I don’t a like

area hold other and services I while is well as cash in services shorter could pumps business could see for the decline they installations for conserve around The think some to and near-term. upgrades of valves. customers cycle look Again, and reasonably up we

impact all transactional in and year Angie, you’ll through more the I and that spread their levels. things the immediate customers So, pulling together, services, could mobility-related then as schedules more stocking an see of that you see think outage work throughout

about But, support we diligently and of some team franchise are question this technology long and that good helping. and service customers to feel over the asked, remote we have run, the mentioned the working is the certainly that I James

Operator

you. Thank

from Our next Chase of comes Bank Mulvehill with America.

line open. is Your

Chase Mulvehill

gentlemen. Hey. is Hope Good everybody morning, safe.

Lorenzo Simonelli

Chase. Thanks, morning. Good

too. You

Chase Mulvehill

you. Thank

those Obviously, about $XXX really cash which profile, coming think almost on free free was I million that we flow flow obviously, a firstly XQ. strong that as to If want XQ. operating the in million cash approach was guess, cash in kind I flow. free hit flow, seasonally lot cash $XXX of of strong So, from

is and much XQ. – a we see than it better conversion typically in This cash

if what kind was that of talk through really much underlying drove of So, this. may conversion? you be prepayments cash can How better of versus kind

Brian Worrell

say, planned processes progress am inventory as and management. I’d in we collections board cash did know, well with you collections really But improvement the across say, I’d the see performance in overall look, as nothing Yes, and it’s process I’d our come Chase, on say, quarter. some I we that. through. extraordinary on happy favorability the

the to the I we you that come we think, benefits together to improve work we first came and about when processes again, talked see to you through. are starting do cash needed of

think I can I incur cash separation for of Look, the restructuring and the I from generate year modest total free businesses cash for free franchise, and we’ll long cash I’d the cycle that we $XXX say the the at how standpoint. flow, despite costs look think, year service visibility given and flow from cash the the

had and that the as weeks. that’s that for as we last we’ve the about well here talked few $XXX we previously the projects again, ongoing, restructuring million that And launched million $XXX in separation

that the that of free for a good exclude you allocation decision gives operating $XXX strength if cash a the So, view you the of standpoint. GE company million capital restructuring separation, and from flow

out that versus last know, I’d XX% is We talked thing about some you to point Other leverage. we do have CapEx year. than cutting more

Chase, cash and the be are more. they’d on into we play year, out activity coming year. to likely And rest levels then the depending could more where thought cut we taxes over versus XXXX think where I be of the

to again, move with and OFS But the just to improvement improvements things from working the think, the of a would in I some we would continue that place. progress expect place of I collections to then good capital, to to related driving process progress expect drive given largely capital are orders. lower what lower collections I larger working lower in in we’ve capital the working be and offset revenue. impact seeing been we got the So, around bit

So, generate pleased We first done. this indicator flow can teams good the saw time conversion progress again, what have and free that. over cash business a with quarter XX% of on you think the is the

Chase Mulvehill

a there. over facing. am color was But are touched kind - But appreciate – orders and LNG. bit the you of that probably this Yes, could to year be a skinny headwinds the you you gears bit pretty kind going near-term about macro little that to switching of I some of Lorenzo, on talk orders. a year of little

– gotten LNG outlook for backlog risk and – medium I’ve But orders could term to few talk the also, could then questions about of longer about your some you of backlog. LNG talk a your you about

the were you So, any see around, tell backlog did your could and maybe there you if downturn? if to risk last cancellations

Lorenzo Simonelli

Yes, Chase.

As better uncertain Hard FIDs delay special economic as any order we comment the in environment in some result decisions specific and is fewer on commodity to in outlook. XXXX mentioned, of the assess LNG the to operators price sanctioning to likely projects.

projects But year. couple LNG two delayed later operators. by chance a small likely a we still and happening perhaps FID are where year of of we already large-scale still seeing some this see smaller to projects one now, larger having this be Right medium to projects

XXX macro we to to and remains be to medium in long-term growth strong perspective, demand a outlook MTPA LNG the from global XXXX. XXX Fundamentally, by range still for expect

know, XXX, have to today's to represents produce need as still are And to XXX going capacity place, MTPA significant XXX that MTPA. XXX from to XXX approximately nameplate you of MTPA by which growth in XXXX, we

feel our stay going perspective, are year. FIDs still we customers. and to see macro And good to we'll again, again that close through this continuing So, some

Brian Worrell

Chase, any look, some history with the LNG we And that projects cancellations had seen our was through backlog, during us. Yes. and one specifically on we once FID-ed The has recall And I been move in thing the project going downturn, FID-ed any LNG last in can't the seen, schedules didn't cancellations have you've with see around. us.

have far customers obviously, the very any that of has we so about lots that with wouldn't little worries happen, make about stay the I how significantly. around schedules and backlog move are are is right no been I surprised they projects of we projects now. not that and there progressing. There that feel executing but things if a our bit. see didn't good can and again, close some FID-ed on be And very indication we But

Operator

Thank you.

comes Our with Sean JPMorgan. from next Meakim question

Lorenzo Simonelli

Hey Sean.

Sean Meakim

North production-oriented. in your America, So, pretty business mix is

have an you to minimum. months at and for in store producers noted. these completions, So, drilling that's stable we issue next a as more the challenges typically creating few But,

maybe have mean, have could barrels precedents come offline for a X X million period. to historical some much million to We here. day I don't

the impact your Just in quarters? curious chemicals how next businesses couple could lift in that

Lorenzo Simonelli

artificial positioning Yes, competitive to in we hear Sean. lift our and and good Good chemicals. from about you in feel North America

mentioned though, the potential production and production that in the also decline sharp ESP the we environment, chemicals current the in business. impact As in believe and will shut-ins you

looking E&Ps And cash and to lines. across are spending on back aggressively product cutting conserve all

we as look quarters, impact at there. one the so, see And you'll some two next to

there's However, and as say place, and likely also quickly perspective. they'll businesses in more also look I recovering stimulation also wells, you'll ESPs if that, operators would need from a a back to see our bring chemicals production-driven recovery

Sean Meakim

Right.

Obviously, as well spoken haven't Pretty a incrementals. the And makes Okay. here as environment business, sense. lot digital. a upcoming. on that then, should but the also challenging last decrementals in pretty be one That high quarter, high in

Just year? be and the margins think curious, you we if about you mind. cadence That’d how just don't for helpful revenue that as about go through

Brian Worrell

right. Yes, Sean, you're

comes I in incrementals. really G&A. Digital margins simply And R&D, mean, can't especially do you around gross as fast down, business You strong. see cost out selling, the high and Solutions volume the are take enough decrementals high

the taking be some as is as I volume we world. some the furloughing are are GDP we employees to we with economic and to it anticipate So, lower and there that – will are challenges actions mentioned, we lower seeing struggling continue around

to strong back are come it from to So, folks inactivity like the as work bounce see really incrementals. as quarter, should lot economic and world. I standpoint back look up. through you we out point expect look, Digital demand with would around in getting But to the a given quarter you what will likely it And start a quickly Solutions seeing and the picking activity the first second

Operator

you. Thank

comes Our Simmons. Bill question with next from Herbert

open. Your line is

Bill Herbert

to of and results kind using blend Lorenzo, to of Brian a with at QX. morning, for American regard a with international your contraction. spending mean, that on contractions and revenue XX% Good I my in XX% formulation sequential least North math,

to Given the margins? would OFS that contraction, violence well do breakeven of generate

Brian Worrell

Yes. look there. in expect always decline you significant revenue do formulation mean, But Look, there, quarter. that I if you at second edges there around I think is the have you variability some the I know the

the Claudia are the from cost of we've you of I do that The I other thing, that we about is, downturn talked will has And seeing out remind dampen Maria here. what executing. the impact Bill, already some been that would of think

a activity is we how level strong what of are than the am East. internationally, that I'd probably say, probably Middle your have in more seeing based on little the where math I today we

the things think are good quite a about the moving So, team around look, I Maria situation. and how bit, current I feel are Claudia but addressing

Bill Herbert

TPS are and for bunker regard understanding Lorenzo, LNG And thanks. that in the crisis helpful, hear with long-term to of you outlook and this That's not secular acute Okay. forever. I then we

for going But that of the year to allocators year. year-over-year? around to is the the it are this the be vicinity are orders expect effectively like balance Or assuming very down harsh? that cautious too TPS for capital reasonable of in Is that world XX%

Lorenzo Simonelli

think, I again, where as macro obviously the as where well we're total the we look environment as is Look, seeing current TPS, LNG, are uncertain. at you seeing

on even regular basis customers these to are continue of move the projects a though forward speak We to and timing predicting to to the difficult some we is see.

which orders If component to in pressured orders be TPS, revenues. of orders, service in large you those our the with line service expect our at a we are look

of we have offshore/onshore petrochemical. As imagine, outcomes, production, a range wide equipment you and refinery, orders can also,

service little order is the that. and the the better we also Given outlook harsh we do $X.XX expect than and a equipment, would to think

to of prior our go a say, the are is at with that we standpoint in that of our potential downturn, forward. lot look conversations customers you FIDs also than from I'd relative If better orders. a floor still And

Brian Worrell

are with And I staying Hey, now. the to we're conversations fluid and customer. say, in right you But on what downturns in again, seen down quite Bill, would orders close could have things we customers. prior XX% see based

So, we'll more. you as know we update

Operator

you. Thank

Our next Scott comes from Citigroup. with Gruber question

Scott Gruber

good Yes, morning.

Lorenzo Simonelli

Scott. Hey,

Brian Worrell

Hey, Scott.

Scott Gruber

is the So, downturn? when what you new closures, side that contemplating on through the restructuring are other your especially items are of you working normal of facility costs, the fixed environment this like

touch indicators. Maybe, the usual if on that through you market could

like costs, thinking But E&P envisioning other fixed reset being are three U.S. it years you for orders, international magnitude rig four side. when that sounds years weaker offshore these tree about recovery, the out? So, count, you potential thinking about your of spending are what to you on

Lorenzo Simonelli

Yes.

a and are things situation all, obviously I it's unfolding. think, of first dynamic

of impacts, obviously efficiency also with perspective That's happening you first what's said, more are look being longer-term of and operations, utilized. as and to from see an COVID cost at the you of all, remote the starting As some reduction. we

office. we at not if from to you in involved. way continuing and opposed us And out are in of as facilities in the also, we that back there, the being work, the We which standpoint will the more deploy working look are home some of which have the of technologies to number result people people bringing also

elements won't of the think back. the we restructuring I that's think that come through sort much of we taken necessarily working are and we've actions still and is restructured the And working we at are what, right these we through, So, aspects – moment. again, are are

Scott Gruber

Got it.

Brian Worrell

think that And looked what for we industry that gives Scott, anticipating. we feel the at we we scenarios cost come to quite see I activity flexibility as maybe and prepared how stronger and in out, And think, as is stress-tested that our scenarios here some going we are overall a perform. outlined than like think do us few I worse we are than we've

accordingly. I it's adjust staying medium to as we'll and think and our we to But, rest market close But, out, plays the how a customers the Lorenzo term. assured, are points out bit early call really over exactly this

Scott Gruber

how There of is there Understood. A much of to revenue lot exited? now. a targeted XQ capacity quick OFS is Roughly, your be follow-up. out right

Brian Worrell

overall a rate company. lower X% the flow the be OFS will lines for amount. in product work exiting small and positive that that It's are cash It's we positive margin the and than

Lorenzo Simonelli

in rate line much and very is focus with the strategy this out capital. invested laid margin on say, just we've on I'd to And accretion return also

that fluids out see that land America we you are the really of as smaller at that just North moving the drilling time activities. accelerating So, commoditized this completion well made can we've decisions with completions-driven of, some as the and are

Operator

like to would further the over remarks. you. turn call back now management for to Thank any I

Lorenzo Simonelli

call. Stay soon. we speaking And well joining to like again safe. you to to look the forward and stay for everybody Just thank

Operator

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

a You may day. have all disconnect. great Everyone

Baker Hughes (BKR) 22 Apr 202020 Q1 Earnings call transcript