BKR - Earnings call transcript Q2 2022

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Operator

Good day, ladies and gentlemen, and welcome to the Baker Hughes Company Second Quarter 2022 Earnings Conference 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.

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,

Jud Bailey

welcome Thank conference Hughes Baker morning, call. and you. everyone to second 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

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

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

Lorenzo Simonelli

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

Our navigated company component to each operations. our second a ranging mixed and Russian different the supply results quarter from as challenges inflation chain of shortages of product were suspension set

While through have OFS the OFE both experienced and DS well, fairly difficulty. TPS and current more situation are managing

next the of outlook power we oil combat erodes and and and the raise rates hand, to aggressively On second interest XXXX look purchasing to XX circumstances to is inflation. face months deteriorating, half of as one an into markets XXXX, the unusual As for XX consumer set challenges. the demand inflation central banks

potential need in keep demand Russian other the replace commodity of even elevated hand, underinvestment On to at of a levels, due the to broader moderate and can prices supply globally destruction. barrels, scenario constraints realistically years

as in is volatile, LNG the strong but the first map activity, natural of a the required an outlook believe having relatively frenzy oil growing of In the the with the contracting a map major of higher in sustained in half market, has projects agreements likely scenarios. still XX levels likely been over recessionary global FID. LNG and to totaling XXXX. moderate greater energy spending re-drawing of prices, of reach that supportive significant re-order offtake offsets demand is most result, offtake and There remains gas prices impact, energy long-term increase to activity even the during U.S., a we destruction As MTPA seem pipeline high a for

For trilemma another be as year-to-date sectors XXXX. sustainability, importance the continue to This outlook acute Xx activity LNG the annual security, contracting the natural for contracting the of solving governments comparison, We volume reflects This gas. that priorities energy gas. their face interruptions growing of Overall, is increase industrial positive average on around rebalance remain energy economies. between believe back and and greater and this their LNG in very importance sharp gas will certain natural U.S. going than avoid positive we will working natural long-term theme to as are in shortages to for world grow countries affordability.

strong prices this positioned to scenarios to upstream a well long-term affordable and with from multi-year be is and next more fuel believe also that power is in uncertain LNG make as that all reliable natural spending in the sources. investment continue execute Baker portfolio increase and intermittent for remain baseload Hughes ten required our on over order a If will natural preparing cycle. cycle expect, gas can to years macro and LNG gas renewable strategy. backdrop, five Against paired our we commodity benefit is We a infrastructure to significant a resilient source

to continue transition also our will industrial while returning XX% also initiatives, to flow shareholders. free in of We and to invest XX% energy cash

to free volatility, further businesses balanced peerleading policy long allow cash will and enable of to and commodity cycle shareholders. cash experiences However, us we if us our to price the generate returning our short believe portfolio maintain flow turbulence economy and global of

over addition In which scenario, and and half operational From strategic energy us an In either of balance exciting allows of create value as invest we future. visibility, a for sheet backlog well for is through such in Power, executing investments a we perspective, opportunistically, shareholders. best-in-class flow Baker strong Hughes to us key and Net on that were that year, opportunities. tuck-in cash the HIF active tuck-in to first either number acquisitions the technologies investment the have positioned new affords Mosaic, share to a buybacks Global, or position

been transition opportunities setting help on us internal up industrial structures will the and which also on have focused areas. We energy and in IAM, capitalize to commercial like CTS

is addition In of the formalizing time areas our two OFSE IET. core and optimizing and on focused around business to increasingly these initiatives, our operations

energy it across becoming to the aligning is makes markets continue clearer As core two areas strategic evolve, these that sense.

additional and with to are on on We look drive process OFE. significant that We focus focusing will distinct OFS area a ways our be the synergies and further organization TPS look DS, and of both as a we for between it streamline efficiency believe simplify future. Hughes, across and Baker to our systems, position operations, as and for our opportunity and to this we productivity

continue multiple net Now, I both across the American being give North pricing activity lines. and an of product and you is to markets achieved each segments. trend our positively In on Oilfield international will update levels Services, in

in see also Africa strength markets, West key East. recent Middle visibility Latin in with into and international XXXX In for growth improving growth the and diversified America, some We continues, areas broad beyond.

and In execute and natural beginning the plans East to second improve expect the most XXXX. are Producers orderly We committed to with international into in the the expectations. of increase the the to capacity the production gas activity and oil continue, year strong, in continuing region to both strongest in drilling track remains are to an likely pricing markets rig growth half increases above America, and to region. Middle count from production in our with come North over

XXXX outlook quarter in during team as oil continued overall pleased chain coming made as progress dependent challenges am constraints and inflation. in navigating factors Operationally, related well Russia, modest supply the will count in I and macro the on the broader expect We growth prices. second by but OFS the to rig the be months, with for the

chemicals the quicker quarter, OFS we well the in Russia Outside to second executed quarters. and the quarters line a margins inflationary than anticipated suspension coming operations the increase of Russia, being the sequential of reaching production second business. from During operations down and weighed saw supply increases chemicals has our in our closer consecutive accelerated for in in agreement as chain improvements OFS sell by a with After in OFS to several moved our in quarter, the our business further of an to sight country. impacts impacts,

margin the improvement our cost we expect headwinds operations suspension Russia. of forward, to the to from Going drive in despite continue

to remain Moving with we on services. in billion the TPS $X operations and orders, to equipment optimistic impacts TPS, revenue well second of the despite project well an Operationally, XXXX some to where as suspension in from across both represented some performed generate shipment in XXXX. delays $X view quarter solid performance track another in as orders of Russia,

projects. that another Including constructive at in of we XXXX. next We of May are U.S. cycle, XXX FID XXX beginning to the for to the and X two FIDs particularly LNG continue Cheniere’s X Phase VG’s at and in additional end the FIDs Plaquemines with the to Stage MTPA FID of Corpus June, over of years XXXX of Christi we expect LNG continue believe

local two of cubic gas and booked field and the Hughes packaging Also, the the relationship Integrated the southwest award add natural expansion gas Compressor billion technology provide Line TPS all leveraging facility were turbomachinery Modon Corpus natural Louisiana. booked During Cheniere the project equipment during currently X.X motor-driven a supplies. electric Hughes totaling of support to in its gas pipeline Baker Christi the time virtually its of landmark electric America. daily, projects. trains on Saudi between compressor of and provide the technology climate LNG quarter, Kingdom’s support feet North an and Stage important to train Arabia an strong awarded X project, program. approximately is order of the footprint an provide Baker in-country LNG, we non-associated upwards emissions. second supply chain Baker equipment the the no award award be and total technology is regions for marks is in producing TPS The expected processing footprint projects in natural value since a quarter, in of will in supply compression carbon supply of equipment to many Liquefaction production the XXXX, for the ICL This of order Each Christi X.X XX.X install with Pass gas from largest pleased gas unconventional is electric-powered deliver the Cheniere’s ICL Tellurian project MTPA of for that gas vital segment gas as to to liquefaction project to zero-emissions Hughes facility. key transmission to deliver team motor-driven compressors country. in that mid-scale already capacity. comprised reducing the lowers field compressors decarbonization seven Cheniere’s first XX This Outside is LNG, for Jafurah Sabine builds MTPA we Corpus of pipeline

compression contract Products economy. TPS references for our compressors. quarter, Products experience ammonia to advanced the the organization Air TPS’ CTS Baker and and framework in carbon-free hydrogen ammonia production to supply NEOM order Arabia. the supplying ammonia technology Hughes’ with green for the builds of This hydrogen hydrogen continued on During and support syngas leverages the facility collaboration growth ammonia syngas a Saudi Air broad and of secured and in with

are the improving areas. different Next, across on Equipment, business trends see we to demand encouraged Oilfield

overall have the level, on to However, further years. will and in deepwater few improve improve to level the to disappointed actions a we macro executing momentum a we offshore portfolio. over believe additional should markets and of of At of profitability remain Despite pipeline solid out solid couple are subsea business cost a operations across develop of the order and drive the with commodity continue recent volatility, markets. trends the that across opportunities continue price key next and

orders with momentum risers, Americas recovery record. profitability. the flexibles half Importantly, see and to large and Middle million of OFE gain the Brazil a in second OFE flexibles oil we flowlines systems across securing over in flexible flexible and ever also including and orders XXXX, East. with jumpers, of help several outside and services, OFE $XXX customers extend first provide the quarter, continue multiple to field year highest to offshore booked improve their the will in and the pipe contracts for pipe technology, in its life

to we awards offshore, that drive an have activity we to improving to recognize level. While operating OFE project are back and in work acceptable margins do

improve to we have take while place business this the across to actions continued operations, also forward. driving resources in are We business the appropriate ensuring

in We cost between are globally. more area more also the management of OFSE the certain OFE and of planning across efficient final business integration parts driving stages OFS,

Finally, order as shortages, hampered well in inflationary was Digital Solutions, in challenges, chain the while second the business electronic quarter, by continues supply to mainly be as pressures. strong activity

During machinery machines protection systems the condition systems services quarter, secured for Orbit plant and monitoring The gained its will portfolio also Middle advanced Bently sector. additional and to steel emissions industrial Nevada without provide monitoring includes management condition of latest DS for its interest Nevada’s critical reliable continued with a saw the a the XX the at contract contract in East. DS spend. protection will the in system, customer hardware traction technologies. Bently which enable upgrade

with first be Egypt. implemented low-carbon in host at Following the technology deployment Egypt’s for for February, November. supporting an the The of country refining in the to strategy, Alexandria, prepares sector contract and COPXX secured Petrosafe signed APC flare.IQ in deployment a tackling DS in emissions operations MOU in will Refinery the as

General Controls to in products reached provide Nexus with We the in of Nexus also such provider currently oil to is and XXXX. the continue customers’ of and products second GE’s close for expected agreement Baker control exclusive an recently Electric. GE our the Hughes Mark needs. its Controls control the gas sale Baker be will Hughes for transaction product line quarter supplier of GE and The service will portfolio to

including As the the in recent in DS, across Nevada Bently we past, during strategic make have continue leadership we to and quarter. changes mentioned operational changes

serve We we to and to broader also the the taking business a have review actions composition portfolio, drive are of DS right customers returns. ensure our conducting

we more there clearly forward, do. As move to is work

returns and business. profitability performance, better driving to committed are DS We the for

expanded This a emissions in the sustainable report I commitments Before end environmental, performance the X I of the quarter. XX% highlighting compared reporting. X of outlines footprint Scope Brian, strategy turn to of our and and at the baseline. an from We our would XXXX We Report Responsibility that carbon provides in second a spend again to our like call few X% some lowered and and published achievements view emissions a Corporate over and an was moments versus corporate XXXX achieved expanded our governance reduction and in energy future. reduction XXXX, to our for emissions XXXX our our social,

of company. from I include chain an am emissions carbon emissions Carbon planet. successfully safer, as Scope reporting on and Global programs our XXXX, more our new our for reconcile that this equity pledge and cleaner, and across accountability XXXX emissions process by processes our a embed Overall, to meet its in value to Baker further of in and out priority, our we vision the to making expanded also and our XXXX. XX% launched people and Equity, We to and into updated efficient expanded categories. emissions energy forward, initiative X Inclusion launched and also process. reduction operations to Hughes XXXX take to and technology an it energy take Out, net-zero to achieve in evaluate executing by We We strategic the increase to several pleased Diversity, is say we a Council internal operating company company-wide on across pay

that, energy of Responsibility in will progress decarbonization Corporate meet to turn broader Report Brian. areas. well-positioned our over demand drive Our efficiency objectives. the to and With is Hughes I call gains Baker to support demonstrates global energy many these

Brian Worrell

segments. XX%, by across company Lorenzo. total orders increases I Orders and and OFE, partially details. then Solutions driven results Thanks, by Year-over-year, TPS were the segment the quarter by begin with move billion, $X.X up the will XX% all and increase OFS. into offset in for were down four an Digital driven sequentially

down was with quarter, X% quarters. decrease Russia and down Remaining RPO driven down currency two services billion, ended $XX.X exchange in We performance sequentially. billion, Equipment strong X% Performance XX% suspension sequentially sequentially. operations our the in of $XX.X at by in was orders the and are orders performance the Obligation movements. pleased last the RPO ended the following in $X.X foreign at RPO The billion,

offset in million in $X Revenue up Solutions. company Digital equipment the offset for operations total $XX partially partially Solutions, TPS was Russia. volumes. quarter OFS was by quarter the related Year-over-year, TPS, was quarter million, suspension revenue Our in X%, decreases X.X OFE, by of sequentially, and ratio million. our separation, X% income quarter loss increases was for the book-to-bill Digital and million $XXX charges. operating impairment, down and X.X. our these by was book-to-bill was $XXX lower driven excludes the in the billion, restructuring, by driven OFE in OFS, Operating $XXX other Included which of Adjusted and and to was charges in

under applicable and were moment, environment. operating income will XX% either was sequentially prohibited Adjusted a sanctions up activities up in the our current I X% year-over-year. or explain Russian As in unsustainable

rate up sequentially. income adjusted income up was EBITDA Year-over-year, was points up for up up XX year-over-year. was in rate basis XXX X% EBITDA Adjusted X% and rate points. operating our basis points XXX operating $XXX sequentially year-over-year. the quarter Adjusted adjusted the X.X%, Our was million, XX.X%, quarter basis

the by Russia exchange suspension million currency during $XXX and costs operating largely quarter Corporate quarter. operations and the foreign in adjusted of income EBITDA were the impacted adjusted were margins Our our movements.

quarter line third and amortization was more expect the to expense in corporate in and million Depreciation the For costs with decline first we quarter. levels. $XXX quarter, be

$XXX ADNOC in tax impairments D&A a result quarter, roughly million. expense quarter $X.XX. related per business GAAP GAAP due taken to interest million Net third decline $X its the of net million. as sale held quarter. of as was from share of other second in we CX sequentially loss quarter. a million recorded $XX net $XX included was and expect second of investment an Included was Drilling, are non-operating expense which OFS the Adjusted of value Income Also $XX change $XXX fair for earnings were loss investment of $X.XX. the Russia value the end in the diluted in in at from diluted the classification in our million all For in per fair are in loss AI; the loss share was losses in to our share loss. per change the our to million

Free get inventory largely in free statement, a was Turning collections, on which as related, we flow quarter the the as well cash $XXX flow in execute order backlog. quarter cash the cash ready our large build are to as million. was by flow timing impacted in to lower

For lower we below to cash the EBITDA cash seasonality. quarter, share. now by due million, from share average improve Class X.X sequentially, XX% per flow cash and repurchasing the an be shares repurchase flow on quarter, higher price million adjusted $XXX to we for second third Hughes program, the expect at to of earnings A conversion free generation from driven Russia. free expect primarily for We execute continued our Baker In to $XX year,

Before these I quarter I on results, the an our factors go and our into update into segment Russia to like how you forward our outlook. operations, second give situation current the how impacted would results,

sale at earlier, our Russia As the the was second classified held OFS I mentioned in end business as for quarter. of

took OFS step compliance the Russia all to ensure the During second quarter, suspend operations to with we our sanctions.

OFS full under million leading we XX% revenue in the our Russia cost as sequentially to declined As maintained $XX second base. approximately result, absorption cost quarter, our to a meaningful

have our for in Russian Russia. and we we required work costs operations. a the operating In in maintain to ahead, our equipment contracts are we TPS, on resolution reach suspended Looking service until country

second roughly quarter have result, minimal impacted been As these and impact million but to $XXX was margins. RPO revenue by a TPS operating removed with projects from

by to XXXX. full Russia. lower under margins with OFE, projects impacted from to by will these be the year, suspended absorption impact the of due equipment be in $XXX the For OFE but, RPO. that cost estimate we TPS all will revenue and In have quarters TPS again, approximately impacted removal service next minimal volume in contracts and million we over few

billion, up Russia International million, you with Latin Africa, basis Now Sub-Saharan by in North on our increased Starting low X% forward. offset revenue inflation. America led up Russia price points through and in land. was in more X% offset revenue America results increases with margins I sequentially X% Middle partially $X.X give double-digit increasing $XXX X.X%, up Operating quarter detail cost sequentially. walk America, income margin the thoughts points. will East, Europe, you productivity, segment XX revenues the the up sequentially, driven margins by going Caspian. was Operating outlook XX% impacts in were Services, sequentially. in in and and by improvements by XXX partially with Oilfield revenue was the basis was the growth sequentially rate Year-over-year, and North quarter from lower

margin XX%. was Excluding XX.X% EBITDA operating OFS Russia, rate was OFS rate and

the quarter, North both we continued underlying see ahead fundamentals look well to third American energy As as we and to pricing. International improve, in improvements continue in activity, expect growth as to and

to this framework, continue the that quarter, basis we per Russia. third For in $XX approximately of would sequentially, mid-single quarter cost $XX carry related OFS to XX we million points sequentially which will to XXX increase digit assumes by to margin million increase the rate revenue range. expect our to between revenue should With

we we continue the international market increases, the mid-double broader markets. strong North the digits. year expect industry-wide activity For to to broad-based most experience a with of across outlook recovery the XXXX, an set In of see or improving expect continued greater. continuation markets, In major in activity the with XX% growth we America, growth full

the backdrop, in this OFS we macro would revenue Given in mid-double expect digits XXXX. to increase

fourth We of depending resolution two XX% margin XX% the be on timing Russia quarter, of business. our expect EBITDA between the next in rates to increase to and and the over quarters

and the partially SPC, down for were in decrease Flexibles Systems from by Equipment, down of quarter. driven SDS, by year-over-year, was Revenue Oilfield and removal the X% income of growth quarter removal and a was operating a SPS, Services, year-over-year, and million, by offset Drilling SPS lower OFE’s challenges increase the orders $XX to by by results. some driven by million, primarily projects. Subsea offset $XXX consolidated partially driven Flexibles. strong primarily lower driven was Moving SPS and in Operating million, $XXX in operational $XX on up rate million negative certain the primarily lower margin Services volume year-over-year, in volumes in XX%

level Although as had across OFE. more this better some performance to and evaluating performance, OFS navigate drive includes is ways unacceptable cost-out mentioned, current and, has of which Lorenzo operating the challenges to we year, are and OFE additional integration

to flat be For approximately the we depending third sequentially, timing quarter, down to the backlog conversion. on anticipate low-single revenue of digits

the expect due contracts operating be income suspension related to of to breakeven to under cost We below following absorption Russia.

For and still the project we recovery offshore expect increase should full which awards, a in in activity XXXX, year help a orders. double-digit drive

digits, primarily expect SDS, of OFE be and deconsolidation below decline double margins breakeven. OFE to revenue driven by to We the

will upgrades, and the was and an foreign I currency in quarter X the offset Orders Arabia partially down growth down Services Turbomachinery. in in expansion. contractual year-over-year, by by in $X.X Stage were a by the XX% orders by rate X% impacted Equipment Christi movements, driven as up a services. feel Equipment basis for foreign billion, quarter, navigated Overall, to processing driven quarter services has by for billion, relative offset including contractual the project margin services, during higher still XX% challenging the Russia-related these favorably for environment. chain and revenue the XX% headwinds, XX% Operating rates headwinds schedules, Margin a up mix. $XXX year-over-year. year-over-year, impacts, order at was million, we multiple a XX.X%, full beginning up Russia-related prior points year-over-year. outlook in XX% supply the Operating income year. Corpus quarter was confident year services, the the orders was revenue decrease impacts driven XXX second quarter gas Saudi of up and operating Revenue the decrease down and year. installation currency $X.X Despite XX% by upgrades. versus changes the expectations driven orders transactional award was year-over-year by movements. down transactional Cheniere’s were year and Service in were in Next, cover in TPS year-over-year. TPS team income has unfolded, our were in

we For expect to lower on increase the mid-single volume to this revenue the ultimate equipment With third expect higher margin digits revenue on outlook, services. quarter, moderately a be equipment from a we year-over-year and basis, between TPS mix by driven depending conversion. backlog year-over-year rates on basis, planned

For some still of operations be increasing driven XXXX. by lower the suspension now in orders the driven be low-single changes We versus billion TPS euro roughly to the flat project digits full in of LNG year, schedules. expectations in dollar, The and up revenue primarily depreciation and expect awards. revenue the $X Russia, year between growth $X to is to earlier by the modest we growth expect billion, the versus execution versus

we on the on a operating and services year-over-year the between be rates slightly mix now On income margin side, basis, equipment. depending higher expect to margin

markets. a Power orders Sequentially, driven DS XX% to across up Solutions, orders continues X% were for higher were Finally, outlook $XXX see Industrial the orders orders. in in up market year-over-year. Industrial growth and end delivered Digital and Oil by million, & Gas strengthening and quarter

lower ability level to end Revenue recover, $XXX volume in DS driven of orders XX%, start year-over-year, PSI. by driven up and XX%, and affected for higher Sequentially, productivity. are availability chip impacting by DS and higher X% was convertibility markets and million, quarter Bently Nexus was by XX% $XX quarter by year-over-year, up up PPS, both income the driven negatively Sequentially, Controls. continues XXXX. gas income our the and Nevada lower inflation in offset mix, the by the productivity. volume. finally Nexus was fourth be and by by for quarter Controls, higher million, largely Overall, the partially lower drive volume offset Waygate, component our higher partially of PPS in Bently electronic volumes in to and backlog was now since volume operating oil down As driven Nevada highest shortages, Operating at revenue to

we to leadership changes changes of make recently and to announced and sale performance, mentioned, continue GE. evidenced Nexus designed strategic Lorenzo improve Controls As the by recent as to DS operational across

expect see third digit slight quarter, operating growth we the to sequential For margin rates. low-single increase revenue and a in

year. that, For DS we expect for the margin mid-single will operating range over the mid-single the the digit full year, in digits Jud. the back average rates and growth in income to revenue full to With I turn call

Jud Bailey

let’s call the for Thanks, Brian. Operator, open questions.

Operator

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

Your line is open.

James West

morning guys. good Hey,

Lorenzo Simonelli

James. Hi,

Brian Worrell

James. Hi,

James West

for expect are working now, of resolve. out to I’d last flush, to Brian, something no who final and And to guys the Lorenzo the see little So outright sale about to need to longer buyout the you sale? held they’re or will whether kind a flush noise statement. bit of last should it – two we income so hunt situation? the of quarters I’d how thinking numbers management to and resolution the ultimate kind I numbers But the it’s be love of we of have the talk kind here and know Russia expect from should just kind something obviously just Russia when love even of you on your you’re kind Russia, out about Russia. It’s hear we been a to lot when also

Brian Worrell

the you’re due going look at frame year, you, the and our for some point I the look, a lot it a There’s to James, about Yes. complexities disruption full operations, when the step suspension commitment up to over current last and back be this right. of Russia out just and to managing with just been the just couple operations, through And but years. there take the environment. also time impact dealing as you the from obviously on of is

our overall And primarily operating generate some million less second expecting as operations level beginning the And well as in quite we we quarter. look, accretive the year, mix some our Russian for quite well to at the business EBITDA premium in bit to as some of in did around were a and of really OFS due services, $XXX there, product year. in this risk of of as mix, generally EBITDA the quarter first lines. TPS So are Russia this

So remain there see will when $XX is to per get outright have generation, rest things management absorption we product whether largest I quarter control million will $XX cost with we’re that. a it’s sale quickly. and revenue Look, of in until that think roughly that to our transaction, OFS we Russian. through in that of we And work done about working we’re the under place trying year, James the are hard in a those virtually resolution line the to And on buyout. million continuing no or an

of out of it’s control. our Some

the that the areas Maria So negative we We’ll get able that across But impacts done for out by from to should the been Claudia can. planning some other world. if try will be Russia year sooner in and offset point of end purposes, it I team I’m the thinking the done. to of have

outlook job overall their hasn’t nice our And there and versus they’ve a quarter so, call. first earnings done changed really

that. Russia biggest where of that The of lot able year contracts Russia offsetting likely is out parts backlog. of you out the be to impact sizable to world. that it And of to a of this some with the as So get in takes now other cost and OFE in come the business impact were profitable know, have for the negative time quite deal

revenue impact. biggest But So that’s de earlier, where minimis. see you’ll is impact talked there. then I margin some the roughly you’ll And TPS, impact about like see

timing laid out, quarters were there. see might some You how generally terms things real in of impact movement of across but no

relative And directly like not earlier, obviously round discontinuity, so you’re you it’s for euro dollar and to lower. translation for the clear, weakness revenue to And James, costs overall that while to on is be plan, But actual our be from well. I’d related, going of pressure. original the our with direct slightly the as in not are year highlighting impacted being say about environment. million it, the Russia it’s of thinking kind we’ll short-term what’s down is And versus income in then worth to have the dollar out to through said just macro it’s of – $XXX $XXX I’ve euro manageable coming as Russia. by To long-term the going million FX

So Russia the and that full there. we’re about out rounds kind of thinking how year

like So manageable long-term. the said, over I

James West

Okay.

me very And a OFS maybe the that’s Brian, on quick business. follow-up Okay. just helpful. for overall then

tipping a activity we’re ramp at in lots they of national think, trying companies stage, point. ramp cycle of somewhat I through up We’re production undersupplied to of Lots market. the oil so an countries, where going into can

agreement there you guess, Brian, so kind secondarily, point with that the do that half an are to in second that, then And in underway? somewhat inflection of maybe from where Lorenzo we and And expect enter I the see then XXXX? or is of most you as benefit

Lorenzo Simonelli

with to conversations our expect and you broad-based as say, on a to digits. growing growing recovery, James. Yes, up geographies based internationally, continue major again, we our and really double all customers, And

the stated Middle as that in could of before. East, one that a second XXXX in through look at lot be markets the strongest of half, we with we As coming

their budgets seen You’ve capital increase.

Brazil we also not East at solid should America still pretty Pacific And growth Asia led see and continuing as growth XXXX, to Latin strength see America, in then good Africa also, We base. Latin and growth. a low Mexico. likely strong but or solid West And see Sea Middle look by in as off as lastly, North

again, As expectations. to broader strong market the track growth sector And remained continuing with we or you activity above look greater. at XX% the pricing of continued our expect rig count experience and strong, activity North increases America,

you at barring from a again, as outlook the again, XXXX, rest So of any, look perspective, big we remain constructive. changes recessionary

James West

Okay. Great guys. helpful. Thanks

Operator

Chase of question Our from Bank comes next America. with Mulvehill

Your is open. line

Chase Mulvehill

everybody. Hey good morning

Lorenzo Simonelli

Hey Chase.

Chase Mulvehill

like mentioned to unlock it’s OFS a guess OFE streamline TPS It seems DS kind of realignments of then ultimately first the side. opportunities and organization I and between the on couple about question, and also business times really and more better you and synergies. the

doing don’t understand financial of of time here impact then exactly what maybe just spend you’re us could of some expand the know I of you if kind synergies. potential Lorenzo, So help here some on and these to kind

Lorenzo Simonelli

sense the time. business, made of we formed back the XXXX, on most the at based company Yes, sure, it the about Chase. when four think product And running we the as each size in companies outlook across

separate As other of relatively you with finance, communications, independently know, the business each has run leadership other functions, supporting and technology.

As of we’ve have and outlook the evolved, changed quite for the the energy a businesses markets also, have some bit. evolved

And think of of differently them opportunity made a made the as the seen them as we well. years, couple manage smaller. divestments, that to you’ve over some there’s we’ve And so

can lead review the between we’ve as And DS areas OFSE. evaluating we between last IET result, that that and And the and TPS an broader two conducting we businesses. OFE you’ll some further there multiple saying portfolio think drive broad and deep ways changes. could started as business we we more our well structure of a OFS can Also, year, as analysis. across recall synergies been were And exhaustive so alignment that drive and we are a conducted to corporate

So structures part at looking number sense. organizational we’ve as this been could make of of that a exercise,

and in that forward better we across several evaluating. efficiencies go the as So are organization, there done. got needs summary, we productivity things synergies to and know drive we’ve We we’re what be to think

Brian Worrell

point the opportunity There’s premature it at – synergies. and see on there, definitely range Hey, Yes. say you side, time. in bit I’d Chase, a to we probably me be give it’s a this would financial for

as about make able OFE to look We’re where good and drive synergies be to OFE that. OFS and I profitable. more through we’ll still there. we are talked with earlier more we I some working feel about what

number we So when look, update like a we’ll that about. to we’ve can feel you talk we guys solid you got

Chase Mulvehill

to there. supply Follow-up, Perfect. It energy of potential over just the and soaring the to and Europe right. the in worries All crisis some and of kind prices energy rationing for that Okay. want winter of around winter. lot there’s pivot like seems

could So what European help this mitigate your of Europe footprint for in is, kind year? you. understand maybe could Number number is rationalization the are happen manufacturing power you two, your that then energy And Europe? across to us winter taking two intensive steps potential the really, you one questions in guess, I manufacturing exposure how and

Lorenzo Simonelli

or continuing and we risk we’re of generally and this, to of both the operations them carefully as because Yeah, major of cover in got use we and those disruptions facilities. to manage the ways to winter, through event outages scheduled also importantly, our We’ve imminently I’ll proactively at a to contingencies situation but most Chase of the looking string we’re gas the the putting power a monitor don’t through go within business number see during we TPS test. in place that. Most

event protected forward. critical we pandemic to in I think as industry a go period be remember during that it’s the enough designation the considered any got feel so we factor. gas and contingency shortages the be a are important had shouldn’t we in it and as will major that place And we of we’ve

Brian Worrell

working where Yeah. actually base Europe. and supply And one started still like of on forgings working Europe thing we’ve that we’ve shifted that supply in like not with energy we’ve and Chase, our have supply quite say castings other been we supply I’d just for today, intensive sometimes, out been in the it’s and we’ve some for is

is few with risk We supply working for sure that supply kudos what the I team give the chain to are make the to through quarters. there. to base And we understand for have working last

Chase Mulvehill

over. color. hear. all I’ll for turn to good the Thanks it Very

Operator

JPMorgan. question from comes next Our Jayaram Arun with

line open. Your is

Arun Jayaram

just My morning. Good LNG. question first is on Yeah.

inbound you guys Venture put XXXX. of to the Global? if for about was you’re have forward seeing half that interest if continue some in you could in talk end You and TPS billion the more $X with XXXX. $X visibility second billion I of solutions And highlight wondering into modularized in orders of to kind

Lorenzo Simonelli

indicators think as first the on extremely the continued call. pipeline grow conversations Arun. And about And to definitely opportunities they edge remain for with of the leading customers, positive. Yeah, you quarter based LNG look has since our

and LNG opportunity. you speed well And a as towards If projects, a in growing given the the fast designs, demonstrated notable are seeing market that growth look modular we’ve of at we trend Global with presents as the to success overall this Venture modular LNG designs, concepts.

look back look the you year at agreements. in as average going prepared contracted activity so think, greater three long-term I indicators agreements XXXX. seen mentioned than just at we’ve XX this MTPA times other for to far the and the long-term year, over I that on under the that’s remarks supply entire

two again reflects course comfortable feel XXXX, FIDs XXX the also LNG investment we of in of continuing next still agreeing the good overall so Another MTPA attractiveness to Conoco a XXXX. data years long-term the point to Arthur from an which in over MTPA and activity XXX Port of perspective, with FID

NFE. X it of far we’ve frame Just up MTPA to other awards with and small already VG booked also some Plaquemines, Christi so award XX this Cheniere, year, the for Corpus Stage

Again, with So for good good for and looking the before, to billion $X said XXXX. $X billion billion billion we the for about to orders TPSs $X of what TPS. out year, into feel $X about consistent feel of orders also

Arun Jayaram

to you flow? trying better just those I’m Brian talked within cash some profitability for that that between one converting into overall the order of maybe And Great. strength understand about, the DS, maybe orders disconnect

Brian Worrell

now, have Yeah. us of right going normally that The at to we be the would really shortages. and chip we be that on around preventing biggest levels component thing that’s is in conversion DS

really than third to – well this for shortages, days. XX% at been perspective impacting it’s to that’s happening XX XX% delivery from the a problem with We us. but confidence of been right stable PXX and And as drive year bit some business. and as The have delivery through at you see at a step I inflation as customers been particularly if ability increases labor XX convertibility So little backlog a working of time. suppliers days our as as and our this to some from from rate of impacting for take [ph] through volume offset of and to look lateness terms quarter we with time to the Nevada doubled is quarter last of back flowing and on-time well of inflation, negatively pressure interval, productivity delivery more chips cost And that schedules, in what’s in give from little electronics is the sitting more more the chip bit after on-time pushing pressures. we’ve component the we’ve but to pricing our we’re our Arun, think those did now,

gone top times that up two by have a of lead times. and on half So

We’ve are is all through that and indications projects planning out of got volatility programs good We’ve that of that really August. will through now So pushing testing factory. in team working are been through that things pretty being place come running and engineering programs right what’s come a going terms in for testing the and redesigns. in the bit into laid been should

convertibility the fundamentally this customers what And higher delivery anticipating and we’re see our going it’s the profitability we through because DS. of once us up that’s are of to So is on-time but that, business core in at gross the here, improve issue margins. you’ll

everything And going So up working levels. team in can on the I’d industry pretty demand Orders we’re The as just is strong. in is are you back lot, to mix a all it out high over it. news Working here. what’s our the is of point in good we say broader control.

cancellations. want and services. Customers really any seeing not the We’re product

So on the to the deck with chain everybody issues supply work electronics. is

Arun Jayaram

Okay. Brian. Thanks lot, a

Operator

Our next Marc comes question Bianchi with from Cowen.

Your is line open.

Marc Bianchi

Hey, thank you.

it that confidence OFS here, I’m Maybe that correct seems could fourth what quarter? sort math comment And whether in kind you depending increase I think – on Russia. could my be gives third quarter if bracketing you of on correct. happens if conclusion in from fourth consensus, if of I’ve or got quarter like with is what significant

Brian Worrell

internationally even performance the presence math strong is last of your a in solid. say quarters, for other pretty saw would for there is see things. OFS underpin obviously potential backlog, there, given quarter got view pretty And fourth the in we strong very the the we’ve a I business has the one, and up, have quarter. well you been the we’ve good just growing right Russia there schedules with generally particularly how are franchise. the look services as then thing the a quarter where what been you see few was And and if of our pretty a I’d couple customers, quite the lining is over TPS backlog strong Yes. especially implications quarter at We are look, things seasonality look. the the that growth in coming of doing today. really would the Marc with out don’t any fourth say and That ballpark any contracts that execution impact or of Russia RPO. because those issues in weakness customers that schedule being see And I things offset of coming from suspended delivery issues significant look, OFE really there the that certainly

got jump realm to in teams what’s terms in of but outside understand it’s not the fourth we’ve before aligned happen. we look, So what done, The are seen it to quarter. of the get

Marc Bianchi

quarter in rate there quarter. appear Okay, great. just be to got you to third it And a more that bit then, bit margin to of I TPS point, guess the the Could your for just kind improvement fourth unpack from for fourth quarter quarter, sort us? little a strong you a that on fourth pretty get which in little would of flattish usually zeroing is

Brian Worrell

Yes. Marc, mix equipment the comes between again, down and it basically services. to

You’re right.

really come businesses profitability of that we how to ultimate just of services. quarter number pretty timing in you because the of in the both, a what pushes higher before the see in rate drive fourth will uptick just with have guys so out quarter stronger we backlog. this that given run services down some later from that of it as the large in look mix that And the services of some see schedule ultimately and come anticipating really come in will any year, mix down those in quarter the a from fourth the equipment. coming talk of the and out You’d through about, margin mitigate an mix then the equipment services, given in to comes usually you quarter are into strong, And upside equipment that do of we versus laid really a was much

Marc Bianchi

I’ll Thanks. turn great. Okay, it back.

Operator

with Our next question comes from Scott Citi. Gruber

is Your open. line

Scott Gruber

about line order so and a in could more and will the general how the also of turn I morning. in of that supply seeing your there a seeing Good if to chips Are fruit are to chain starting Yes. normalization efforts hear is itself We’re just the a improve? improvement happen? to that timing here. mentioned sight to supply chain tight managing when you chip Brian, back you availability you at of seeing digital But you begin availability? that bear digital. wanted deliver to

Brian Worrell

stable stable. look overall almost and are relief specialty telling be relief some we haven’t to for about Yes. been continues seeing at suppliers a would terms and of you them and hearing in When but believe should anticipate chips there’s A we’re standardized system of first; and we’re and outside and Look, talked and operating we supply things, I relatively these with of challenge based that have in talked not definitely around Commodity think how lot was going DS, things chemicals to But where sort pretty in by with really lot chain programs terms on what some chemicals supply what as late availability in of deliveries. a talking how in in that’s see others some a there. yet your we’re question I the in biggest I the about driven on do better working say second couple about tension places. of in we of normal so what XXXX. DS us now broader I’d back we’re environment in that the start say only that are I’d planning where we’ve here us half. But in more from this space specifically our to shortages I’ve chemicals. to changed there’s seen

in Europe to about steel, and with on twice we’ve a I in but the specking quotes still validity And elevated working we’re and protected iron, suppliers diversifying of say have been I’d working pricing input can some but and pig XXXX Scott as for we’ve that actually And pricing hard or energy to going really down, that. continue there around copper, these like cost there? that talked sure want we You for supply TPS, is we’ve metals was we make manageable, we’re And based some coming sure orders all versus gone times. alloys orders been side. out make how see availability nickel what offset big through from lead bit are and little got thing just look around stabilizing and then on to

So parts of we’ve to set that we’ve some supply we for at as we’ve already time, with with diversifying the of get I a tightened long our where to impacts. had other order worked but validity moved And supplier well deal and up that. some said, to world as those

a I we’re there is we just back the term some the the – chips, stabilizing to forward So we’ll XXXX. second think think in right and but relief to see half, better looking

Scott Gruber

you I’m have in could demand obviously prices this a this high possible on into risk LNG curious winter, level deferral from this a turning there seen could of actually long expand if service I’m is been? the Or very Have just and the at not how because sustain could operational through perspective? bit, an TPS, Got of service to LNG And much drag so XXXX? prices given that is it. TPS how high if maintenance TPS you seeing And a side just are last? within asking,

Lorenzo Simonelli

on. anticipation we’re contractual customers you looking services the outages continuing as the being see that produce at that are customers Yes. Definitely the the higher cycle, the and normalizing again and side. just maintenance of the side, further actual say so catch up will in commodity to the to they transactional through with prices. itself. as and again the contractual seeing you on go later comes again That’s have On you’d to defer And

Brian Worrell

around contractual like one things to those inspections changes to guarantees especially in side; and and continue within to remember certain parts Yes. schedule to to and bonus/malice happen the window have that Scott, place you services hold. limited guarantees a the add have really the for structure. just thing we in on The have

you’re have make is So going yes, right outages, than risk to again equipment high, have maintained the outage. call running and some while an a to outage sure much and unplanned because, it’s definitely planned is prices is worse are to the

good significant So on seen movements it’s look, we the – schedules, contracts customers with haven’t proactively And those pretty that there. are we regard. from any work but

Scott Gruber

Thank color. the you. Appreciate it. Got

Operator

next with Our from comes Mehta question Neil Goldman Sachs.

is Your open. line

Neil Mehta

we’re hour, at the be I you, Thank Team. here top the of questions. two know I’ll quick with so

latest thoughts price back a stock right first is, return to the But around buy call where capital? at than return is higher talked your lower now. economic with The what we second you of have of free course, weigh outlook cash company The the uncertainty. and in capital flow quarter are slightly about you a that on of that did

sum business two your thoughts strategic So second gap you. parts on the a the then businesses to to question ultimately of and latest Thank And whether So apart? the there? combined makes is, sense or be the any it color just questions. closing break

Brian Worrell

the so our is year, in capital quarter. have and per $XXX our return the of of say about the And first did to Look, roughly I’d what intention was. shares, talked flow dividends of to during to through month. We on the million $XX average bought allocation. back months price back we VWAP six Neil, It about XX% unchanged. first our shareholders free buybacks Yes. XX% cash

once a at and tranche final consistently, we’ve step here probably back as third I about the down things. happy would sell And you’ve as roughly is of quarter level say we’ll we’ll – take that then the the that. seen relook done, happens. And that in So said same the we’ll GE that continue

of talked the Russia For of free quarter, portfolio. cash the change about flow impact no fundamentally, generation the real cash in the flow, we capabilities to free but

So short-term long-term. can see that manage a discontinuity, as again, I this something we through

of how And a there the allocation we structured, taken about some drive no the have look, the we steps the of and capital of synergies in align change better talked we’re company terms So then real businesses to that standpoint. and from some there.

from the I’ll always us As look, on appreciate positive strength of that combined and through the talked But financial and environment and that, makes I we’ve synergies those you that scale how of growth the said, certainly The we’re we’re for working diversity operating a closer profitability. about some organization the and and size see company. scale, current that’s alignment. we update in

So competitive operational you higher infrastructure I’d times, many But in drive if entity. around like overall for and to more sharing and the going margins say look, our we’ll return and continue doing. shareholders cost is technology a continue We’ll or But I’ve are we guys look, decision. to that benefits to process. our return ability changes a thought free on we’re capital same like update overall, the what to purely obviously, there weigh delivers flow now, and and cash position any what’s for said invested world drive the base, the around benefits overlaps customer drive the with of the better benefits and company with what focused scale of the customers, potential right that

Neil Mehta

Thank you.

Operator

to have for turn I’d Lorenzo closing Simonelli to like remarks. the we That’s all back over the questions. time call for

Lorenzo Simonelli

everyone Thanks, today. our and to earnings thanks joining call for

some we the need we optimistic strategy. remain some closing on before across leave our execute both and you continue quarter, continue business outlook energy, Despite this security thoughts. long-term with I given Baker sustainability, on affordability. the Just challenges our of end, we areas to want to core the to of At for Hughes,

transition to to shareholders. returning positioned also and spending continue invest cash multiyear strong new initiatives LNG XX% cycle. to to is and cycle from a portfolio energy of our free We’ll flow benefit upstream industrial well also in while activities XX% Our a

may you again time, look forward Operator, thanks So the the call. and to you speaking lot for soon. all to a close

Operator

the Thank you. This conclude does program.

have great day. disconnect. a may now You Everyone,

Baker Hughes (BKR) 20 Jul 222022 Q2 Earnings call transcript