Baker Hughes Company Announces Second Quarter 2021 Results

  • Orders of $5.1 billion for the quarter, up 12% sequentially and up 4% year-over-year.
  • Revenue of $5.1 billion for the quarter, up 8% sequentially and up 9% year-over-year.
  • GAAP operating income of $194 million for the quarter, up 18% sequentially and favorable year-over-year.
  • Adjusted operating income (a non-GAAP measure) of $333 million for the quarter was up 23% sequentially and favorable year-over-year.
  • Adjusted EBITDA* (a non-GAAP measure) of $611 million for the quarter was up 9% sequentially and up 38% year-over-year.
  • GAAP loss per share of $(0.08) for the quarter which included $0.18 per share of adjusting items. Adjusted earnings per share (a non-GAAP measure) was $0.10.
  • Cash flows generated from operating activities were $506 million for the quarter. Free cash flow (a non-GAAP measure) for the quarter was $385 million.

The Company presents its financial results in accordance with GAAP. However, management believes that using additional non-GAAP measures will enhance the evaluation of the profitability of the Company and its ongoing operations. Please see reconciliations in the section entitled “Reconciliation of GAAP to non-GAAP Financial Measures.” Certain columns and rows in our tables and financial statements may not sum up due to the use of rounded numbers.

*Adjusted EBITDA (a non-GAAP measure) is defined as operating income (loss) excluding depreciation & amortization and operating income adjustments.

LONDON & HOUSTON–(BUSINESS WIRE)–Baker Hughes Company (NYSE: BKR) (“Baker Hughes” or the “Company”) announced results today for the second quarter of 2021.

 

Three Months Ended

 

Variance

(in millions except per share amounts)

June 30, 2021

March 31,

2021

June 30, 2020

 

Sequential

Year-over-

year

Orders

$

5,093

 

 

$

4,541

 

 

$

4,888

 

 

 

12

%

4

%

Revenue

5,142

 

 

4,782

 

 

4,736

 

 

 

8

%

9

%

Operating income (loss)

194

 

 

164

 

 

(52

)

 

 

18

%

F

Adjusted operating income (non-GAAP)

333

 

 

270

 

 

104

 

 

 

23

%

F

Adjusted EBITDA (non-GAAP)

611

 

 

562

 

 

444

 

 

 

9

%

38

%

Net loss attributable to Baker Hughes

(68

)

 

(452

)

 

(195

)

 

 

85

%

65

%

Adjusted net income (loss) (non-GAAP) attributable to Baker Hughes

83

 

 

91

 

 

(31

)

 

 

(9

)%

F

EPS attributable to Class A shareholders

(0.08

)

 

(0.61

)

 

(0.30

)

 

 

86

%

71

%

Adjusted EPS (non-GAAP) attributable to Class A shareholders

0.10

 

 

0.12

 

 

(0.05

)

 

 

(16

)%

F

Cash flow from operating activities

506

 

 

678

 

 

230

 

 

 

(25

)%

F

Free cash flow (non-GAAP)

385

 

 

498

 

 

63

 

 

 

(23

)%

F

“F” is used in most instances when variance is above 100%. Additionally, “U” is used in most instances when variance is below (100)%.

We are pleased with our second quarter results as we continued to generate significant free cash flow, execute on our strategy, and lead in the energy transition. During the quarter, TPS and OFE delivered solid orders and operating income while OFS continued to improve margins. We continued to invest and collaborate in strategic areas for new energy frontiers, advancing our partnerships in hydrogen, carbon capture, utilization and storage, and clean integrated power. I want to thank our employees and partners for their continued hard work and commitment to safety,” said Lorenzo Simonelli, Baker Hughes chairman and chief executive officer.

As we look ahead to the second half of 2021, we see continued signs of global economic recovery that should drive further demand growth for oil and natural gas. Although we recognize the risks presented by the variant strains of the COVID-19 virus, we expect spending and activity levels to gain momentum through the year as the macro environment improves, likely setting up the industry for stronger growth in 2022.

We remain focused on executing our strategy as the macro economy improves and our customers continue on their journey to a net-zero future. We look forward to supporting our customers, advancing our strategic priorities, and delivering for our shareholders,” concluded Simonelli.

Quarter Highlights

Supporting our Customers

The OFS segment executed an innovative Integrated Well Services tripartite agreement with bp and Odfjell Drilling to work together and transform platform drilling and completions activity in the North Sea’s Clair Field, the largest oil field in Western Europe. The five-year agreement will aim to improve production across the Field and will use Integrated Operations Level Three (IO3), the most progressive and technologically-advanced model for shaping offshore work and onshore support.

OFS continued to secure contracts for its differentiated portfolio of electrical submersible pump systems (ESPs) in multiple regions. In the Middle East, OFS secured a contract with an oil and gas operator to install over 500 ESPs across onshore operations, enhancing the customer’s capabilities to increase production and provide reliable energy. In Latin America, OFS secured an eight-year sole provider rental contract with a customer in Ecuador for ESPs, horizontal pumping systems, variable speed drives, and ProductionLink digital solutions, ensuring reliable and efficient operations.

OFS also increased its leadership position in Latin America, securing a large offshore Integrated Drilling Services contract with Petrobras in Brazil. The contract will aim to increase integration, expand remote services, and promote drilling efficiency.

The OFE segment secured multiple significant contracts with Petrobras in the second quarter and continued to gain traction with its Subsea Connect portfolio of technologies. OFE signed a frame agreement for two flexible pipe contracts across five of Petrobras’ offshore fields, totaling more than 300 kilometers of pipe to ensure reliable connections and optimal flow under high pressures, extreme temperatures and corrosive conditions. OFE was also awarded a subsea oilfield equipment contract from Petrobras as part of the Marlim and Voador field revitalization plan in the Campos Basin, including production and injection manifolds, control modules, subsea connection systems and associated services.

The TPS segment maintained its LNG leadership with several new equipment contracts in multiple regions, including the supply of main refrigerant and power generation technology for Nigeria LNG’s Train 7 project and aeroderivative gas turbine and compression technology for New Fortress Energy’s first “Fast LNG” modular offshore liquefaction project.

TPS secured a key contract for an ethylene cracker facility in India, displacing a competitor and providing compressor trains based on high efficiency steam turbine and centrifugal compression technologies. TPS also secured a key industrial win for its NovaLT12 technology for a combined heat and power application which will power a factory in the Kingdom of Saudi Arabia. TPS grew its year-over-year upgrades volume with multiple awards to support customer decarbonization efforts.

The DS segment continued to secure important contracts to advance customers’ energy transition goals, helping to reduce methane and carbon emissions as well as improve efficiencies. DS saw a number of awards in its flare.IQ advanced flare gas monitoring and optimization system, with contracts secured in the Middle East, China, North America and Europe.

DS secured a flare.IQ contract with bp, marking the first time flare.IQ will be used in the upstream oil and gas sector and continuing the two companies’ partnership to measure and reduce bp’s emissions from flaring at its global flaring operations. flare.IQ will be embedded into bp’s existing System 1 condition monitoring software from Bently Nevada, requiring no additional hardware for the customer.

DS continued to expand its industrial asset management wins across multiple end-markets. Bently Nevada secured a contract with a large corrugated paper manufacturing company for its condition monitoring and protection solutions, including wireless sensors, remote monitoring and diagnostics services to optimize production and reduce maintenance costs. The recently acquired ARMS Reliability business in Bently Nevada also grew its industrial asset management orders, including a subscription for its OnePM software to be deployed by a global chemicals customer with initial roll-out in China and Chile.

Executing on Priorities

Baker Hughes led another consecutive quarter in transforming its core operations, investing for growth in strategic areas, and positioning the Company for new frontiers.

The Company announced multiple collaborations and investments to decarbonize industries and develop low and zero-carbon technologies for the energy transition:

  • Announced intention for Baker Hughes to become a cornerstone investor in the FiveT Hydrogen Fund alongside Chart Industries and Plug Power, helping to advance the hydrogen economy and infrastructure projects necessary for the hydrogen value chain.
  • Announced an investment in Electrochaea, a growth-stage technology company, to expand Baker Hughes’ carbon capture, utilization and storage (CCUS) portfolio with power-to-gas solutions. Baker Hughes will combine its post-combustion carbon capture technology with Electrochaea’s bio-methanation technology to transform CO2 emissions into lower-carbon synthetic natural gas. Baker Hughes will take an approximately 15% stake in Electrochaea and assume a seat on Electrochaea’s Board of Directors.
  • Signed a strategic global agreement with Air Products to develop next generation hydrogen compression solutions to lower the cost of production and accelerate adoption of hydrogen as a zero-carbon fuel. Baker Hughes will provide advanced technologies for global hydrogen projects including the NovaLT16 turbine for Air Products’ net-zero hydrogen energy complex in Alberta, Canada, as well as advanced compression technology for the NEOM carbon-free hydrogen project in the Kingdom of Saudi Arabia.
  • Signed an agreement with Borg CO2, a Norwegian carbon capture and storage developer for industrial clusters, to collaborate on a CCUS project to service as a decarbonization hub for multiple industrial sites in the Viken region of Norway. The project aims to capture and store up to 90% of the CO2 from the industrial sites, eventually being liquified, shipped and stored underneath the seabed of the North Sea. Borg CO2 will leverage Baker Hughes’ CCUS technology portfolio, including the Chilled Ammonia Process and Compact Carbon Capture solutions.
  • Signed an agreement with Bloom Energy to collaborate on the potential deployment of integrated, low-carbon power generation and hydrogen solutions. The two companies will focus on developing integrated power solutions using Bloom Energy’s solid oxide fuel cell technology and Baker Hughes NovaLT gas turbine technology; integrated hydrogen solutions using Bloom Energy’s solid oxide electrolyzer cells with Baker Hughes’ hydrogen compression technology; and opportunities to leverage both companies’ portfolios for low-carbon and emissions reduction solutions. Pilot projects are expected to be launched in the next 2-3 years.
  • Signed an agreement with Samsung Engineering to identify joint business development opportunities for energy and industrial customers to reduce their emissions. The two companies will focus on hydrogen and CCUS projects, leveraging Baker Hughes’ compression, NovaLT gas turbines, flexible pipe, and condition monitoring technologies and services. The two companies will initially focus on key Korean customers and projects including refineries, petrochemical plants, and industrial environmental facilities.
  • Signed an agreement with Rosetti Marino, a provider of integrated project execution, engineering, procurement, fabrication, installation and commissioning services for the oil and gas, renewables, chemical, power generation and shipbuilding sectors. The two companies will collaborate on jointly developing CCUS projects, initially focusing on opportunities in Italy to boost the activation of a local supply chain and drive progress in energy transition in the region.

Baker Hughes signed a major agreement with PJSC LUKOIL to collaborate on multiple energy efficient technologies for the oil and gas sector to increase efficiencies, reduce carbon emissions, raise productivity and support the energy transition.

The companies will partner to test artificial lift systems (ALS) technology using Baker Hughes’s ESPs with LUKOIL’s leading energy efficient Permanent Magnet Motors (PMM), reducing energy consumption by 15-20% compared to existing artificial lift processes. The companies will also explore emissions mapping and abatement projects at LUKOIL’s overseas projects and a collaboration to produce Baker Hughes’ spoolable composite pipes in Russia, leveraging LUKOIL’s polymer production to provide an efficient and lower carbon alternative to traditional steel pipes.

TPS continued its focus on services growth, maintaining long-term relationships with LNG customers and achieving a major milestone by securing a six-year services contract extension in North America for a key producer. TPS also grew its year-over-year upgrades volume with significant deals across multiple regions, in particular Europe and the Middle East, for various applications including pipelines and offshore, as well as solutions to support customers’ operational decarbonization efforts.

Leading with Innovation

Baker Hughes continued to develop and deploy technologies to advance the energy transition, improve efficiencies, reduce emissions and accelerate digital transformation for industrial customers.

The BakerHughesC3.ai joint venture alliance (BHC3) announced that KBC, a wholly-owned subsidiary of Yokogawa Electric corporation, has adopted BHC3’s artificial intelligence (AI) technology to enhance its existing software portfolio for oil and gas process simulation, supply chain optimization and energy management. BHC3’s AI solutions will provide continuous automated updates to physics-based simulations through a flexible model to scale for any industrial configuration and environment. KBC expects the software deployment to generate significant annual economic value for customers, estimating that improved operations will yield more than $0.65 per barrel.

DS continued to drive digital transformation for industrial customers through its Nexus Controls and Bently Nevada product lines. In Latin America, DS secured a contract to upgrade Ecopetrol’s turbomachinery control systems for an upstream facility in Colombia. The contract includes control systems, cybersecurity, and excitation systems from Nexus Controls as well as the 3500 condition monitoring system and System 1 software from Bently Nevada.

Waygate Technologies launched a new digital service using advanced robotics to provide safe and efficient inspection as well as cleaning of industrial boilers. The service, known as Boiler Robotic Inspection & Cleaning (BRIC), leverages sophisticated ultrasonic and visual sensors and was developed in close collaboration with BASF, a world leader in chemicals. BRIC eliminates physical risks of inspections, provides more precise data than competing technologies, and dramatically cuts costs for customers in the chemical, pulp & paper, energy and other manufacturing industries.

TPS continued to advance technologies for the energy transition. As part of a research and innovation consortium funded by the EU Horizon 2020 program, TPS is developing supercritical CO2 technologies for flexible and efficient energy storage systems, with a first of its kind compressor to be used in thermal power plants. The compressor prototype is being tested at Baker Hughes’ facilities in Italy and is expected to increase overall plant efficiency, reduce emissions and water consumption, and provide more flexibility to adapt for changing energy conditions.

Consolidated Results by Reporting Segment

Consolidated Orders by Reporting Segment

 

(in millions)

Three Months Ended

 

Variance

Consolidated segment orders

June 30,

2021

March 31,

2021

June 30,

2020

 

Sequential

Year-over-

year

Oilfield Services

$

2,359

 

$

2,200

 

$

2,411

 

 

7

%

(2

)%

Oilfield Equipment

681

 

345

 

699

 

 

97

%

(3

)%

Turbomachinery & Process Solutions

1,513

 

1,447

 

1,313

 

 

5

%

15

%

Digital Solutions

540

 

549

 

465

 

 

(2

)%

16

%

Total

$

5,093

 

$

4,541

 

$

4,888

 

 

12

%

4

%

Orders for the quarter were $5,093 million, up 12% sequentially and up 4% year-over-year. The sequential increase was a result of higher order intake in Oilfield Equipment, Oilfield Services and Turbomachinery & Process Solutions, partially offset by a reduction in Digital Solutions. Equipment orders were up 15% sequentially and service orders were up 10%.

Year-over-year, the increase in orders was a result of higher order intake in Turbomachinery & Process Solutions and Digital Solutions, partially offset by a decline in Oilfield Equipment and Oilfield Services. Year-over-year equipment orders were down 6% and service orders were up 12%.

The Company’s total book-to-bill ratio in the quarter was 1.0; the equipment book-to-bill ratio in the quarter was 0.9.

Remaining Performance Obligations (RPO) in the second quarter ended at $23.8 billion, an increase of $0.6 billion from the first quarter of 2021. Equipment RPO was $7.6 billion, up 1% sequentially. Services RPO was $16.2 billion, up 3% sequentially.

Consolidated Revenue by Reporting Segment

 

(in millions)

Three Months Ended

 

Variance

Consolidated segment revenue

June 30,

2021

March 31,

2021

June 30,

2020

 

Sequential

Year-over-

year

Oilfield Services

$

2,358

 

$

2,200

 

$

2,411

 

 

7

%

(2

)%

Oilfield Equipment

637

 

628

 

696

 

 

1

%

(8

)%

Turbomachinery & Process Solutions

1,628

 

1,485

 

1,161

 

 

10

%

40

%

Digital Solutions

520

 

470

 

468

 

 

11

%

11

%

Total

$

5,142

 

$

4,782

 

$

4,736

 

 

8

%

9

%

Revenue for the quarter was $5,142 million, an increase of 8%, sequentially. The increase in revenue was driven by higher volume across all segments.

Compared to the same quarter last year, revenue was up 9%, driven by higher volume in Turbomachinery & Process Solutions and Digital Solutions segments, partially offset by Oilfield Equipment and Oilfield Services.

Consolidated Operating Income by Reporting Segment

 

(in millions)

Three Months Ended

 

Variance

Segment operating income

June 30,

2021

March 31,

2021

June 30,

2020

 

Sequential

Year-over-

year

Oilfield Services

$

171

 

 

$

143

 

 

$

46

 

 

 

20

%

F

Oilfield Equipment

28

 

 

4

 

 

(14

)

 

 

F

F

Turbomachinery & Process Solutions

220

 

 

207

 

 

149

 

 

 

6

%

48

%

Digital Solutions

25

 

 

24

 

 

41

 

 

 

3

%

(39

)%

Total segment operating income

444

 

 

379

 

 

221

 

 

 

17

%

F

Corporate

(111

)

 

(109

)

 

(117

)

 

 

(2

)%

5

%

Inventory impairment

 

 

 

 

(16

)

 

 

%

F

Restructuring, impairment & other

(125

)

 

(80

)

 

(103

)

 

 

(56

)%

(21

)%

Separation related

(15

)

 

(27

)

 

(37

)

 

 

46

%

60

%

Operating income (loss)

194

 

 

164

 

 

(52

)

 

 

18

%

F

Adjusted operating income*

333

 

 

270

 

 

104

 

 

 

23

%

F

Depreciation & amortization

278

 

 

292

 

 

340

 

 

 

(5

)%

(18

)%

Adjusted EBITDA*

$

611

 

 

$

562

 

 

$

444

 

 

 

9

%

38

 

*Non-GAAP measure.

“F” is used in most instances when variance is above 100%. Additionally, “U” is used in most instances when variance is below (100)%.

On a GAAP basis, operating income for the second quarter of 2021 was $194 million. Operating income increased $30 million sequentially and increased $245 million year-over-year. Total segment operating income was $444 million for the second quarter of 2021, up 17% sequentially and favorable year-over-year.

Adjusted operating income (a non-GAAP measure) for the second quarter of 2021 was $333 million, which excludes adjustments totaling $139 million before tax, mainly related to restructuring and separation related charges. A complete list of the adjusting items and associated reconciliation from GAAP has been provided in Table 1a in the section entitled “Reconciliation of GAAP to non-GAAP Financial Measures.” Adjusted operating income for the second quarter of 2021 was up 23% sequentially, driven by volume increases across all segments. Adjusted operating income was favorable year-over-year driven by volume in the Turbomachinery & Process Solutions segment, and margin expansion in the Oilfield Services and Oilfield Equipment segments, partially offset by margin contraction in the Digital Solutions segment.

Depreciation and amortization for the second quarter of 2021 was $278 million.

Adjusted EBITDA (a non-GAAP measure) for the second quarter of 2021 was $611 million, which excludes adjustments totaling $139 million before tax, mainly related to restructuring and separation related charges. Adjusted EBITDA for the second quarter was up 9% sequentially and up 38% year-over-year.

Corporate costs were $111 million in the second quarter of 2021, up 2% sequentially and down 5% year-over-year.

Other Financial Items

Income tax expense in the second quarter of 2021 was $143 million.

Other non-operating loss in the second quarter of 2021 was $63 million. Included in other non-operating loss was a non-recurring charge for a loss contingency related to certain tax matters and losses from the net change in fair value of our investment in C3.ai.

GAAP diluted loss per share was $(0.08). Adjusted diluted earnings per share was $0.10. Excluded from adjusted diluted earnings per share were all items listed in Table 1a in the section entitled “Reconciliation of GAAP to non-GAAP Financial Measures” as well as the “other adjustments (non-operating)” found in Table 1c.

Cash flow from operating activities was $506 million for the second quarter of 2021. Free cash flow (a non-GAAP measure) for the quarter was $385 million. A reconciliation from GAAP has been provided in Table 1d in the section entitled “Reconciliation of GAAP to non-GAAP Financial Measures.”

Capital expenditures, net of proceeds from disposal of assets, were $121 million for the second quarter of 2021.

Results by Reporting Segment

The following segment discussions and variance explanations are intended to reflect management’s view of the relevant comparisons of financial results on a sequential or year-over-year basis, depending on the business dynamics of the reporting segments.

Oilfield Services

 

(in millions)

Three Months Ended

 

Variance

Oilfield Services

June 30, 2021

March 31,

2021

June 30, 2020

 

Sequential

Year-over-

year

Revenue

$

2,358

 

$

2,200

 

$

2,411

 

 

7

%

(2

)%

Operating income

$

171

 

$

143

 

$

46

 

 

20

%

F

Operating income margin

7.3

%

6.5

%

1.9

%

 

0.8

pts

5.4

pts

Depreciation & amortization

$

195

 

$

201

 

$

248

 

 

(3

)%

(21

)%

EBITDA*

$

366

 

$

344

 

$

293

 

 

7

%

25

%

EBITDA margin*

15.5

%

15.6

%

12.2

%

 

(0.1

)pts

3.4

pts

Oilfield Services (OFS) revenue of $2,358 million for the second quarter increased by $158 million, or 7%, sequentially.

North America revenue was $693 million, up 11% sequentially. International revenue was $1,665 million, an increase of 6% sequentially, driven by higher revenues in Asia Pacific, Europe, and Latin America.

Segment operating income before tax for the quarter was $171 million. Operating income for the second quarter was up $28 million, or 20% sequentially, primarily driven by higher volume.

Oilfield Equipment

 

(in millions)

Three Months Ended

 

Variance

Oilfield Equipment

June 30, 2021

March 31,

2021

June 30, 2020

 

Sequential

Year-over-

year

Orders

$

681

 

$

345

 

$

699

 

 

97

%

(3

)%

Revenue

$

637

 

$

628

 

$

696

 

 

1

%

(8

)%

Operating income (loss)

$

28

 

$

4

 

$

(14

)

 

F

F

Operating income margin

4.3

%

0.7

%

(2.1

)%

 

3.7

pts

6.4

pts

Depreciation & amortization

$

26

 

$

32

 

$

34

 

 

(21

)%

(25

)%

EBITDA*

$

53

 

$

37

 

$

20

 

 

45

%

F

 

EBITDA margin*

8.4

%

5.8

%

2.9

%

 

2.5

pts

5.5

pts

Oilfield Equipment (OFE) orders of $681 million were down $18 million, or 3%, year-over-year, driven by lower order intake in the Subsea Production Systems, and Subsea Pressure Control Projects businesses, and from the disposition of the Surface Pressure Control Flow business in the fourth quarter of 2020, partially offset by growth in Services and Flexible Pipe Systems.

Contacts

Investor Relations
Jud Bailey

+1 281-809-9088

[email protected]

Media Relations
Thomas Millas

+1 713-879-2862

[email protected]

Read full story here

error: Content is protected !!