Oil Service Giant Baker Hughes Received Record Orders of $8.0 Billion in Fourth Quarter

Energy services company Baker Hughes reported weaker than expected fourth quarter earnings on Monday before the market open. However, $BKR said it had record orders of $8.0 billion for the fourth quarter. Baker Hughes reported fourth-quarter net income of $182 million, or 18 cents a share. On an adjusted basis, BKR earned 38 cents a share, up from 25 cents a share a year before. Last quarter the company reported a loss of $17 million for the second-straight quarterly loss after taking large charges after pulling out of Russia following the Ukraine invasion. $BKR shares were near flat at $31.295 after the release. Peer Schlumberger reported Friday.

Baker Hughes Drill Bit

Baker Hughes: $BKR Reported Before Open Monday

Baker Hughes Q4 2022 Earnings and Revenues Miss Estimates:

  • Net income of $182 million, or 18 cents a share, compared with $294 million, or 32 cents a share, in the year-prior quarter.
  • On an adjusted basis, Baker Hughes earned 38 cents a share, up from 25 cents a share a year before but below the FactSet consensus, which called for 40 cents a share.
  • Revenue rose to $5.91 billion from $5.49 billion, analysts had been looking for $6.06 billion.
  • Cash flows generated from operating activities were $898 million for the quarter. Free cash flow (a non-GAAP measure) for the quarter was $657 million.

BKR: Stock Market Reaction

  • $31.295 ▲ +0.225(0.72%) Pre market
  • $31.295 ▲ +2.545(8.85%) YTD
  • $31.295 ▲ +4.225(15.61%) Over year
  • $31.295 ▼ -4.525(12.63%) Over 5 years
  • 52wk High $39.03
  • 52wk Low $20.28

Despite recessionary pressures in some of the world’s largest economies, we maintain a positive outlook for the energy sector, given supply shortages appear likely to persist,”

CEO, Lorenzo Simonelli on the release

Hydrogen

“IET continued to support the growth of the hydrogen economy, securing two new contracts with Air Products. As part of the companies’ previously announced hydrogen collaboration framework in 2021, Baker Hughes will supply reciprocating compressors for liquid hydrogen for Air Products’ net-zero hydrogen energy complex in Edmonton, Alberta, Canada, as well as for a green hydrogen import terminal in Rotterdam, The Netherlands. IET also secured a third contract with Air Products to provide Bently Nevada’s Orbit 60 condition monitoring system to monitor critical compressors for the world’s largest green hydrogen project at NEOM in Saudi Arabia.

In another first, IET advanced the hydrogen economy with the successful completion of tests using hydrogen to power gas turbines at one of Snam’s natural gas compression stations in Istrana, Italy. The experiment demonstrated the compatibility of Baker Hughes’ NovaLT12 and PGT25 gas turbines with the blending hydrogen and natural gas. The introduction of hydrogen in increasing quantities in Snam’s current fleet will allow for a greater reduction in CO2 emissions compared to the use of natural gas alone.”

Two New Segments, OFSE and IET (Announced in Q3)

CEO, Lorenzo Simonelli on the release

“Last month, we announced a restructuring and re-segmentation of the company into two reporting segments, OFSE (oil field services and equipment) and IET (industrial and energy technology). These changes are designed to sharpen our focus, improve operational execution and better position Baker Hughes to capitalize on the quickly changing energy markets.”

BKR is looking for the reorganization to improve operations and profitability and may yield more than $150 million in cost savings. The new structure was made official Oct. 1st, the first day of the fourth quarter.

Outlook

Demand Destruction Fear

“With years of under investment now being amplified by recent geopolitical factors, global spare capacity for oil and gas has deteriorated and will likely require years of investment growth to meet forecasted future demand.” said Chief Executive Lorenzo Simonelli in a statement.

Simonelli offered a positive outlook for next year, saying: “Many of the key challenges should be behind us.” BKR anticipates double-digit revenue growth in its international oilfield services business in 2023 and modest growth in its North America business, driven largely by public firms.

The Ukraine invasion by Russia and the global supply crunch has hit customers but also the cost of materials for BKR. Baker Hughes has been negatively impacted in the second quarter by a $365 million charge from its Russian operations and supply chain inflation.

Western sanctions on Russia’s energy industry hit supplies. which disrupted operations and led to higher costs for chemicals. Its digital solutions unit was also again negatively impacted by supply chain problems related to semiconductors, boards and displays.

Baker Hughes Peer’s Earnings

General Electric Demerger

On June 26 $GE announced it will divest its 62.5 percent stake in Baker Hughes in the next two or three years in a bid to simplify its structure and boost shareholder returns. GE acquired the Baker Hughes in July 2017, creating the second largest oilfield services provider by revenue.

Baker Hughes today announced will keep technology, capabilities and infrastructure obtained through the merger despite its breakup with GE.

“There are agreements in place to ensure there is a seamless separation. We’ll work with GE as they evaluate the timing and structure,” Simonelli said..

Source: BKR

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