Baker Hughes Company Announces First Quarter 2021 Results
Baker Hughes Company (NYSE: BKR) reported its Q1 2021 earnings, highlighting significant challenges but also notable achievements. Orders totaled $4.54 billion, down 12% sequentially and 18% year-over-year. Revenue fell to $4.78 billion, a decrease of 13% sequentially and 12% on a year-over-year basis. Adjusted operating income was $270 million (down 42% sequentially, up 13% year-over-year), with a GAAP net loss of $452 million. Despite these declines, the company generated strong free cash flow of $498 million and advanced its investments in energy transition technologies, including hydrogen and carbon capture initiatives.
- Generated free cash flow of $498 million, an increase of 99% year-over-year.
- Adjusted operating income rose by 13% year-over-year to $270 million.
- Secured multiple contracts in energy transition technologies, enhancing growth prospects.
- Net loss attributable to Baker Hughes was $452 million, a significant decline from previous periods.
- Total orders decreased by 12% sequentially and 18% year-over-year, indicating a declining trend.
- Revenue dropped 13% sequentially and 12% year-over-year due to lower volume across all segments.
Baker Hughes Company (NYSE: BKR) ("Baker Hughes" or the "Company") announced results today for the first quarter of 2021.
|
Three Months Ended |
|
Variance |
|||||||||
(in millions except per share amounts) |
March 31,
|
December 31,
|
March 31,
|
|
Sequential |
Year-over-
|
||||||
Orders |
$ |
4,541 |
|
$ |
5,188 |
|
$ |
5,532 |
|
|
(12)% |
(18)% |
Revenue |
4,782 |
|
5,495 |
|
5,425 |
|
|
(13)% |
(12)% |
|||
Operating income (loss) |
164 |
|
182 |
|
(16,059) |
|
|
(10)% |
F |
|||
Adjusted operating income (non-GAAP) |
270 |
|
462 |
|
240 |
|
|
(42)% |
|
|||
Adjusted EBITDA (non-GAAP) |
562 |
|
770 |
|
594 |
|
|
(27)% |
(5)% |
|||
Net income (loss) attributable to Baker Hughes |
(452) |
|
653 |
|
(10,227) |
|
|
U |
|
|||
Adjusted net income (loss) (non-GAAP) attributable to Baker Hughes |
91 |
|
(50) |
|
70 |
|
|
F |
|
|||
EPS attributable to Class A shareholders |
(0.61) |
|
0.91 |
|
(15.66) |
|
|
U |
|
|||
Adjusted EPS (non-GAAP) attributable to Class A shareholders |
0.12 |
|
(0.07) |
|
0.11 |
|
|
F |
|
|||
Cash flow from operating activities |
678 |
|
378 |
|
478 |
|
|
|
|
|||
Free cash flow (non-GAAP) |
498 |
|
250 |
|
152 |
|
|
|
F |
|||
"F" is used in most instances when variance is above
“We are pleased with our first quarter results as we generated strong free cash flow, continued to drive forward our cost-out efforts, and took further meaningful steps in the execution of our strategy. During the quarter, TPS delivered solid orders and operating income while OFS continued to execute cost-out programs to help drive another strong quarter of margin performance. We also advanced our position in the energy transition, investing in strategic areas for growth and entering important partnerships to advance new energy frontiers including hydrogen and carbon capture, utilization and storage. I want to thank our employees 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 rest of 2021, we remain cautiously optimistic that the global economy and oil demand will recover from the impact of the global pandemic. 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, and are well positioned to benefit from an economic recovery while leading the energy transition and the journey to net-zero. We will continue to take energy forward by supporting our customers, staying disciplined on our strategic priorities, and delivering for our shareholders,” concluded Simonelli.
Quarter Highlights
Supporting our Customers
The OFS segment executed a major software deployment for Saudi Aramco, deploying its WellLink™ service to deliver real-time data visualization and analysis across all Saudi Aramco drilling activities. The five-year contract was awarded in 2020 and includes a detailed planning phase to transition from the incumbent provider to Baker Hughes. Using WellLink, Saudi Aramco personnel can collaborate and make decisions using a single view of data, paving the way for the use of artificial intelligence to enhance operations. Despite significant pandemic-related challenges, the deployment was completed
Baker Hughes continued to invest in localization for Saudi Arabia. In addition to the WellLink deployment project, Saudi Aramco awarded OFS a five-year drill bits contract, supported by the Baker Hughes drill bits manufacturing facility in Dhahran. The facility recently expanded its capabilities and has produced more than 15,000 drill bits since beginning operations a decade ago. OFS also inaugurated its completions manufacturing center in Saudi Arabia to support growth plans and add in-country value.
The TPS segment continued to maintain its leadership in FPSO and LNG with several offshore topside contracts in Latin America and Asia. In Latin America, TPS was awarded a contract for multiple FPSOs, including one of the world’s largest units, to provide power generation systems, compression trains for gas reinjection, CO2 compression services and water injection centrifugal pumps. In Asia, TPS secured a topside offshore contract to provide three aeroderivative gas turbine-driven compressor units for a fixed platform. TPS also continued to strengthen long-term relationships with key customers, achieving a major milestone by securing a 10-year services contract extension in Malaysia for one of the largest LNG facilities in the world.
The DS segment continued to expand across industrial end markets, including marine, aerospace, electronics, and pulp and paper. The Bently Nevada product line signed a multi-year agreement with P&O Maritime Logistics to supply a hybrid condition-based monitoring solution that combines the VitalyX lubrication oil monitoring solution with Bently Nevada’s vibration monitoring and Host Remote Monitoring & Diagnostic service. By combining oil and vibration monitoring, Bently Nevada can provide greater protection against asset loss and ensure valuable uptime for over 180 assets on 19 P&O Maritime Logistics vessels in its Caspian fleet. This cloud-based subscription contract is the first of its kind for both P&O Maritime Logistics and Bently Nevada.
Bently Nevada also secured a contract to supply plant-wide condition monitoring solutions for Arauco’s pulp and paper plant in Chile, one of the main global players in wood pulp and bioenergy. The brownfield contract includes hardware, software and services support of 900+ sensors integrated to System 1 software for 450 machines across three sites, increasing productivity and efficiency of Arauco’s operations. In the industrial inspections segment, the Waygate Technologies (WT) product line secured multiple orders from one of the world's leading battery manufacturers in Asia. The customer has initiated a global roll-out project with WT's Phoenix CT systems to inspect lithium ion batteries for electric vehicles.
DS secured major contracts to advance customers’ energy transition goals, helping to reduce methane and carbon emissions as well as improve efficiencies. The Panametrics product line secured several orders for the Flare.IQ advanced flare gas monitoring and optimization system, with contracts for oil and gas operators in North America, China and the U.A.E. The Druck product line secured a number of significant contracts across North America and China to supply pressure sensors to improve aircraft fuel efficiency. This included one of the largest aerospace engine contracts in Druck’s history, a 25-year deal, and strengthened Baker Hughes’ leadership position with aerospace OEMs.
Executing on Priorities
Baker Hughes made progress in strategically positioning the company for new frontiers, announcing new collaborations to advance industrial decarbonization and low- to zero-carbon solutions:
- Signed a cooperation agreement with PAO NOVATEK to decarbonize natural gas and LNG production by developing and implementing innovative compression and power generation technologies for NOVATEK’s LNG projects. The agreement will begin with a pilot program to introduce hydrogen blends into the main process for natural gas liquefaction to reduce carbon dioxide emissions from LNG export terminals including NOVATEK’s Yamal LNG complex.
- Signed a memorandum of understanding (MOU) with Horisont Energi AS for the Polaris offshore carbon storage facility in Norway to explore the development and integration of technologies to minimize the footprint, cost and delivery time for carbon capture, transport and storage. The Polaris facility is part of the “Barents Blue” project, the first global and full-scale carbon neutral “blue” ammonia production plant. The project is expected to have a total carbon storage capacity of 100+ million tons, equivalent to twice Norway’s annual greenhouse gas emissions.
- Acquired from SRI International an exclusive license for the use of Mixed Salt Process technology for carbon capture applications including fossil-fueled power plants, gas turbines, industrial applications, and the cement industry. The agreement further expands and complements Baker Hughes’ CCUS technology portfolio offering as it strategically positions to be able to offer customers a variety of solutions based on project size, design requirements and plant location.
The OFS and OFE segments continued to transform core operations and improve productivity and profitability, developing new business models and exiting product lines and geographies that did not meet strong return requirements. OFS completed the sale of pressure pumping assets in Argentina’s Neuquén Basin to Tenaris, including a hydraulic fracturing fleet, coiled tubing unit and related equipment. OFE announced a joint venture company (JV) with Akastor ASA to combine Baker Hughes’ Subsea Drilling Systems business with Akastor’s subsidiary, MHWirth AS. The new JV will deliver global offshore drilling solutions to better serve customers while driving productivity and cost synergies.
OFS continued to see growth in the Chemicals product line with a five-year production chemicals contract from a major operator in Guyana and one of the largest Chemicals contracts in Baker Hughes history. As part of the contract, Baker Hughes developed a new oilfield chemicals technology solution in record time to meet specific regional production challenges. Notably, Chemicals also secured a five-year production chemicals contract for multiple deep-water blocks in Angola, and a five-year contract for specialty chemicals and services in offshore Norway.
OFE expanded its non-metallic materials portfolio and won multiple contracts in its Flexible Pipe Systems (FPS) product lines. A new onshore composite flexible pipe was launched in January, addressing the corrosion and cost of ownership challenges with conventional steel pipes for the energy and industrial sectors. The lightweight reinforced thermoplastic pipe (RTP) is manufactured at a state-of-the-art Houston facility, and the spoolable design can reduce installation costs by more than
DS expanded its industrial asset performance management (APM) portfolio by acquiring ARMS Reliability, a leading global provider of reliability solutions deploying reliability engineering, data capture, integration, visualization, and analytics to improve the reliability and availability of physical assets. The acquisition closed on April 1, positioning Bently Nevada as a comprehensive industrial asset management platform with a full spectrum of APM services and extended plant-level coverage for industrial customers. ARMS Reliability’s current customer base includes the mining, oil and gas, power generation, manufacturing, and utility segments.
Leading with Innovation
Baker Hughes continued to develop technologies to advance the energy transition, improve efficiencies, reduce emissions and accelerate the digital transformation of industrial segments.
BakerHughesC3.ai (BHC3) released its latest application, BHC3 Production Schedule Optimization (PSO). PSO improves supply chain and delivery performance for highly engineered products while minimizing manufacturing costs. The application generates industrial customer demand predictions and optimal production schedules using a holistic view of buyer activity, supply chain materials, and manufacturing and distribution options. PSO is the third BHC3 AI-based application released since the alliance was formed in 2019 and allows for further customer penetration in the downstream oil and gas segment.
OFS continued to innovate to reduce emissions and environmental footprint for customers. The Artificial Lift and Completions product lines secured a contract to supply equipment and services for the first wireline-retrievable electric submersible pumping (ESP) system in Italy. This latest ESP technology was developed in collaboration with channel partner AccessESP and will allow the customer to reduce its carbon footprint, minimize deferred production, and reduce workover costs by eliminating the need for a rig during ESP change-out operations.
OFS is also utilizing novel plug and abandonment (P&A) technologies to decommission wells in Europe in a more environmentally friendly, less emissive way. In one project in the Netherlands, the Baker Hughes HEAVY METAL section milling service was paired with a rigless P&A unit to reduce metal waste by 288,000 pounds and reduce carbon dioxide emissions by
Consolidated Results by Reporting Segment
Consolidated Orders by Reporting Segment |
||||||||||||||
(in millions) |
Three Months Ended |
|
Variance |
|||||||||||
Consolidated segment orders |
March 31,
|
December 31,
|
March 31,
|
|
Sequential |
Year-over-
|
||||||||
Oilfield Services |
$ |
2,200 |
|
$ |
2,266 |
|
$ |
3,147 |
|
|
(3) |
% |
(30) |
% |
Oilfield Equipment |
345 |
|
561 |
|
492 |
|
|
(39) |
% |
(30) |
% |
|||
Turbomachinery & Process Solutions |
1,447 |
|
1,832 |
|
1,394 |
|
|
(21) |
% |
4 |
% |
|||
Digital Solutions |
549 |
|
528 |
|
500 |
|
|
4 |
% |
10 |
% |
|||
Total |
$ |
4,541 |
|
$ |
5,188 |
|
$ |
5,532 |
|
|
(12) |
% |
(18) |
% |
Orders for the quarter were
Year-over-year, the decline in orders was a result of lower order intake in Oilfield Services and Oilfield Equipment, partially offset by growth in Digital Solutions and Turbomachinery & Process Solutions. Year-over-year equipment orders were down
The Company's total book-to-bill ratio in the quarter was 0.9; the equipment book-to-bill ratio in the quarter was 0.8.
Remaining Performance Obligations (RPO) in the first quarter ended at
Consolidated Revenue by Reporting Segment |
||||||||||||||
(in millions) |
Three Months Ended |
|
Variance |
|||||||||||
Consolidated segment revenue |
March 31,
|
December 31,
|
March 31,
|
|
Sequential |
Year-over-
|
||||||||
Oilfield Services |
$ |
2,200 |
|
$ |
2,282 |
|
$ |
3,139 |
|
|
(4) |
% |
(30) |
% |
Oilfield Equipment |
628 |
|
712 |
|
712 |
|
|
(12) |
% |
(12) |
% |
|||
Turbomachinery & Process Solutions |
1,485 |
|
1,946 |
|
1,085 |
|
|
(24) |
% |
37 |
% |
|||
Digital Solutions |
470 |
|
556 |
|
489 |
|
|
(15) |
% |
(4) |
% |
|||
Total |
$ |
4,782 |
|
$ |
5,495 |
|
$ |
5,425 |
|
|
(13) |
% |
(12) |
% |
Revenue for the quarter was
Compared to the same quarter last year, revenue was down
Consolidated Operating Income by Reporting Segment |
||||||||||||||
(in millions) |
Three Months Ended |
|
Variance |
|||||||||||
Segment operating income |
March 31,
|
December 31,
|
March 31,
|
|
Sequential |
Year-over-
|
||||||||
Oilfield Services |
$ |
143 |
|
$ |
142 |
|
$ |
206 |
|
|
1 |
% |
(31) |
% |
Oilfield Equipment |
4 |
|
23 |
|
(8) |
|
|
(82) |
% |
F |
|
|||
Turbomachinery & Process Solutions |
207 |
|
332 |
|
134 |
|
|
(38) |
% |
55 |
% |
|||
Digital Solutions |
24 |
|
76 |
|
29 |
|
|
(68) |
% |
(17) |
% |
|||
Total segment operating income |
379 |
|
573 |
|
361 |
|
|
(34) |
% |
5 |
% |
|||
Corporate |
(109) |
|
(111) |
|
(122) |
|
|
2 |
% |
11 |
% |
|||
Goodwill impairment |
— |
|
— |
|
(14,773) |
|
|
— |
% |
F |
|
|||
Inventory impairment |
— |
|
(27) |
|
(160) |
|
|
F |
|
F |
|
|||
Restructuring, impairment & other |
(80) |
|
(229) |
|
(1,325) |
|
|
65 |
% |
94 |
% |
|||
Separation related |
(27) |
|
(24) |
|
(41) |
|
|
(12) |
% |
33 |
% |
|||
Operating income (loss) |
164 |
|
182 |
|
(16,059) |
|
|
(10) |
% |
F |
|
|||
Adjusted operating income* |
270 |
|
462 |
|
$ |
240 |
|
|
(42) |
% |
13 |
% |
||
Depreciation & amortization |
292 |
|
307 |
|
355 |
|
|
(5) |
% |
(18) |
% |
|||
Adjusted EBITDA* |
$ |
562 |
|
$ |
770 |
|
$ |
594 |
|
|
(27) |
% |
(5) |
% |
*Non-GAAP measure.
"F" is used in most instances when variance is above
On a GAAP basis, operating income for the first quarter of 2021 was
Adjusted operating income (a non-GAAP measure) for the first quarter of 2021 was
Depreciation and amortization for the first quarter of 2021 was
Adjusted EBITDA (a non-GAAP measure) for the first quarter of 2021 was
Corporate costs were
Other Financial Items
Income tax expense in the first quarter of 2021 was
Other non-operating loss in the first quarter of 2021 was
GAAP diluted loss per share was
Cash flow from operating activities was
Capital expenditures, net of proceeds from disposal of assets, were
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 |
March 31,
|
December 31,
|
March 31,
|
|
Sequential |
Year-over-
|
||||||||
Revenue |
$ |
2,200 |
|
$ |
2,282 |
|
$ |
3,139 |
|
|
(4) |
% |
(30) |
% |
Operating income |
$ |
143 |
|
$ |
142 |
|
$ |
206 |
|
|
1 |
% |
(31) |
% |
Operating income margin |
6.5 |
% |
6.2 |
% |
6.6 |
% |
|
0.3 |
pts |
(0.1) |
pts |
|||
Depreciation & amortization |
$ |
201 |
|
$ |
211 |
|
$ |
249 |
|
|
(5) |
% |
(20) |
% |
EBITDA* |
$ |
344 |
|
$ |
353 |
|
$ |
456 |
|
|
(3) |
% |
(25) |
% |
EBITDA margin* |
15.6 |
% |
15.5 |
% |
14.5 |
% |
|
0.2 |
pts |
1.1 |
pts |
|||
Oilfield Services (OFS) revenue of
North America revenue was
Segment operating income before tax for the quarter was
Oilfield Equipment |
||||||||||||||
(in millions) |
Three Months Ended |
|
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FAQ
What are Baker Hughes’ Q1 2021 financial results?
Baker Hughes reported Q1 2021 revenue of $4.78 billion and a net loss of $452 million.
How did Baker Hughes perform in terms of free cash flow in Q1 2021?
The company generated strong free cash flow of $498 million in Q1 2021.
What was the order intake for Baker Hughes in Q1 2021?
Baker Hughes reported total orders of $4.54 billion, a decrease of 12% sequentially.
What is the adjusted operating income for Baker Hughes in Q1 2021?
The adjusted operating income for Q1 2021 was $270 million, down 42% sequentially.
What initiatives did Baker Hughes undertake for energy transition in Q1 2021?
Baker Hughes advanced investments in hydrogen and carbon capture technologies during the quarter.
Baker Hughes Company
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