01—Abstract
Summary
Summary of the 10-K filed February 23, 2018. Cited figures are marked; the original filing is the authoritative source.
Baker Hughes, a GE company (BHGE), formerly Baker Hughes Incorporated, completed a significant business combination with GE's Oil & Gas business on July 3, 2017.
This merger created a comprehensive "fullstream" oilfield technology provider, aiming to offer integrated equipment and service capabilities across the entire oil and gas value chain. The company reported $17.3 billiona in 2017 revenue, a substantial increase from the prior year, largely due to the inclusion of Baker Hughes' operations from mid-year. Despite the revenue growth, the company posted a net loss of $242 million for the year, impacted by $373 million in merger and related costs, $412 million in restructuring and impairment charges, and a significant increase in debt.
The company operates across four segments: Oilfield Services (OFS), Oilfield Equipment (OFE), Turbomachinery & Process Solutions (TPS), and Digital Solutions (DS). The company's outlook for 2018 anticipates continued growth in North American onshore activity, moderate growth internationally, and a cautious view on offshore projects due to ongoing oil price volatility.
The company highlights its fullstream portfolio, complementary technology, and digital capabilities as key differentiators. However, investors should be aware of the significant integration risks, ongoing restructuring costs, and the company's dependence on GE's brand and capabilities, as well as potential market fluctuations in oil and gas prices.
02—Key points
Key Highlights
- Merger with GE Oil & Gas completed on July 3, 2017, creating a fullstream oilfield technology provider.
- Reported 2017 revenue of $17.3 billion, a significant increase from 2016 ($13.3 billion) due to the merger.
- Posted a net loss of $242 million in 2017, impacted by merger-related costs and restructuring charges.
- Operates through four segments: Oilfield Services (OFS), Oilfield Equipment (OFE), Turbomachinery & Process Solutions (TPS), and Digital Solutions (DS).
- Backlog at year-end 2017 was $21 billion, a slight decrease from $21.7 billion in 2016.
- Company plans to focus on integrating operations and leveraging combined technologies to drive customer productivity and cost reduction.
- GE holds a 62.5% controlling interest in BHGE LLC, the partnership formed by the combination.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2017, Baker Hughes Co lost $0.01.
- Revenue$17.26B100.0%
- Cost of revenue−$14.22B82.4%
- Gross profit$3.04B17.6%
- Operating costs−$3.32B19.2%
- Operating income−$284.0M1.6%
- Interest, other & tax$181.0M1.0%
- Net income−$103.0M0.6%
04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 23, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $17.26B$13.27B | +30.1% |
| Cost of Revenue | $9.40B$7.82B | +20.3% |
| Gross Profit | $3.04B$3.15B | −3.5% |
| R&D Expenses | $501.00M$352.00M | +42.3% |
| SG&A Expenses | $2.54B$1.93B | +31.6% |
| Operating Expenses | $17.46B$12.63B | +38.3% |
| Operating Income | -$284.00M$457.00M | −162.1% |
| Net Income | -$103.00M$0 | — |
| EPS (Basic) | $-0.24— | — |
| EPS (Diluted) | $-0.24— | — |
05—Questions
Frequently Asked Questions
What was the primary impact of the July 3, 2017 transaction on the company's financial results?
The transaction combined Baker Hughes with GE's Oil & Gas business, creating a new entity. This resulted in the inclusion of Baker Hughes' operations from July 3, 2017, onwards, significantly increasing revenue to $17.3 billion in 2017 compared to $13.3 billion in 2016. However, it also led to substantial merger and related costs ($373 million) and restructuring charges ($412 million), contributing to a net loss for the year.
How is the company structured and what are its main business segments?
Baker Hughes now operates as a fullstream oilfield technology provider, organized into four key segments: Oilfield Services (OFS), Oilfield Equipment (OFE), Turbomachinery & Process Solutions (TPS), and Digital Solutions (DS). These segments cover a wide range of products and services across the oil and gas lifecycle.
What is the company's financial performance trend based on this filing?
The company experienced significant revenue growth in 2017 due to the acquisition, but reported a net loss. The segment operating income shows strength in Turbomachinery & Process Solutions ($853 million) and Oilfield Equipment ($383 million), while Oilfield Services had a modest operating income ($71 million) after a prior year loss, and Digital Solutions also showed profitability ($333 million). The overall company results were weighed down by corporate expenses, restructuring charges, and merger costs.
What are the key risks and outlook for Baker Hughes?
Key risks include competition, potential integration challenges from the merger, volatility in oil and gas prices affecting customer spending, and cybersecurity threats. The company's outlook for 2018 is cautiously optimistic, expecting continued growth in North America onshore activity, moderate international growth, and a stable but cautious approach to offshore projects due to oil price volatility.
06—Continue