10-KPeriod: FY2017

Baker Hughes Co Annual Report, Year Ended Dec 31, 2017

Filed February 23, 2018For Securities:BKR

Summary

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 billion 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.

Financial Highlights

48 data points
Beta

Revenue

$17.26B

17.6% Gross Margin

Net Income

-$103.00M

-0.6% Net Margin

EPS (Diluted)

$-0.24

Total Assets

$56.50B

Cash & Equivalents

$7.03B

Free Cash Flow

-$799.00M

Financial Statements
Beta
Revenue$17.26B
Cost of Revenue$9.40B
Gross Profit$3.04B
R&D Expenses$501.00M
SG&A Expenses$2.54B
Operating Expenses$17.46B
Operating Income-$284.00M
Net Income-$103.00M
EPS (Basic)$-0.24
EPS (Diluted)$-0.24

Key Highlights

  • 1Merger with GE Oil & Gas completed on July 3, 2017, creating a fullstream oilfield technology provider.
  • 2Reported 2017 revenue of $17.3 billion, a significant increase from 2016 ($13.3 billion) due to the merger.
  • 3Posted a net loss of $242 million in 2017, impacted by merger-related costs and restructuring charges.
  • 4Operates through four segments: Oilfield Services (OFS), Oilfield Equipment (OFE), Turbomachinery & Process Solutions (TPS), and Digital Solutions (DS).
  • 5Backlog at year-end 2017 was $21 billion, a slight decrease from $21.7 billion in 2016.
  • 6Company plans to focus on integrating operations and leveraging combined technologies to drive customer productivity and cost reduction.
  • 7GE holds a 62.5% controlling interest in BHGE LLC, the partnership formed by the combination.

Frequently Asked Questions

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.

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.

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.

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.