01—Abstract
Summary
Summary of the 10-K filed February 19, 2019. Cited figures are marked; the original filing is the authoritative source.
Baker Hughes, a GE company (BHGE) filed its 2018 10-K on February 18, 2019, detailing its operations following the combination with GE's Oil & Gas business in July 2017.
The company operates as a fullstream oilfield technology provider across four segments: Oilfield Services (OFS), Oilfield Equipment (OFE), Turbomachinery & Process Solutions (TPS), and Digital Solutions (DS). In 2018, BHGE generated $22.9 billiona in revenue, with OFS being the largest segment. A significant development in 2018 was GE's initiation of an orderly separation from BHGE, which led to a reduction in GE's economic interest in BHGE LLC from approximately 62.5% to 50.4% through secondary offerings and unit repurchases.
The company navigated a dynamic oil and gas market, with commodity prices experiencing significant volatility, particularly in the fourth quarter of 2018. Despite this, BHGE emphasized its comprehensive portfolio, technological innovation, and strategic focus on delivering cost efficiencies and productivity improvements for its customers.
Key financial performance indicators showed growth in revenue compared to the prior year, driven largely by the full year inclusion of Baker Hughes operations, though segment profitability varied. The company also highlighted its commitment to environmental sustainability, setting targets for CO2 emission reductions.
02—Key points
Key Highlights
- Revenue for 2018 reached $22.9 billion, a substantial increase from $17.2 billion in 2017, primarily due to the full year inclusion of Baker Hughes operations following the 2017 combination with GE Oil & Gas.
- GE initiated a plan to separate from Baker Hughes, reducing its economic interest in BHGE LLC from ~62.5% to ~50.4% by year-end 2018 through equity transactions.
- The company operates across four key segments: Oilfield Services (OFS), Oilfield Equipment (OFE), Turbomachinery & Process Solutions (TPS), and Digital Solutions (DS), with OFS being the largest revenue generator.
- Despite commodity price volatility in late 2018, the company maintained a positive long-term outlook, focusing on technology, integrated solutions, and cost reduction to drive customer value.
- Total segment operating income increased significantly to $1.8 billion in 2018 from $1.1 billion in 2017, driven by strong performance in OFS and DS.
- Baker Hughes reported $21.0 billion in Remaining Performance Obligations (RPO) as of December 31, 2018, indicating significant future revenue potential.
- The company invested $700 million in Research & Development in 2018 to drive innovation and maintain a competitive edge.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, Baker Hughes Co kept $0.01.
- Revenue$22.88B100.0%
- Cost of revenue−$18.89B82.6%
- Gross profit$3.99B17.4%
- Operating costs−$3.29B14.4%
- Operating income$701.0M3.1%
- Interest, other & tax−$506.0M2.2%
- Net income$195.0M0.9%
Where FY2018 revenue went
$22.88B- Cost of revenue: $18.89B, 83% of revenue
- Net income: $195.0M, 0.9% of revenue
- R&D: $700.0M, 3.1% of revenue
- SG&A: $2.70B, 12% of revenue
- Interest, other & tax: $506.0M, 2.2% of revenue
Kept 0.9% as net incomeNet income $195.0M · 0.9%Interest, other & tax $506.0M · 2.2%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 19, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $22.88B$17.26B | +32.6% |
| Gross Profit | $3.99B$3.04B | +31.3% |
| R&D Expenses | $700.00M$501.00M | +39.7% |
| SG&A Expenses | $2.70B$2.54B | +6.5% |
| Operating Expenses | $22.18B$17.46B | +27.0% |
| Operating Income | $701.00M-$284.00M | +346.8% |
| Net Income | $195.00M-$103.00M | +289.3% |
| EPS (Basic) | $0.46$-0.24 | +291.7% |
| EPS (Diluted) | $0.45$-0.24 | +287.5% |
05—Questions
Frequently Asked Questions
What is the company's financial performance in 2018 compared to 2017?
In 2018, Baker Hughes generated $22.9 billion in revenue, a significant increase from $17.2 billion in 2017. This growth was primarily driven by the full year inclusion of Baker Hughes operations following the combination with GE Oil & Gas in July 2017. Total segment operating income also saw a substantial increase from $1.1 billion in 2017 to $1.8 billion in 2018.
What is the significance of GE's ongoing separation from Baker Hughes?
GE announced its intention to separate from Baker Hughes in 2018. By the end of the year, GE's economic interest in BHGE LLC had reduced from approximately 62.5% to 50.4% through secondary offerings and unit repurchases. This separation is a strategic move to solidify commercial and technological collaborations while positioning Baker Hughes for greater independence.
How does Baker Hughes plan to navigate the volatile oil and gas market?
Baker Hughes is focused on its 'fullstream' offering, leveraging its broad portfolio of products and services, technological innovation, and digital solutions. The company aims to deliver value to customers by reducing costs, improving efficiency, and offering integrated solutions. Despite market volatility, the company remains optimistic about the long-term energy demand and its strategic positioning to meet future industry needs.
What were the key segment performances in 2018?
The Oilfield Services (OFS) segment was the largest contributor to revenue, significantly boosted by the full year of operations. The Digital Solutions (DS) segment also showed revenue growth. The Turbomachinery & Process Solutions (TPS) segment experienced a slight revenue decline, while the Oilfield Equipment (OFE) segment saw a marginal decrease in revenue. Profitability varied across segments, with OFS and DS showing strong growth in operating income.
06—Continue