01—Abstract
Summary
Summary of the 10-K filed February 25, 2021. Cited figures are marked; the original filing is the authoritative source.
Baker Hughes Company (BKR) reported significant financial impacts in its 2020 10-K filing, largely driven by the COVID-19 pandemic and a sharp decline in oil prices.
The company experienced a substantial revenue decrease, primarily in its Oilfield Services (OFS) and Digital Solutions (DS) segments, reflecting reduced industry activity. A major event during the year was a goodwill impairment charge of $14.8 billiona, predominantly affecting the Oilfield Services segment, due to the severe market downturn. The company also incurred significant restructuring costs totaling $2.1 billion to right-size its operations in response to these challenging market conditions.
Despite these headwinds, Baker Hughes benefited from a $1.4 billionb unrealized gain from its investment in C3.ai, following its IPO. The company maintained a strong liquidity position with $4.1 billion in cash and cash equivalents at year-end and an undrawn revolving credit facility, allowing it to navigate the volatile environment while continuing strategic investments in new energy frontiers.
02—Key points
Key Highlights
- Revenue declined by 13% to $20.7 billion in 2020, primarily due to lower activity in the Oilfield Services (OFS) and Digital Solutions (DS) segments, impacted by the COVID-19 pandemic and oil price volatility.
- Baker Hughes recorded a substantial goodwill impairment charge of $14.8 billion in Q1 2020, reflecting the severe market downturn, with the majority impacting the Oilfield Services segment.
- The company incurred $2.1 billion in restructuring and other charges during 2020 to align its operations with anticipated activity levels and market conditions.
- A significant unrealized gain of $1.4 billion was recognized from the company's investment in C3.ai following its Initial Public Offering.
- The Turbomachinery & Process Solutions (TPS) segment showed resilience, with revenue increasing by 3% to $5.7 billion and operating income rising by 12%, driven by higher equipment and project revenues.
- Despite the challenging year, Baker Hughes ended 2020 with a robust liquidity position, holding $4.1 billion in cash and cash equivalents and maintaining an undrawn $3 billion revolving credit facility.
- The company reported $23.4 billion in remaining performance obligations at the end of 2020, indicating future revenue potential.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 25, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $20.70B$23.84B | −13.1% |
| R&D Expenses | $595.00M$687.00M | −13.4% |
| SG&A Expenses | $2.40B$2.83B | −15.1% |
| Operating Income | -$15.98B$1.07B | −1587.7% |
| Net Income | -$9.94B$128.00M | −7865.6% |
| EPS (Basic) | $-14.73$0.23 | −6504.3% |
| EPS (Diluted) | $-14.73$0.23 | −6504.3% |
05—Questions
Frequently Asked Questions
What was the primary driver of Baker Hughes' financial performance in 2020?
The primary drivers of Baker Hughes' financial performance in 2020 were the significant downturn in the oil and gas industry, exacerbated by the COVID-19 pandemic and a sharp decline in oil prices. This led to reduced customer spending, lower activity levels across most segments, and necessitated significant restructuring and impairment charges.
How did the company's segments perform in 2020?
Revenue decreased across most segments, with Oilfield Services (OFS) seeing the largest decline due to reduced drilling and production activity. Digital Solutions (DS) also experienced a notable revenue decrease. The Turbomachinery & Process Solutions (TPS) segment was a bright spot, showing revenue growth and increased operating income due to strong demand for its equipment and services. Oilfield Equipment (OFE) saw a modest revenue decline.
What is the significance of the goodwill impairment charge?
The $14.8 billion goodwill impairment charge, primarily in the Oilfield Services segment, is a non-cash accounting charge reflecting that the carrying value of the goodwill exceeded its fair value as determined by impairment testing. This was a direct consequence of the severe and rapid decline in market conditions and future cash flow expectations for the oilfield services sector in 2020.
What is the company's outlook for 2021 based on this filing?
Baker Hughes expressed optimism for a stabilization and modest recovery in 2021, expecting improvements in North America onshore activity and stabilization in international onshore markets. Offshore projects were anticipated to stabilize or grow modestly. The company remains positive about the long-term outlook for LNG and sees continued growth opportunities in new energy solutions focused on decarbonization.
06—Continue