10-QPeriod: Q2 FY2018

Baker Hughes Co Quarterly Report for Q2 Ended Jun 30, 2018

Filed July 30, 2018For Securities:BKR

Summary

Baker Hughes, a GE company (BHGE) reported a mixed financial performance for the second quarter of 2018. While total revenue significantly increased to $5.55 billion, up from $3.02 billion in the prior year quarter, this was largely driven by the acquisition of Baker Hughes completed in July 2017. The company reported a net loss of $38 million for the quarter, compared to a loss of $20 million in the prior year quarter. This loss is attributable to increased restructuring and merger-related costs, as well as an equity in loss of affiliate. Despite the net loss, operating income showed improvement, turning positive at $78 million compared to a loss of $66 million in Q2 2017, indicating underlying operational improvements. Key factors impacting the results include substantial revenue growth in the Oilfield Services segment, bolstered by the acquisition, and continued strength in Digital Solutions. However, longer-cycle businesses like Turbomachinery & Process Solutions and Oilfield Equipment saw revenue declines. The company is navigating a complex market environment with volatile oil and gas prices but maintains optimism for long-term industry growth, focusing on innovative solutions and operational efficiency. Investors should monitor the impact of ongoing restructuring efforts and the company's ability to integrate the acquired Baker Hughes operations effectively.

Financial Highlights

46 data points
Beta

Revenue

$5.55B

16.9% Gross Margin

Net Income

-$19.00M

-0.3% Net Margin

EPS (Diluted)

$-0.05

Total Assets

$54.09B

Cash & Equivalents

$4.88B

Free Cash Flow

$139.00M

Financial Statements
Beta
Revenue$5.55B
Cost of Revenue$2.75B
Gross Profit$936.00M
SG&A Expenses$662.00M
Operating Expenses$5.47B
Operating Income$78.00M
Net Income-$19.00M
EPS (Basic)$-0.05
EPS (Diluted)$-0.05

Key Highlights

  • 1Total revenue surged to $5.55 billion in Q2 2018, a significant increase from $3.02 billion in Q2 2017, largely due to the integration of the acquired Baker Hughes business.
  • 2The company reported a net loss of $38 million for Q2 2018, an increase from the $20 million loss in the prior year quarter.
  • 3Operating income improved to $78 million in Q2 2018, a significant turnaround from an operating loss of $66 million in Q2 2017.
  • 4Oilfield Services segment revenue saw substantial growth, driven by the acquisition, while Digital Solutions also showed positive performance.
  • 5Longer-cycle businesses, Turbomachinery & Process Solutions and Oilfield Equipment, experienced revenue declines in the quarter.
  • 6The company incurred $146 million in restructuring and impairment charges and $50 million in merger and related costs during the quarter.
  • 7Remaining Performance Obligations (RPO) stood at $20.9 billion as of June 30, 2018, indicating significant future revenue potential.

Frequently Asked Questions

The primary driver of the significant revenue increase to $5.55 billion in the second quarter of 2018 was the acquisition and subsequent integration of Baker Hughes, which was completed in July 2017. This acquisition substantially expanded the company's operational scale and revenue base.

The company reported a net loss of $38 million primarily due to significant restructuring and impairment charges ($146 million) and merger and related costs ($50 million) incurred during the quarter. Additionally, an equity in loss of affiliate ($34 million) also contributed to the net loss, offsetting some of the gains from improved operational performance.

Baker Hughes has a $3 billion committed unsecured revolving credit facility and a commercial paper program, providing significant liquidity. As of June 30, 2018, the company had $4.9 billion in cash, cash equivalents, and restricted cash. Debt repayment and share repurchase programs were key financing activities during the first half of 2018, with ongoing focus on maintaining financial flexibility.

The company expects continued growth in North America onshore activity and moderate growth in international onshore activity. Offshore projects are expected to see increased awards, though still below historical peaks. The LNG market is viewed as oversupplied in the short term, but with positive long-term economics. Refining, petrochemical, and industrial projects are showing healthy demand. Digital Solutions is expected to grow at or above global GDP.