10-QPeriod: Q2 FY2020

Baker Hughes Co Quarterly Report for Q2 Ended Jun 30, 2020

Filed July 24, 2020For Securities:BKR

Summary

Baker Hughes Company reported its second quarter 2020 results, marked by significant impacts from the challenging macroeconomic environment, including the COVID-19 pandemic and a sharp decline in oil and gas prices. Total revenue for the quarter was $4.74 billion, down from $6.00 billion in the prior year's second quarter, reflecting lower activity across most segments, particularly Oilfield Services (OFS) and Turbomachinery & Process Solutions (TPS). The company recognized a substantial goodwill impairment charge of $14.77 billion in the first quarter of 2020, which significantly impacted net income. For the second quarter of 2020, Baker Hughes reported a net loss attributable to the company of $201 million ($0.31 loss per share), compared to a net loss of $9 million ($0.02 loss per share) in the prior year. However, cash flow from operations remained positive, demonstrating the company's ability to generate cash even in a downturn. The company also completed the sale of its Rod Lift Systems (RLS) business for a pre-tax loss of $228 million.

Financial Statements
Beta

Key Highlights

  • 1Total revenue for Q2 2020 was $4.74 billion, a decrease of 21% year-over-year, driven by lower volumes across most segments, especially Oilfield Services (OFS) and Turbomachinery & Process Solutions (TPS).
  • 2The company reported a net loss attributable to Baker Hughes of $201 million ($0.31 loss per share) for Q2 2020, compared to a net loss of $9 million ($0.02 loss per share) in Q2 2019.
  • 3A significant goodwill impairment of $14.77 billion was recognized in Q1 2020 due to macroeconomic conditions, heavily impacting year-to-date net loss.
  • 4Cash flow from operating activities for the six months ended June 30, 2020, was $708 million, an increase from $409 million in the prior year period, indicating strong operational cash generation.
  • 5The company completed the sale of its Rod Lift Systems (RLS) business for a pre-tax loss of $228 million, as part of strategic portfolio adjustments.
  • 6Total segment operating income decreased by $245 million year-over-year, primarily due to declines in OFS and Digital Solutions (DS), though Turbomachinery & Process Solutions (TPS) saw an increase in operating income driven by cost productivity.
  • 7Baker Hughes maintained a solid liquidity position with $4.1 billion in cash and cash equivalents at June 30, 2020, supported by a $3 billion revolving credit facility.

Frequently Asked Questions

The primary driver for the decrease in revenue was the challenging macroeconomic environment, including the COVID-19 pandemic and a significant decline in oil and gas prices. This led to reduced customer spending and lower activity levels, particularly in the Oilfield Services (OFS) and Turbomachinery & Process Solutions (TPS) segments.

The company recognized a substantial goodwill impairment charge of $14.77 billion in the first quarter of 2020. This significantly impacted the net income and earnings per share for both the first and second quarters, contributing to a large net loss for the six-month period. While it's a non-cash charge, it reflects a significant decrease in the carrying value of certain reporting units.

Baker Hughes is focusing on maintaining strong liquidity. As of June 30, 2020, the company had $4.1 billion in cash and cash equivalents. They also have access to a $3 billion revolving credit facility and are managing their capital expenditures and cash preservation. The company maintained positive cash flow from operating activities, which provides further financial strength.

Baker Hughes completed the sale of its Rod Lift Systems (RLS) business, which resulted in a pre-tax loss of $228 million. Additionally, the company continued to implement restructuring plans approved in the first quarter, totaling $1.8 billion, to align operations with anticipated market conditions.