10-QPeriod: Q2 FY2022

Baker Hughes Co Quarterly Report for Q2 Ended Jun 30, 2022

Filed July 21, 2022For Securities:BKR

Summary

Baker Hughes Company reported mixed financial results for the second quarter of 2022. While total revenue saw a slight decline compared to the prior year, driven by lower volumes in the Turbomachinery & Process Solutions (TPS) and Oilfield Equipment (OFE) segments, the Oilfield Services (OFS) segment demonstrated robust growth. This growth was largely attributed to increased activity in North America and international markets, reflecting a positive trend in the global rig count. The company incurred a significant net loss for the quarter, heavily influenced by substantial restructuring, impairment, and other charges, particularly related to the suspension of operations in Russia and the classification of its OFS Russia business as held for sale. These charges, along with other non-operating losses such as those from equity investments, led to a substantial loss before income taxes. Despite the quarterly loss, Baker Hughes maintains a positive outlook for certain energy markets, especially natural gas and LNG, anticipating continued investment. The company highlights its strong order intake and substantial remaining performance obligations, which provide revenue visibility. However, the broader economic environment, characterized by inflation and rising interest rates, introduces uncertainty. Baker Hughes is focusing on executing its long-term strategy, including opportunistic investments and returning cash to shareholders, while navigating the volatile macro backdrop and ongoing geopolitical events that impact its operations, particularly in Russia.

Financial Highlights

43 data points
Beta

Revenue

$5.05B

Net Income

-$839.00M

-16.6% Net Margin

EPS (Diluted)

$-0.84

Total Assets

$33.75B

Cash & Equivalents

$2.93B

Free Cash Flow

$321.00M

Financial Statements
Beta
Revenue$5.05B
SG&A Expenses$624.00M
Operating Expenses$5.07B
Operating Income-$25.00M
Net Income-$839.00M
EPS (Diluted)$-0.84

Key Highlights

  • 1Total revenue for Q2 2022 was $5.05 billion, a slight decrease from $5.14 billion in Q2 2021, primarily due to lower volumes in TPS and OFE segments.
  • 2Net loss attributable to Baker Hughes Company was $839 million for Q2 2022, compared to a net loss of $68 million in Q2 2021, heavily impacted by significant restructuring, impairment, and other charges.
  • 3The Oilfield Services (OFS) segment showed strong performance with revenue increasing by 14% to $2.69 billion, driven by increased activity in North America and internationally.
  • 4Restructuring, impairment, and other charges amounted to $362 million in Q2 2022, significantly higher than $125 million in Q2 2021, largely due to the suspension of operations in Russia.
  • 5The company classified its Oilfield Services Russia business as held for sale, resulting in a loss of $426 million recognized in 'Other non-operating loss, net'.
  • 6Orders recognized for the first six months of 2022 increased by 32% to $12.7 billion, signaling strong future revenue potential.
  • 7Remaining Performance Obligations (RPO) stood at $24.3 billion as of June 30, 2022, providing good visibility into future revenue streams.

Frequently Asked Questions

The significant net loss in the second quarter of 2022 was primarily driven by substantial restructuring, impairment, and other charges totaling $362 million. These charges were largely a result of suspending operations in Russia and classifying the OFS Russia business as held for sale, which resulted in a $426 million loss. Additionally, losses on equity securities contributed to the overall financial results.

The Oilfield Services (OFS) segment demonstrated strong performance, with revenue increasing by 14% to $2.69 billion in Q2 2022 compared to Q2 2021. This growth was fueled by increased activity in both North America and international markets, supported by a rising global rig count. In contrast, the Turbomachinery & Process Solutions (TPS) and Oilfield Equipment (OFE) segments experienced revenue declines.

Baker Hughes remains optimistic about the natural gas and LNG markets, expecting continued investment due to the re-drawing of the global energy map. The company anticipates strong growth in North America onshore activity and continued improvement in international onshore activity, assuming commodity prices remain stable. Offshore activity is also expected to recover. However, the company acknowledges uncertainty due to inflation and rising interest rates, and plans to maintain flexibility in its operations.

Due to the ongoing conflict in Ukraine and related sanctions, Baker Hughes suspended new investments in Russia in March 2022 and subsequently committed to selling its Oilfield Services Russia business in the second quarter of 2022. The company has suspended substantially all operational activities related to Russia and has an immaterial amount of net assets remaining in the country. The sale of the OFS Russia business is expected to be completed by the end of 2022, subject to regulatory approval.