![CEO: Baker Hughes Lands $3.5B in New Contracts in ‘Age of Gas’](/sites/default/files/styles/hart_news_article_image_640/public/image/2024/07/ceo-baker-hughes-lands-35b-new-contracts-age-gas.jpg?itok=5dPM5cro)
Baker Hughes’ North American revenue grew 3% from the first quarter, but was down 2% year-over-year. (Source: Shutterstock)
Baker Hughes landed $3.5 billion worth of contracts during the second quarter, but the firm revised its global upstream spending outlook “slightly down” due to North American softness, President and CEO Lorenzo Simonelli said.
Baker Hughes Industrial & Energy Technology (IET) division contracts included a large Sonatrach award for gas-boosting in Algeria's Hassi R'Mel gas field. Total orders of $3.5 billion jumped 19% compared to 1the first quarter, according to Evercore ISI analysis.
“This marks the highest quarterly non-LNG equipment bookings in the company's history and again underscores the breadth and versatility of our IET portfolio,” Simonelli said during the company’s July 26 earnings call.
Simonelli said natural gas is being recognized for its advantages as a plentiful, lower emission fuel.
“We've often said it's the age of gas, and this is the time for natural gas,” he said. “We're seeing that also from the developments of gas infrastructure around the world as energy demand continues to be there and also people are looking for lower carbon intensity, and gas is the solution.”
The company also secured two major offshore topside contracts to provide power generation systems for innovative all-electric FPSO units, which will be installed offshore in Latin America, Simonelli said.
North America was a different story. Expectations of a wobbly North American spending have emerged as a broad theme among oilfield services (OFS) companies during second-quarter earnings.
“The company revised ’24 NAM outlook lower and now expects it to be down mid-single digits vs low to mid-single digit decline previously and stated that oil activity recovery in 2H24 now unlikely to materialize,” Jefferies analyst Lloyd Byrne wrote in a July 26 report. “Internationally, the company reiterated high single digits y/y growth for ’24.”
Baker Hughes’ North American revenue grew 3% from the first quarter, but was down 2% year-over-year (yoy). International revenue was up 7% from the first quarter and 5% yoy, Byrne said.
In other business segments, Baker Hughes also saw growth.
Baker Hughes digital products also gained around in the quarter, with the company securing a multimillion-dollar global frame agreement with BP “covering all of their upstream and downstream assets,” he said.
The enterprise subscription enables BP to deliver reliable and efficient condition monitoring supporting its digital optimization strategy, he said.
The oilfield services firm also gained traction in its gas tech services business, booking multi-year service awards totaling $500 million.
“This included a 25-year service agreement to support a customer's offshore operations in Latin America,” Simonelli said. “Our services backlog uniquely differentiates Baker Hughes’ adding recurring long-term and profitable revenue streams.”
Gas tech is a full lifecycle business and not just an equipment sale, offering Baker Hughes the chance to “stay close to the customer for 20 [years] to 30 years,” Simonelli said.
The company recorded new energy orders of $445 million during the second quarter —a quarterly record— bringing 2024 orders to $684 million — already approaching the $750 million Baker Hughes booked in 2023.
The multiple contract wins showcased the company’s technology differentiation and the versatility of the Baker Hughes portfolio, Simonelli said.
Baker Hughes continues to improve and optimize its performance by capitalizing on opportunities in the its oilfield services and equipment segment as well as LNG, new energies and emerging areas in IET, James West, senior managing director for Evercore ISI wrote in a July 26 analysis.
West said the company is leveraging its the new organizational structure, announced in 2022, to maximize returns, generate strong free cash flow and return capital to shareholders. Evercore ISI continues to rate BHI shares as “outperform.”
The OFSE and IET segments delivered a 25% yoy increase in total company adjusted EBITDA and 46% growth in adjusted earnings per share, Simonelli said.
Total company adjusted EBITDA margins increased 15.8% yoy.
Baker Hughes remains confident that strong underlying natural gas demand will lead to robust and sustainable growth in LNG through the end of the decade.
Offtake contracting for LNG is 42% higher than in the same period last year.
“With recent contracting of Middle East capacity from Asian buyers and portfolio players, we expect a record-breaking year for contracting offtake volumes, Simonelli said.
Baker Hughes is well positioned to capitalize on LNG momentum with its gas technology equipment portfolio.
Simonelli said the company’s versatile gas tech equipment sets Baker Hughes apart from its peers.
“This enables us to sell our LNG equipment into numerous end markets outside of LNG where we often compete and win against a diverse group of industrial companies,” he said.
However, for the first-half 2024 Baker Hughes booked $6.4 billion of orders with 85% associated with non-LNG equipment and services.
“Looking over the next few years, we see continued strength in gas infrastructure opportunities across the Middle East, U.S., Latin America and Sub-Saharan Africa,” Simonelli said. “This will drive momentum in gas infrastructure equipment orders well beyond this year and provides opportunities for gas tech services, condition monitoring and pipeline inspection."