Baker Hughes' Strategy in the Face of Rising Crude Oil Prices

Operational Adjustments in Response to Rising Oil Prices

Baker Hughes has increased its Oilfield Services & Equipment revenue by 6% due to heightened international activity, reflecting operational adjustments to rising oil prices. The company also reviews liquidity and capital resources to adapt to market changes, ensuring resilience against fluctuating oil prices and geopolitical uncertainties.

"We continuously review our liquidity and capital resources. If market conditions were to change, for instance due to the uncertainty created by geopolitical events, a global pandemic or a significant decline in oil and gas prices, and our revenue was reduced significantly or operating costs were to increase significantly, our cash flows and liquidity could be negatively impacted." --- (BKR, sec filing, 2024/Q1)

"Turning to the macro on Slide 5. Since bottoming in December of last year, oil prices have rallied significantly, a resilient global economy, steeper-than-expected seasonal decline in U.S. oil production to start the year and the roll forward of OPEC+ production cuts have helped to keep global oil markets more balanced." --- (BKR, earning call, 2024/Q1)

"Oilfield Services & Equipment OFSE revenue of $3,783 million increased $206 million, or 6%, in the first quarter of 2024 compared to the first quarter of 2023, as a result of increased international activity as evidenced by an increase in the international rig count." --- (BKR, sec filing, 2024/Q1)

"OFSE increased $206 million and IET increased $496 million. Total segment operating income increased $139 million, driven by both segments. Oilfield Services & Equipment" --- (BKR, sec filing, 2024/Q1)

"Longer term, we continue to be encouraged by increasing opportunities to support growing energy demand and decarbonization efforts giving us confidence in achieving our $6 billion to $7 billion new energy orders target in 2030." --- (BKR, earning call, 2024/Q1)

Investment in Technology and Innovation

Baker Hughes is significantly investing in technology and innovation, evidenced by substantial orders in gas, industrial, and climate technology. Their strategic approach includes transforming core operations, investing for growth, and exploring new energy frontiers. Recognition on the Fortune 500 list and the appointment of a new CTO further underscore their commitment to scaling technological capabilities.

"Within IET, Gas Technology orders were $1.9 billion and $2.4 billion, Industrial Technology orders were $0.8 billion and $0.9 billion, and Climate Technology Solutions ("CTS") orders were $0.2 billion and $0.3 billion, for the three months ended March 31, 2024 and 2023, respectively." --- (BKR, sec filing, 2024/Q1)

"To accelerate our transition to an energy technology company, we have long held the three-pronged approach of transforming the core, investing for growth and positioning for new energy frontiers." --- (BKR, earning call, 2024/Q1)

"We're proud to share that we've once again been named on the @Fortune 500 list- a testament our employees' efforts to fuel energy technology innovation, the vision of our leadership to transform our operations, and the actions we take every day to energize change across industry. https://t.co/1z5nHZSvOI" --- (BKR, Twitter post, 2024/06/04)

"We are an energy technology company with a broad and diversified portfolio of technologies and services that span the energy and industrial value chain." --- (BKR, sec filing, 2024/Q1)

"I'm excited to join the team and look forward to helping scale the technology capabilities further at a time when both industry tailwinds and company growth are accelerating. Binu brings over 30 years of experience in leading product development and strategy at software technology companies." --- (BKR, press release, 2024/06/06)

Market Positioning and Competitive Strategies

Baker Hughes is leveraging market momentum for CCUS, optimizing production solutions, and integrating digital offerings like Lucepa to strengthen its market position. Despite economic challenges, the company sees strong opportunities in FPSOs, indicating a robust competitive strategy amid rising crude oil prices.

"The markets increasing alignment towards the view is spawning stronger momentum, in particular, for CCUS." --- (BKR, earning call, 2024/Q1)

"And how do you think about the competitive dynamics in the market? Your team was quite excited by your production optimization solutions at your annual meeting?" --- (BKR, earning call, 2024/Q1)

"We've got a great market position and also great customer acceptance. And we are seeing great opportunities to also integrate our digital offerings of Lucepa with production optimization and helping the mature asset solutions." --- (BKR, conference, 2024/06/18)

"In a challenging economic environment, we may experience delays in the payment of our invoices due to customers' lower cash flow from operations or their more limited access to credit markets." --- (BKR, sec filing, 2024/Q1)

"And as we go forward, you'll have had also from others and SPM the other day, there is a very strong market backdrop with regards to FPSOs." --- (BKR, conference, 2024/06/18)

Financial Performance and Revenue Impact

Baker Hughes reported strong first-quarter 2024 earnings with $6.5 billion in orders, reflecting positive momentum. The company’s financial performance is influenced by revenue volume changes and various economic risks. Discussions on total revenue and cost of revenue provide further insights into their financial health amidst rising crude oil prices.

"The volume impact on profit is calculated by multiplying the prior period profit rate by the change in revenue volume between the current and prior period." --- (BKR, sec filing, 2024/Q1)

"Today we announced first quarter 2024 earnings results. We are very pleased with our performance, noting strong orders of $6.5B, as we continue to build on the momentum from last year and execute our strategy." --- (BKR, Twitter, 2024/04/23)

"These forward-looking statements, including forecasts, may be substantially different from actual results, which are affected by many risks, along with the following risk factors and the timing of any of these risk factors: Economic and political conditions - the impact of worldwide economic conditions and rising inflation; the effect that declines in credit availability may have on worldwide economic growth and demand for hydrocarbons; foreign currency exchange fluctuations and changes in the capital markets in locations where we operate; and the impact of government disruptions and sanctions." --- (BKR, press release, 2024/04/23)

"In addition, the discussions below for revenue and cost of revenue are on a total basis as the business drivers for product sales and services are similar." --- (BKR, sec filing, 2024/Q1)

"How do you think about the impact on the second half for IET? Are there reasons to believe the normal seasonality may be a bit more muted for both revenues and margins in the second half?" --- (BKR, earning call, 2024/Q1)

Supply Chain Management

Baker Hughes is navigating supply chain constraints, particularly in gas tech services, which impact revenue and margin expansion. Despite these challenges, the company is focusing on efficiency and cost optimization to mitigate the effects of supply chain tightness.

"And also Gas Tech services -- revenue increasing as we went through the first quarter, we continue to see that for the rest of the year, even though we're still constrained by some of the supply chain headwinds." --- (BKR, earning call, 2024/Q1)

"This was driven by the conversion of higher-margin equipment backlog, continued margin expansion in our industrial tech businesses and further efficiency and cost optimization efforts by the team, partially offset by continued tightness in the gas tech services supply chain." --- (BKR, earning call, 2024/Q1)

Sustainability and Environmental Initiatives

Baker Hughes is committed to sustainability, as evidenced by their vision for a more sustainable environment and their 2023 Corporate Sustainability Report, which highlights improved ESG performance and sustainable operations.

"Both orgs share our vision of creating a more sustainable environment. \ud83d\udd17 https://t.co/1NkmNPipgy https://t.co/sB4H3buoF6" --- (BKR, Twitter, 2024/06/28)

"We're pleased to share our 2023 Corporate Sustainability Report, which demonstrates how our teams continue to drive more sustainable operations through improved performance in ESG metrics \ud83d\udc49 https://t.co/DxRRh9oKT2 https://t.co/40UPLnWzRI" --- (BKR, Twitter, 2024/05/15)