The paragraph introduces the Baker Hughes Company Fourth Quarter 2024 Earnings Conference Call, hosted by Chase Mulvehill, Vice President of Investor Relations. He welcomes participants and introduces company executives Lorenzo Simonelli, Chairman and CEO, and Nancy Buese, CFO. Chase mentions the availability of the earnings release and presentation on their website. He also points out that the call will include forward-looking statements with associated risks, and notes where participants can find reconciliations of financial measures. Lorenzo Simonelli then begins his remarks.

The paragraph reports the company's strong fourth-quarter and annual performance, achieving record highs in revenue, free cash flow, and adjusted measures like EPS and EBITDA. The adjusted earnings per share grew significantly year-over-year, and EBITDA margins increased to a record 17.8%. Orders in industrial and energy technology, particularly in gas infrastructure and FPSOs, remained strong, with Gas Tech Equipment's non-LNG orders more than doubling to $3.6 billion. New energy orders reached $1.3 billion, reflecting a 70% year-over-year growth. The company's free cash flow for the quarter was $894 million, leading to a record annual total of $2.3 billion and a conversion rate near their target range's high end. The results demonstrate the company's leadership in energy and industrial technology, with additional highlights including large-scale orders and technology developments in 2024.

In the third consecutive year of booking over $5 billion in orders, GTE secured significant contracts in the LNG sector, including orders from Venture Global and Bechtel for projects in Louisiana. The company also advanced its involvement in Saudi Arabia's gas infrastructure, providing equipment for the Jafurah gas field expansion. GTE maintained over $1 billion in long-term service agreements, signing notable contracts to support LNG facilities in Louisiana and Texas, and secured a maintenance contract for a major LNG facility in Asia Pacific. The fourth quarter also saw GTE achieve its strongest quarter for equipment upgrades since 2020, with significant projects including the upgrade of the Monsanto Compression Station for Snam.

During the quarter, IET's Climate Technology Solutions secured several awards focused on flare reduction. Notably, they will provide SOCAR with a system to reduce flaring at the Heydar Aliyev Oil Refinery and supply compressors for a major flare gas recovery project in the Middle East. The Oilfield Services & Equipment division saw strong momentum in Brazil, securing a significant contract from Petrobras for flexible pipes, bringing total orders to a record $1.4 billion for the year. Additionally, a multi-year contract was awarded by ENI in Europe for bypass reserves, utilizing Baker Hughes' advanced drilling technology. In the Middle East, the company received various awards for coil tubing services, drilling fluids, and artificial lift services in Iraq, along with a partnership in Abu Dhabi to enhance drilling efficiency using AI technology.

The paragraph discusses Baker Hughes' strategic focus on innovation and expanding its manufacturing presence in key growth regions, notably in Namibia, Oman, and their newly relocated headquarters in Abu Dhabi. The company is optimistic about its positioning for future success, particularly as global economic conditions remain uneven, with the U.S. economy showing resilience and challenges in Europe and China. Positive trends in power consumption are expected to fuel increased demand for natural gas and LNG, benefiting Baker Hughes' products and solutions. A forecasted rise in U.S. natural gas demand and a strong outlook for LNG project FIDs are expected to drive growth, with significant capacity expansions anticipated by 2030.

The paragraph discusses expectations for the energy sector in 2025, including continued strong demand for gas infrastructure projects, especially in the Middle East, Africa, North America, and Latin America. Although less large-scale projects are anticipated compared to the strong bookings in 2024, the focus is shifting towards energy efficiency and decarbonization technologies, with significant investment targets for new energy orders. Despite policy uncertainties in the U.S., a growth in project opportunities is expected both domestically and internationally, with promising new technologies in development. In the oil markets, potential price volatility is linked to production changes in North America and OPEC+ production cuts, alongside demand uncertainties from factors like U.S. tariffs on key economies such as China. Global upstream spending is also expected to decrease slightly in 2025.

In North America, spending is expected to decrease due to operators focusing on capital discipline, but the company expects to outperform the market due to its production-weighted portfolio. International spending is anticipated to be flat or decrease due to factors like an oversupplied oil market and uncertainties in key regions, though there are areas of activity in Brazil, the Middle East, and Sub-Saharan Africa. Offshore developments remain steady, with significant subsea tree demand expected in 2025. The company anticipates strong growth in its gas technology segment, driven by increased gas turbine demand, especially to support expanding data center capacity for AI workloads. Over three years, $19 billion in equipment orders aim to boost their serviceable base by 20% by 2030, with revenue growth expected to exceed this increase.

The paragraph discusses the positive impact of current market conditions, such as a tight supply chain and material cost inflation, on pricing and growth prospects for the LNG installed base, which is expected to increase significantly by 2030. This growth is crucial as LNG projects have the highest service attachment rates, providing opportunities for equipment upgrades that enhance performance and reduce emissions. The company is introducing new upgrade technologies, stemming from its R&D investments, expected to generate significant revenue. Additionally, advanced service solutions are being developed, leveraging monitoring capabilities and AI, to optimize equipment ownership costs and improve plant performance. This has led to a significant increase in digital orders and connected units.

The paragraph outlines Gas Tech Services' (GTS) strong financial performance and optimistic future outlook. GTS expects its digital orders to double by 2026 and maintain growth. Despite challenges from Saudi Arabia's MSC reduction and a U.S. LNG moratorium, the company exceeded its 2024 order and EBITDA expectations. They anticipate continued EBITDA growth in 2025 and aim to expand their technology portfolio and increase margins beyond 20%. Nancy Buese reports on strong 2024 results, with $28.2 billion in orders and $4.6 billion in adjusted EBITDA, reflecting over a 20% increase. IET's portfolio continues to contribute to a strong order book and nearly record RPO levels.

The company experienced significant financial improvements, with adjusted EBITDA margins rising to 16.5%, marking four consecutive years of growth. Adjusted diluted EPS increased by 47% to $2.35, bolstered by a reduced tax rate, contributing $0.17 to EPS. Free cash flow totaled $2.3 billion, achieving high conversion rates. In the fourth quarter, total orders were $7.5 billion, including $3.8 billion from IET, with adjusted EBITDA growing by 20% to $1.31 billion. GAAP operating income was $665 million, while adjusted operating income was $1.02 billion. GAAP diluted EPS reached $1.18, with adjusted EPS increasing by 37% to $0.70. This increase excludes a $0.48 benefit from unrealized equity gains and tax asset valuation releases. Restructuring charges were associated with optimizing the OFSE operating model and workforce. Free cash flow for the quarter was $894 million. Capital allocation details are discussed in Slide 10.

The paragraph discusses the company's strong financial performance, highlighting a robust balance sheet with $3.4 billion in cash and a $6.4 billion liquidity at the end of the fourth quarter. The company has returned $1.3 billion in dividends and share repurchases in 2024, equating to about 60% of the free cash flow, with a commitment to distribute 60% to 80% in the future. The company has maintained strong earnings growth, with a 37% compound annual growth rate in earnings per share over the past three years, and announced a 10% dividend increase, marking the fourth consecutive year of hikes. The company exceeded its Return on Invested Capital (ROIC) target for 2024 in the industrial and energy technology segment, achieving 25%, and continues to progress towards its 15% ROIC target in the OFSC segment, reaching 13%. Looking ahead, it aims to continue increasing dividends, share buybacks, and maintain financial flexibility. Additionally, strong order bookings of $3.8 billion in the industrial and energy technology segment were driven by LNG awards and gas infrastructure momentum.

The paragraph discusses IET's financial performance, highlighting $13 billion in orders and a record $30.1 billion in RPO levels by year-end, with a strong fourth quarter showing a 38% year-over-year increase in EBITDA. For the full year, IET reached a record $2.1 billion in EBITDA, primarily due to margin enhancements in Industrial Solutions and Gas Tech Equipment. In Oilfield Services & Equipment, the company recorded strong orders, with a full-year EBITDA increase of 11% to $2.9 billion and a margin expansion to 18.4%. The paragraph also outlines efforts to improve structural margins through streamlining activities, enhancing supply chain efficiency, and increasing sourcing from lower-cost countries, which typically reduces costs by over 20%.

The paragraph discusses how IET is benefiting from adopting lean strategies across its operations, resulting in improved efficiency and increased production volumes. Specifically, the GTE team increased its production by 40% through kaizen projects. In Industrial Tech, lead times for the Orbit 60 product were halved and capacity more than doubled due to improved assembly line layouts. The OFSE segment saw EBITDA margins more than double for SSPS, driven by refocusing, rightsizing, and enhanced execution. In 2024, efforts were made to centralize operations to reduce duplication, aiming for operational consistency and efficiency. The overall strategy is focused on improving commercial intensity and operational excellence to meet margin targets, with ongoing opportunities for further efficiency and productivity gains.

The article outlines the company's strategy and financial projections for 2025. It mentions a focus on improving margins, with a target of achieving 20% margins as milestones. For the full year 2025, the company expects revenues of $27.75 billion and EBITDA of $4.95 billion, with a free cash flow conversion target of 45% to 50% of EBITDA. The anticipated effective tax rate is between 25% and 30%, with plans to optimize it further. IET orders are expected to remain strong, projected between $12.5 billion and $14.5 billion, supporting future growth, especially in high-margin aftermarket services. Full-year IET revenue is expected to be $12.75 billion, with EBITDA of $2.3 billion. Although OFSE revenue may slightly decline due to a softening oilfield service market in North America, EBITDA is expected to increase to $3 billion. The company is positioning its OFSE portfolio to withstand changes in upstream spending.

The paragraph discusses the financial outlook for Baker Hughes in 2024, highlighting expected revenues of $6.5 billion and an EBITDA of $1.02 billion. Specifically, it anticipates strong first-quarter EBITDA growth for the Industrial and Energy Technology (IET) sector, driven by Gas Technology and Equipment (GTE), with potential impacts from supply chain issues and foreign exchange rates. For Oilfield Services and Equipment (OFSE), a seasonal decline is expected but still forecasts an EBITDA of $645 million. The text emphasizes Baker Hughes' successful operational performance, marked by consecutive quarters of record EBITDA, and its commitment to improving margins and capitalizing on market opportunities. The company's long-term financial strength is underscored by a projected significant increase in EBITDA margin by 2025.

In the article paragraph, Baker Hughes outlines its strategy for growth amidst evolving energy markets. The company sees a significant opportunity in the shift towards energy with fewer emissions, emphasizing the importance of natural gas in this transition. Baker Hughes highlights its strong market positioning in natural gas, LNG, gas infrastructure, and new energy sectors, offering multiple growth avenues. The company anticipates growth from distributed power solutions and new industrial markets, leveraging its extensive technology portfolio. Despite the uncertain pace of energy transition, Baker Hughes expects to sustain reliable earnings and free cash flow through cycles due to its diverse portfolio, market opportunities, steady IET service revenue, and efficient cost structure. The company expresses gratitude for its team's performance and reiterates its commitment to customers, shareholders, and employees. The paragraph concludes with a transition to a Q&A segment led by Chase Mulvehill from JPMorgan Securities.

The paragraph highlights the strong performance and future outlook of the company's IET (Industrial Energy Technology) orders. Over the past three years, the company has booked $40 billion in IET orders, with $13 billion in 2024 alone, despite challenges like the U.S. LNG permitting moratorium. Although LNG orders declined significantly in 2024, they are expected to rebound in 2025, alongside strong demand for gas infrastructure, pipelines, and processing. There's also growing interest in NovaLT turbines and increased orders for behind-the-meter solutions. In the CTS sector, emission management and clean power are driving order growth. The company projects $1.4 to $1.6 billion in new energy orders for 2025. Overall, the company is optimistic about continued growth, with an addressable market of $150 billion by 2030, predominantly outside of LNG.

In the given paragraph, the discussion centers around the potential growth and opportunities in the gas turbine market. Lorenzo Simonelli highlights the company's extensive portfolio of gas turbine technology and multi-fuel drivers, which are applicable in various contexts beyond oil and gas, such as industrial settings and power applications. He mentions opportunities particularly in the data center market, distributed and off-grid power solutions, and gas processing and pipeline compression. Following this, the conversation shifts to the IET business, with David Anderson from Barclays preparing to ask questions about it.

The paragraph discusses the outlook for the OFSE (Oilfield Services and Equipment) segment in 2025, indicating a slight decline compared to 2024. It mentions that spending in North America is expected to decrease in the mid-single-digit range, with operators focusing on capital discipline and optimizing new acreage. The company's production-weighted portfolio is expected to outperform the market. Internationally, a flat to down trend is anticipated, influenced by OPEC+ oil capacity, regime changes, and a focus on gas, with softness expected in regions like Mexico, Saudi Arabia, and the North Sea, partially offset by Brazil, the Middle East, and parts of Africa.

The paragraph primarily discusses the anticipated growth and key drivers for the Gas Tech Services (GTS) business over the next few years. Lorenzo Simonelli highlights that the installed base is expected to grow by at least 20% by 2030, with GTS revenue expected to outpace this growth. The major contributor to this growth is the improved mix, particularly the increase in LNG services, which are projected to grow by over 50% through 2030. This increase in LNG services is significant due to its high attachment rates, generating more service revenue over the equipment's lifespan. Other contributing factors include pricing, upgrades, and digital advancements.

The paragraph discusses the progress and strategies for margin improvement within the company, particularly focusing on the OFS (Oilfield Services) and IET (Industrial and Energy Technology) sectors. Nancy Buese highlights the success of self-help initiatives and business transformation efforts that contributed to significant margin expansion in 2024, with OFSE (Oilfield Services and Equipment) margins increasing by 1.5 percentage points, surpassing revenue growth. The management aims to sustain and enhance this momentum through operational excellence and streamlined operations, anticipating further improvements in 2025 and beyond amidst a maturing upstream spending cycle.

The paragraph discusses the company's efforts to align their structure with expected activity levels, emphasizing a focus on high-end technology rather than commoditized markets. Despite a softer upstream spending environment, the company is confident in achieving a 20% margin due to their resilient portfolio and operational improvements. They aim to enhance margins beyond 2025 by closing the gap with competitors and highlight solid margin expansion in the IET sector, with a 2 percentage point increase in 2024. The growth is driven by volume leverage, productivity gains, higher-priced backlog, and new digital offerings. Improvements in the aeroderivative supply chain further support margin expansion efforts.

The paragraph discusses the company's ongoing efforts to improve margins through reduced R&D costs, increased factory volumes, and better cost absorption, particularly in the industrial tech sector. They aim to achieve 20% margins by 2026 but consider this a milestone rather than an endpoint. Lorenzo Simonelli emphasizes the importance of self-help measures, execution, and simplification in improving processes, with significant progress expected in 2024. Neil Mehta from Goldman Sachs then asks about capital returns to shareholders, highlighting the recent dividend increase and seeking insights on the balance between dividends and buybacks. He also inquires about the company's approach to mergers and acquisitions (M&A), noting a quieter year in that regard for Baker Hughes.

The paragraph discusses the company's financial strategy, including its commitment to returning 60% to 80% of free cash flow to shareholders through dividends and share buybacks. Since 2017, over $10 billion has been returned via dividends and buybacks, and they plan to continue this trend in 2025 with increased dividends and share repurchases. The company emphasizes maintaining financial flexibility with a strong balance sheet and credit ratings. On M&A, the focus is on tuck-in acquisitions and small tech investments in the new energy sector that complement existing technology. The company is open to strategic opportunities that enhance its portfolio through 2030.

In the paragraph, Scott Gruber from Citigroup asks Nancy Buese about their free cash conversion target, specifically regarding any factors affecting the rate. Nancy responds by expressing satisfaction with their 49% free cash flow conversion rate, which falls within their 45%-50% target for 2024, and their confidence in maintaining this range in 2025. She highlights improvements in working capital efficiency, including collections and inventory management, as key drivers. Additionally, they have focused on tax management to lower cash tax and book rates, and they aim to achieve structurally higher margins, which will support these financial targets.

Lorenzo Simonelli discusses Baker Hughes' strategy for growth, emphasizing the significance of the Industrial & Energy Technology (IET) segment, which is expected to become a larger portion of the company's business mix approaching 2030. Despite moderating growth rates in Oilfield Services, both segments are essential and share capabilities and customers. Simonelli indicates confidence in continued growth, efficient working capital, and tax strategies, although no specific targets for the business mix are provided.

The paragraph describes the conclusion of an earnings call. The operator indicates that the call's final question has been addressed and hands over to Lorenzo Simonelli, the Chairman and CEO, for closing remarks. Simonelli expresses gratitude to the participants and looks forward to future discussions. The operator then officially ends the call, thanking everyone for their participation and wishing them a great day.

This summary was generated with AI and may contain some inaccuracies.