The paragraph is an introduction to the Baker Hughes Company First Quarter 2025 Earnings Call. It starts with the operator welcoming participants and introducing Chase Mulvehill, the Vice President of Investor Relations. Chase outlines the format of the call, mentioning that Lorenzo Simonelli, Chairman and CEO, and Ahmed Moghal, CFO, will be speaking. Chase also notes that forward-looking statements will be provided, with associated risks detailed in SEC filings. Lorenzo then welcomes Ahmed as the new CFO and outlines the focus of the call, which will include a discussion on the macro environment and the company's strong first quarter results.

The paragraph outlines key topics to be covered in a call, including awards, technology developments, and the company's outlook. It highlights macroeconomic challenges, such as geopolitical tensions, trade policy uncertainties, China's slower growth, and inflationary pressures impacting the global economy. For Baker Hughes, these factors, combined with tariff uncertainties, contribute to downward pressure on oil prices. However, their international market presence and diversified supply chain help mitigate financial risks. The company anticipates a decline in global upstream spending by 2025, with varying decreases across international and North American markets.

The paragraph discusses expectations for oil and gas markets, noting that stability in oil prices and tariffs is assumed but risks remain from potential oversupply and international uncertainties. While international upstream spending is constrained, resilience is seen in markets like Brazil, the Middle East, and Asia Pacific. In North America, spending delays and oil price volatility pose risks, but a production-weighted portfolio may outperform the broader market. A positive outlook is given for natural gas, with increasing demand driven by gas-fired power consumption and major LNG projects progressing. Demand for natural gas has grown significantly, with strong LNG contracting trends reflecting consumer confidence. The paragraph also mentions the U.S. repealing the LNG permitting moratorium and aims to boost LNG capacity.

The paragraph discusses the growth and future potential of U.S. LNG projects, with $1.7 billion in orders over the past two quarters and plans for capacity expansion beyond 2030. It highlights the challenges posed by current trade negotiations and tariffs, leading to uncertainty in the business environment. The company offers guidance for the second quarter and a framework for 2025, acknowledging varying dynamics across its segments. While the OFSE segment faces potential challenges due to reduced spending and cost inflation, the IET segment has strong visibility and performance, supported by a healthy backlog and recurring revenues. The company remains confident in its strategy and focuses on improving productivity and efficiency.

The company reported strong financial performance, meeting or exceeding EBITDA guidance for the ninth consecutive quarter and setting new first-quarter records in revenue, EPS, and EBITDA metrics. Industrial & Energy Technology (IET) led growth, with a significant increase in EBITDA and a robust booking of $3.2 billion in orders. Excluding LNG equipment, orders were $2.7 billion. Free cash flow generation was $454 million, with $417 million returned to shareholders. The adjusted EBITDA margin improved by 140 basis points to 16.1%. The company is experiencing strong momentum across various markets, underscored by record participation at an annual meeting in Florence, Italy, with significant representation from diverse industrial and energy sectors. This event led to multiple awards in the data center market, where the company booked 35 Nova LTs, with 22 serving data centers, equating to over 350 megawatts of power.

The paragraph outlines a series of agreements and orders secured by Baker Hughes in the energy sector. They partnered with Frontier Infrastructure to develop CCS and power solutions for data centers, including power generation using Nova LT turbines. Additionally, they received an order from Turbine-X Energy for microgrid solutions and secured a contract for pipeline compression stations supplying gas to a Gulf Coast LNG facility, involving gas turbines and centrifugal compressors. In the U.K., Baker Hughes is supplying equipment for a gas boosting station as part of a broader infrastructure investment. The company also received an order for a liquefaction train in North America and signed strategic agreements with NextDecade and Argent LNG, focusing on expanding LNG capacity at the Rio Grande LNG facility with additional equipment and services.

Argent LNG has chosen Baker Hughes to supply liquefaction and power solutions for its proposed LNG export facility in Louisiana, employing modularized LNG technology. The project contributes to Baker Hughes' LNG supply agreements totaling over 120 MTPA, promising future LNG equipment orders. Gas Tech Services saw a record 167% increase in upgrade orders, driven by efficiency and emission goals, including a significant upgrade for a major Middle Eastern gas processing plant and collaboration with SONATRACH in Algeria. In Oilfield Services, Baker Hughes maintained momentum despite market uncertainty, receiving major orders from Petrobras in Brazil for deepwater fields and an award from SOCAR in Azerbaijan for expanding Leucipa deployment. Additionally, a multi-year agreement was signed with Equinor for plugging services in Norway.

Baker Hughes' Mature Assets Solutions team will lead a plug and abandonment campaign at the Oseberg East field in the North Sea. The company is capitalizing on synergies between its OFSE and IET divisions, focusing on gas infrastructure, CCUS, geothermal projects, and data centers to enhance energy efficiency and decarbonization efforts. Recent achievements include securing a contract for coiled tubing drilling services in Dubai and a multi-year award from ExxonMobil Guyana for providing specialty chemicals. Additionally, Baker Hughes booked $238 million in new energy orders this quarter, including supplying equipment for a CCS project in Europe and exploring geothermal power development with the U.S. Air Force and Department of Defense. A collaboration agreement with Hanwha focuses on developing a new small-scale turbine for ammonia applications.

The paragraph discusses Baker Hughes' positive commercial and technological start to the year, highlighting their strong order pipeline beyond traditional oil and gas markets, which enhances growth and earnings stability. The company is optimistic about sustainable growth and shareholder value. Ahmed Moghal provides an overview of their quarterly performance, noting $6.5 billion in total orders and a 10% year-over-year increase in adjusted EBITDA. Earnings per share rose by 19% compared to the previous year, and they generated $454 million in free cash flow, with a full-year target of 45% to 50% free cash flow conversion. Their strong balance sheet shows $3.3 billion in cash, a net debt-to-EBITDA ratio of 0.6x, and $6.3 billion in liquidity.

The paragraph discusses the company's financial performance and outlook. The next debt maturity is in December 2026, and Standard & Poor's upgraded their long-term credit rating to A. They returned $417 million to shareholders in the first quarter via dividends and share repurchases, maintaining a commitment to return 60% to 80% of free cash flow to shareholders. The Industrial Energy Technology (IET) segment saw solid orders of $3.2 billion, with notable contributions from LNG equipment, data centers, and record gas tech service upgrades. IET revenue increased by 11% year-over-year, led by significant growth in gas tech equipment and Climate Tech Solutions. EBITDA grew by 30% due to margin expansion, particularly in gas tech equipment. The OFSE segment experienced a 10% sequential revenue decline to $3.5 billion, affected by seasonal weakness and economic uncertainty, with a notable slowdown in Mexico. Overall, the company demonstrated strong financial outcomes and strategic improvements in some areas despite challenges in others.

The paragraph discusses the performance and outlook for Baker Hughes, focusing on their international and North American revenue, which saw declines due to seasonal factors and weaknesses in specific areas. Despite an 8% revenue decline, their OFSE segment improved its EBITDA margin rate by 80 basis points year-over-year, reflecting operational changes. Looking ahead, they are strategizing to manage potential impacts from tariffs, relying on strong international operations and a robust U.S. supply chain. However, they anticipate cost challenges due to imports from certain countries, and they are increasing domestic sourcing to mitigate these effects. The company's scenario planning and mitigation strategies aim to navigate current market volatility effectively.

The paragraph discusses the impact of trade policies and tariffs on the company's Industrial Tech (IET) segment, highlighting three main areas of tariff exposure. These include potential effects on U.S. exports to China, equipment supply from Italy to U.S. projects, and steel and aluminum tariffs. To mitigate these impacts, the company is exploring domestic procurement and optimizing its global manufacturing footprint, expecting these efforts to largely offset the tariff-related effects. They estimate a net EBITDA impact of $100 million to $200 million, assuming current tariff rates persist through 2025. The company is also monitoring secondary effects like cautious customer behavior and broader economic risks, which could influence more economically sensitive areas. The 2025 outlook is shaped by these considerations, and further updates will be provided as trade and market conditions evolve. The company believes its diversified portfolio and substantial backlog will help maintain earnings and cash flow stability.

The paragraph outlines the financial outlook for IET and OFSE. IET is expected to maintain structural margin improvement despite high input costs, with EBITDA guidance from January still achievable. In contrast, OFSE faces limited visibility beyond Q2, with potential global upstream spending declines in 2025 if current oil prices and tariffs persist. Despite this, OFSE margins are anticipated to improve due to cost efficiencies and transformation initiatives. For Q2, total revenue is projected at $6.3 billion to $7 billion and EBITDA at $1.04 billion to $1.2 billion, assuming tariff impacts can be mitigated. IET forecasts EBITDA of $520 million to $580 million driven by Gas Tech Services growth, while OFSE expects $600 million to $700 million with revenue improvements despite market uncertainties.

The paragraph discusses factors affecting Baker Hughes' range of operational performance, including their SSPS backlog execution, activity levels in North America and international markets, and activity pace in Mexico. Despite macro and trade policy uncertainties, the company is pleased with first-quarter performance, citing resilient OFSE margins and improving IET margins. They emphasize their commitment to streamlining operations and driving efficiencies, which will help navigate macro uncertainties. Lorenzo Simonelli acknowledges the strong results and stresses Baker Hughes' commitment to optimizing margins, enhancing returns, and addressing global energy demands with a focus on natural gas. The piece concludes with a call for questions from analysts, with the first being from Arun Jayaram at JPMorgan inquiring about guidance amidst uncertainties related to tariffs and OPEC+ policy.

In the paragraph, Lorenzo Simonelli discusses the company's approach to navigating uncertainties in the global economy, particularly concerning trade policies and tariffs. He acknowledges the challenges posed by geopolitical tensions, slower growth in China, and inflationary pressures, but notes that there hasn't been a material impact on volumes or activity levels so far. However, due to uncertainties in trade policy and tariffs, there is less visibility for the second half of the year, especially in economically sensitive business areas. As a response, the company has introduced a framework to guide expectations for 2025, emphasizing the need to adapt to various potential outcomes.

The paragraph outlines the company's strategic response to current trade policies and their impact on business. Ahmed Moghal states that the framework considers the implications of tariffs, predicting a net EBITDA impact between $100 million and $200 million after implementing mitigation actions. Over half of this impact is attributed to the Industrial Equipment Technology (IET) segment. The estimate assumes current tariff levels will persist throughout the year, excluding potential secondary effects like lower oil prices or economic downturns. While the Industrial Tech side faces tariff-related cost inflation, productivity gains in Gas Tech are expected to mitigate these pressures within the IET segment. If the trade and tariff environment worsens, adjustments to their estimates will be necessary.

In the paragraph, the speaker discusses potential challenges facing Industrial Tech (IET) and Oilfield Services and Equipment (OFSE) segments due to slowing GDP growth, inflationary pressures, and declining upstream spending. Despite these challenges, they remain confident in achieving the IET EBITDA guidance range of $2.2 billion to $2.4 billion for 2025. However, the outlook for OFSE is less certain due to broader market uncertainties. They aim to maintain the $4.7 billion EBITDA level for the year, contingent on specific conditions like tariff impacts and oil price stabilization. The speaker emphasizes their commitment to transparency and adaptability, providing ongoing updates as they manage the uncertain environment.

In the paragraph, Stephen Gengaro from Stifel asks Lorenzo Simonelli about Baker's opportunities in the data center sector and the macroeconomic impact on IET order flow for the year. Simonelli highlights a strong start in 2025 for IET orders, mentioning bookings of $3.2 billion in the first quarter, with LNG equipment orders at $2.7 billion. The company is maintaining its full-year revenue guidance of $12.5 billion to $14.5 billion and remains optimistic about the LNG market and data center opportunities. Simonelli notes record levels of Gas Tech Services upgrades and mentions key orders and partnerships, including liquefaction equipment in North America, gas infrastructure for a major U.S. LNG operator, and agreements with NextDecade and Argent LNG to support their facilities.

Over the past two quarters, $1.7 billion in LNG orders were secured, highlighting a strong market position and positive outlook, supported by key agreements with companies like Venture Global and NextDecade. The company expects to reach 800 MTPA by 2030, possibly surpassing it thereafter, driven by substantial increases in offtake agreements and equity investments. Additionally, there is significant demand growth in the data center sector, with a projected 23% CAGR in U.S. energy demand by 2030. Baker Hughes is leveraging its capabilities to offer decarbonization solutions, as exemplified by a partnership with Frontier Infrastructure for CCS and power solutions. The company also booked over 350 megawatts in industrial gas turbine orders, showcasing its expansive reach and differentiation in providing enterprise-wide solutions.

The paragraph discusses the company's strategy and focus on data centers, highlighting multiple use cases for data centers, such as baseload, temporary power backup, and gas power generation. They are focusing on the 150-megawatt range or below, which suits their Nova gas turbines and geothermal solutions. The company anticipates booking at least $1.5 billion in orders for data center equipment over the next three years and sees data centers as a significant growth driver. The discussion transitions to a Q&A with Scott Gruber from Citigroup asking about tariff mitigation initiatives. Ahmed Moghal responds, emphasizing the company’s strong international supply chain, which limits exposure to U.S. tariffs, noting that only a small percentage of their materials are imported into the U.S., and even less comes from China.

In response to tariffs implemented in 2018, the company has developed strategies to mitigate their financial impact, reducing the net effect to $100 million to $200 million. They have established a centralized coordination hub to monitor developments and implement necessary adjustments. Mitigation efforts focus on two main areas: reducing direct sourcing costs tied to imports into the U.S., and assessing potential revenue exposure from U.S. exports to China. To reduce sourcing costs, the company is optimizing its global supply chain, leveraging free trade agreements, expanding duty drawback programs, and utilizing contract mechanisms to offset pricing increases. While they haven't yet achieved mitigation success for revenue exposure in China, they plan to backfill imports with locally sourced products over time. In Italy, exposure is limited due to contractual terms.

The paragraph discusses the challenges faced by a company due to direct tariff impacts and secondary effects, which are difficult to quantify but are being closely monitored. These impacts are expected to affect the transactional side of the business, particularly OFSE and Industrial Tech. Despite these issues, the company believes its diversified portfolio, global supply chain footprint, and strong IET backlog provide a solid foundation to navigate the current environment and maintain earnings and cash flow. During the Q&A session, Saurabh Pant from Bank of America asks about the 10% decline in OFSE revenues, attributed to enhanced seasonal weakness and delayed discretionary spending. Lorenzo Simonelli explains that the revenue softness in Q1 was mainly due to deferred spending, particularly internationally, and a pause in contracting by Pemex in Mexico, with significant rig activity declines. Additionally, sharper seasonal declines were observed in regions such as sub-Saharan Africa, Asia Pacific, Argentina, and Brazil.

The paragraph discusses the current state and outlook of global upstream spending and margins in the oil and gas sector. It notes a shift in focus from oil to gas activity in Saudi Arabia and a 5% revenue decline in North America due to offshore seasonality and land performance. The outlook is revised due to trade policy uncertainty and oil price volatility, with expectations of a high-single-digit decline in global upstream spending, mid- to high-single digits internationally, and a low double-digit decline in North America. Stability in oil prices and tariffs is assumed. Ahmed Moghal highlights the margin progress of OFSE, which aimed for a 20% target set in September 2022. Despite challenges, margins have improved from below 15% to an average of 19.5% last year. They expect further margin improvement in Q2, reaching around 18.6%.

The paragraph discusses the impact of restructuring actions announced in the previous year on the company's margins, with most benefits expected in the second half of the year. The pace of improvement is dependent on tariff developments and the broader upstream environment. Lorenzo Simonelli emphasizes the company's focus on controlling margin accretion, aiming for a 20% margin for OFSE. David Anderson from Barclays queries about margin progression on the IET side, addressing expectations of 18% and 20% margins for the current and next year, respectively. Ahmed Moghal expects second-quarter margins to increase, though at a more modest rate compared to revenue.

The paragraph discusses the company's financial outlook, noting that project closeouts in the first quarter benefited margins, while tariff impacts on the Industrial Tech business are expected to create modest margin pressure. Concerns are raised about the China-U.S. trade impacting high-margin segments. The company estimates these influences on the second quarter and anticipates measured year-over-year margin improvement. Despite short-term challenges, the company remains confident in achieving its EBITDA target for 2025 and sees a path toward a 20% EBITDA margin by 2026, supported by higher-margin projects and productivity efforts.

In the paragraph, Lorenzo Simonelli discusses the company's positive progress, highlighting an increasing installed base and maintaining guidance for the Industrial & Energy Technology (IET) sector, with a goal of achieving a 20% margin rate by 2026. He then thanks everyone for attending the earnings call and concludes the session. The operator closes the call, thanking participants and wishing them a good day.

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