Baker Hughes Company

Good day, ladies and gentlemen, and welcome to the Baker Hughes Company third quarter 2025 earnings call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. As a reminder, this conference is being recorded. I would now like to introduce your host for today's conference, Mr. Chase Mulvihill, Vice President of Investor Relations. Sir, you may begin.

Thank you. Good morning, everyone, and welcome to Baker Hughes' third quarter earnings conference call. Here with me are our Chairman and CEO, Lorenzo Simonelli, and our CFO, Amin Mogul. The earnings release we issued yesterday evening can be found on our website at bakerhughes.com. We will also be using a presentation with our prepared remarks during this webcast, which can be found on our investor website. As a reminder, we will provide forward-looking statements during this conference call. These statements are not guarantees of future performance and involve a number of risks and assumptions. Please review our SEC filings and website for the factors that could cause actual results to differ materially. Reconciliations of adjusted EBITDA on certain gap to non-gap measures can be found in our earnings release. With that, I'll turn the call over to Lorenzo.

Lorenzo Steele- Thank you, Chase. Good morning, everyone, and thanks for joining us. First, I'd like to provide a quick outline for today's call. I will begin by discussing our strong third quarter results. Next, I will highlight key awards announced during the quarter and provide some thoughts on the broader macro environment. Following this, I will share an update on the current progress in the LNG sector. I will then hand it over to Ahmed, who will present an overview of our financial results, followed by an update on our continued focus on portfolio management, including the chart industry's acquisition. To conclude, I will summarize the main points before we open the line for questions. Let us now turn to the key highlights on slide four. We continue to execute at a high level, delivering another quarter of strong results. Adjusted EBITDA rose to $1.24 billion, above the midpoint of our guidance range. This performance reflects continued momentum from our business system deployment, positive trends in gas technology, and strong outperformance in U.S. land, where our leverage to production is a clear advantage. Oilfield services and equipment margins softened in response to the broader macro environment, while industrial and energy technology reported improved results, contributing to a 20 basis points year-over-year increase in consolidated adjusted EBITDA margins to 17.7%. This margin progression highlights the resilience of our portfolio and the foundation we have built through disciplined execution. Given the strong operational performance year to date, we now expect full year adjusted EBITDA to the total company to exceed $4.7 billion. Turning to orders, IET continues to build strong momentum, achieving $4.1 billion during the quarter driven by LNG equipment, record cordon solutions orders, and ongoing strength in gas infrastructure and power generation. As a result, IET backlog grew 3% sequentially, reaching a new record of $32.1 billion, further reinforcing the durability and visibility of our growth outlook. Through the first three quarters, IET orders totaled nearly $11 billion, including $1.6 billion from new energy, already reaching the high end of the $1.4 to $1.6 billion guidance range. With good visibility into fourth quarter awards, we now expect full-year IET orders to exceed our prior midpoint. Looking ahead, we are targeting at least $40 billion of IET orders over the next three years. This outlook is supported by the breadth and versatility of our technology portfolio, which continues to generate a robust pipeline across an expanding range of end markets. We expect growth to be led by gas infrastructure, power generation, and new energy markets, while LNG equipment orders are expected to remain consistent with our solid performance over the past two years. In OFSE, Subsea surface and pressure systems delivered a record quarter with $1.2 billion in orders, driven by major contract wins in Turquia and Brazil. Turning to slide five. As I highlighted, we made strong progress on IET orders year to date, reflecting continued momentum across LNG, power generation, and new energy markets. With strong visibility into our current pipeline, We expect this strength to carry into 2026. In LNG, we secured over $800 million in equipment orders this quarter, including trains three and four of SEMPRA's Port Arthur phase two, and train four of next decade's Rio Grande LNG. At Rio Grande, our cordon asset health digital solution is being deployed on the first three trains. These awards reflect continued investment in large-scale LNG infrastructure and demonstrate our ability to deliver value by integrating equipment and digital capabilities to reduce downtime and boost availability and production. In power generation, we continue to experience strengthening demand for distributed power, cogeneration, and geothermal solutions throughout the oil and gas, industrial, data center, and geothermal markets. Notably, we secured a significant award from Dynamis for mobile power generation for oil and gas operations in North America, supplying more than one gigawatt of aero derivative gas turbines to meet rising energy needs across upstream and downstream markets. We also made meaningful progress in geothermal power, securing a contract to design and deliver equipment for five organic Rankin cycle power plants for Fervo's Cape Station project in Utah. This site will generate 300 megawatts of clean, reliable power, enough to supply approximately 180,000 homes. This builds on our earlier collaboration with Fervo, where OSC provided subsurface drilling and production technologies. Together, these wins demonstrate the growing relevance of our integrated portfolio for scalable, low-carbon energy solutions. We also signed a collaboration agreement with Controlled Thermal Resources for the 500 megawatt Health Kitchen geothermal project in California. As part of this broader trend, we are seeing continued momentum in data center power demand. Year to date, We have now booked more than $700 million in power generation equipment orders for data center applications, led by our Nova LT technology. We remain confident in achieving $1.5 billion of data center orders ahead of our original three-year time length, underscoring the increasing relevance of our power solutions in this fast-growing market. On aftermarket services, we secured a long-term service contract with BP for its Tangu LNG facility in Indonesia and extended our agreement with Fembina Pipeline to support upgrades for the Alliance Pipeline system in North America. These awards reinforce the convertibility of our installed base into aftermarket and service opportunities, reflecting the resilience of our lifecycle model. In offshore, a market we continue to see as a compelling long-term growth opportunity, IET secured an award to supply power generation and compression equipment for an FPSO in South America. This award further demonstrates our ability to deliver integrated solutions for critical energy infrastructure. SSPS delivered a record order quarter, driven by a significant award for subsea trees in Turquia. We will supply Turkish petroleum with integrated subsea production and intelligent completion systems for the third phase of the Zacharia gas field. In offshore Brazil, we also announced the frame agreement with Petrobras for up to 50 subsea trees, marking our return to this subsea tree market following an extended absence. In flexible pipe systems, we booked an additional 66 kilometers of rises and flow lines for hydrocarbon production, CO2 injection, and gas lift, again highlighting our technical leadership in complex offshore developments. We will also provide an all-electric integrated completion systems for the Fusios field in Brazil, enabling more precise subsurface control, increased operational efficiency, and enhanced reliability. Petrobras also extended contracts for our Blue Marlin and Blue Orca stimulation vessels. In Saudi Arabia, we won a major multi-year award from Aramco to expand coil tubing drilling operations, including six new units and extensions for four existing ones, supporting both reentry and greenfield projects across the kingdom. For production solutions, we signed a five-year extension to provide hydrocarbon, and water treatment products and services across Valero's North America and UK refineries. We also continue to see strong demand in Mexico for our downstream chemical solutions as we help Pemex manage crude quality challenges. These awards highlight our ability to serve downstream markets as well as upstream and midstream. In ammonia, we booked a major order from Technipe Energies for the Blue Point number one project in Louisiana. This facility is set to become the world's largest low-carbon ammonia plant with a capacity of 1.4 MTPA. We will supply critical compression equipment for ammonia production and CO2 transportation, along with steam turbines and generators for power solutions. Overall, we continue to see strong momentum across an increasingly diverse opportunity set. supported by the breadth and depth of our technology portfolio. Now turning to the macro on slide six. The macro environment has remained relatively resilient throughout 2025, despite geopolitical and policy-related headwinds. A key factor contributing to this resilience is the powerful new growth dynamic related to the rapid deployment of generative AI. This wave of investment is unlocking new growth factors across a wide range of industries and serving as a broad stimulus for the global economy, with recent estimates indicating that AI-driven investments account for approximately 30 to 40 percent of U.S. GDP growth this year. Globally, McKinsey projects over $1.5 trillion in data center infrastructure investments over the next three years. a major opportunity for Baker Hughes. We are seeing a clear acceleration in project activity and commitments from leading AI companies, with our power solutions portfolio well positioned to meet this demand for resilient, energy-efficient infrastructure. Now turning to oil, the market continues to navigate a range of cross-currents. On one hand, there are concerns around softer demand and rising OPEC Plus production. On the other, persistent geopolitical risks in the Middle East and Russia continue to support commodity prices. Despite the accelerated return of OPEC Plus supply, oil prices in the third quarter remain somewhat resilient. While it is possible some OPEC Plus nations do not have the capacity to fully meet their production quotas, the near-term potential for oversupply continues to weigh on sentiment. keeping operators cautious amid the risk of short-term pricing pressure. As we shared last quarter, we continue to expect oil-related upstream investment to remain subdued until the market fully absorbs this incremental OPEC Plus supply. Against this backdrop, our outlook for 2025 is unchanged, maintaining expectations for a high single-digit decline in global upstream spending. Looking ahead to 2026, early indicators point to another year of subdued activity, possibly leading to another year of global upstream spending decline. Longer term, the outlook is more positive, especially internationally and offshore, where substantial investment will be required to sustain production growth in response to rising demand. We also expect continued growth in OPEX-driven upstream investment as operators focus on enhancing recovery rates and extending the life of existing fields. On natural gas, we continue to see growing divergence between oil and natural gas fundamentals. Its abundance, low cost, reliability, and lower emissions set natural gas apart from other fossil fuels. That structural advantage is increasingly reflected in both policy and capital allocation. By 2040, we expect natural gas demand to grow by over 20%, with global LNG increasing by at least 75%. This growth outlook creates a favorable environment for Baker Hughes. LNG demand continues to demonstrate solid growth, increasing by 6% this year largely driven by a strong storage injection season in Europe, although this was partially offset by softer demand in China. This demand is driving record LNG contracting activity, which is essential for future project FIDs. According to Wood Mackenzie, 84 MTPA of long-term LNG offtake contracts were signed in the first nine months of the year, surpassing last year's total of 81 MTPA. Over the past two years, nearly 75 MTPA of LNG projects have taken FID, with an additional 25 MTPA needed to reach our three-year target of 100 MTPA. This would increase the global installed base to our long-held target of 800 MTPA by 2030. Beyond this, we see continued growth in the installed base, which I'll address shortly. In summary, we are seeing strong momentum in our key end markets, especially natural gas and AI-driven power, despite persistent headwinds in global trade policy and oil. Our diverse portfolio positions us to manage volatility, and we remain confident in our ability to continue executing against our long-term strategy. Turning to slide seven, let me take a few minutes to share our updated perspective on global LNG capacity expansion beyond our long-held target of 800 MTPA by 2030. That milestone is now largely supported by projects that have already reached FID but are not yet commissioned. Looking beyond 2030, we now expect global LNG installed capacity to increase to approximately 950 MTPA by 2035. To achieve this level of capacity, an additional 175 MTPA of projects would need to reach FID by 2031. Our positive long-term outlook is anchored in a simple reality. The world needs more energy. This requirement is being amplified by the exponential growth in AI-driven power demand. Natural gas is well-suited to meet this demand, offering abundance, affordability, and lower emissions than coal without the intermittency issues associated with renewable sources. In many emerging markets, natural gas accounts for less than 5% of the power mix compared to over 40% in the US. This disparity presents substantial potential for natural gas to displace coal and support the transition to a lower carbon economy, especially in regions with high energy requirements that demand reliable and affordable power solutions. Nonetheless, periods of market volatility may occur due to the nonlinear nature of supply growth. Historically, declines in spot prices have encouraged new buyers to enter the market, thereby spurring the next wave of demand and supporting LNG's sustained long-term growth trajectory. Turning to our technology portfolio, this remains a core differentiator for Baker Hughes. Our best-in-class liquefaction solutions pair advanced compression technology with the industry's broadest selection of drivers, including heavy duty and aero derivative gas turbines and electric motors. We consistently raise the bar for efficiency, throughput, and uptime, helping customers achieve superior LNG project economics. The LM9000 aero derivative gas turbine exemplifies this, delivering 44% simple cycle efficiency and setting new benchmarks in performance and reliability for large-scale energy infrastructure projects. We expect that the integration of CHA will further enhance the value we bring to customers, enabling greater optimization across the LNG value chain. This allows for more efficient project design, improved and better lifecycle economics, which we expect will result in superior outcomes for our customers. Importantly, an increasing installed base supports structural growth over the next decade in our gas tech services business, a key driver of long-term growth and earnings durability for Baker Hughes going forward. These service agreements are critical to ensuring the performance, reliability, and emissions performance of LNG facilities over their full lifecycle. Overall, we see sustained LNG growth well beyond 2030. driven by rising global energy demand, the push for decarbonization, and infrastructure expansion in emerging markets. Baker Hughes is well positioned to capitalize on this trend, leveraging deep market expertise, innovative technology, and reliable execution to support our customers with solutions that improve performance, reduce emissions, and enhance project economics. Now, let me summarize the key points before handing it over to Ahmed. The third quarter was marked by strong execution and meaningful strategic progress. Operationally, we continue to form at a high level. IET delivered another quarter of strong order momentum, further demonstrating the breadth and versatility of our portfolio. At the same time, our business system continues to drive consistent performance across the company. The announced acquisition of Chart represents a significant milestone in our journey to become a leading energy and industrial technology company. We see substantial opportunity in combining our portfolios, and we expect that the acquisition will enrich our differentiated technology offerings and enhance the value we deliver to customers across critical high growth markets. As we announced earlier this month, we are conducting a comprehensive evaluation of our capital allocation focus business cost structure and operations in connection with the pending acquisition of chart. This evaluation reflects the disciplined actions we have consistently taken over the years to establish a proven track record of driving strong performance and represents a natural progression in our ongoing value creation strategy. We have made substantial progress in driving operational improvements, advancing our portfolio and delivering leading shareholder returns and we are confident that we have the right strategy to build on this momentum and continue creating long-term value for shareholders. Lastly, I want to take this opportunity to extend my sincere congratulations to Ganesh Ramaswamy as he embarks on his next chapter as a CEO. During the past three years, Ganesh has been an exceptional leader at Baker Hughes, successfully implementing our business system and leading the organization with purpose. To maintain continuity and sustain progress within IET, Maria Claudia Borras, a seasoned and highly respected executive at Baker Hughes, will step in as interim EVP of IET. With that, I'll turn the call over to Ahmed.