Baker Hughes Company — FY 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. The filing is an annual report; it does not provide a standalone Q4 income statement. Unless stated otherwise, financial amounts are in U.S. dollars.
Business context and performance
Baker Hughes is an energy technology company operating in more than 120 countries through Oilfield Services & Equipment (OFSE) and Industrial & Energy Technology (IET). Its portfolio serves oil and gas, LNG, industrial and lower-carbon energy markets. Management’s strategy emphasizes improving the core business, investing in growth markets, and developing energy-transition solutions.
Management reported stronger results in both segments, citing higher activity and pricing, cost-out initiatives, and execution of IET’s Gas Technology Equipment backlog. International OFSE activity and LNG equipment demand supported growth; North American OFSE activity was softer.
Key financial metrics
| Metric | 2023 | 2022 |
|---|---|---|
| Revenue | $25.506 billion | $21.156 billion |
| Operating income | $2.317 billion | $1.185 billion |
| Operating margin | 9.1% | 5.6% |
| Income before income taxes | $2.655 billion | $22 million |
| Net income (loss) attributable to Baker Hughes | $1.943 billion | $(601) million |
| Diluted earnings (loss) per share | $1.91 | $(0.61) |
| Cash provided by operating activities | $3.062 billion | $1.888 billion |
| Capital expenditures | $1.224 billion | $989 million |
| Operating cash flow less capital expenditures | $1.838 billion | $899 million |
| Cash and cash equivalents at year-end | $2.646 billion | $2.488 billion |
| Total debt at year-end | $6.020 billion | $6.658 billion |
The year-over-year increase in pretax income included $554 million of net other non-operating income, including a $555 million gain from changes in the fair value of certain equity investments. In 2022, net other non-operating losses were $911 million, including a $451 million loss on the sale of part of the Russia OFSE business and equity-investment losses. These items materially affect comparability of reported earnings.
At year-end, current assets were $16.301 billion and current liabilities were $12.991 billion. Cash less total debt was approximately $(3.374) billion. Debt included $5.908 billion of senior unsecured notes and debentures; the company reported compliance with debt covenants. A $3 billion revolving credit facility was undrawn, and no commercial paper was outstanding.
Segment results: OFSE revenue was $15.361 billion (up 16%) and segment operating income was $1.746 billion (up from $1.201 billion). IET revenue was $10.145 billion (up 28%) and segment operating income was $1.310 billion (up from $1.135 billion). Total orders rose to $30.5 billion from $26.8 billion. Remaining performance obligations were $33.5 billion at year-end, including $29.9 billion for IET and $3.5 billion for OFSE.
Material changes versus 2022
- Revenue increased 21%; operating income rose to $2.317 billion from $1.185 billion. Net income attributable to Baker Hughes swung from a loss to profit, though the comparison includes significant fair-value and Russia-related items.
- Operating cash flow increased by $1.174 billion. Progress collections and deferred income rose to $5.542 billion from $3.822 billion, supporting cash generation; receivables and inventory also increased.
- OFSE revenue growth was led by Middle East/Asia and Latin America. IET growth was primarily driven by Gas Technology Equipment backlog execution.
- Restructuring, impairment and other charges declined to $323 million from $705 million. 2023 charges included workforce reductions and location and supply-chain footprint actions; 2022 included significant Russia-related charges.
- Cash dividends paid were $786 million, and the company repurchased $538 million of shares in 2023. The quarterly dividend was raised to $0.20 per share in Q3.
- The company acquired Altus Intervention and sold Nexus Controls in 2023. IET reorganized its product-line structure effective October 1, 2023.
Outlook, risks and unusual items
- 2024 outlook: Management anticipated a slow start and only modest second-half recovery in North American OFSE activity, moderate growth in international OFSE spending, and continued optimism for LNG project demand. It expects continued growth in new-energy solutions but provided no specific revenue or earnings guidance.
- Capital and taxes: 2024 capital expenditures were expected to be up to 5% of annual revenue; expected income tax payments were $800–$850 million. Management said available cash, operating cash flow and financing sources should support liquidity needs.
- Market and execution risks: Commodity-price volatility, economic uncertainty, geopolitical conflict, sanctions, supply-chain tightness (including aeroderivative equipment), raw-material cost and availability, and customer spending or payment constraints could affect results. Management noted Middle East escalation could affect the business, though it had not materially affected operations as of the filing.
- Other risks: The company faces fixed-price project, contract-performance, customer-credit, environmental, regulatory, cybersecurity, climate-transition and foreign-exchange risks. Approximately 75% of cash was held outside the U.S.; $637 million was in countries with currency controls.
- Contingencies: Environmental remediation accruals were $58 million at year-end. Off-balance-sheet arrangements, including guarantees and letters of credit, totaled approximately $5.1 billion; the company said they were not expected to materially affect its financial position or results. Certain legal proceedings remained pending, with outcomes not predictable; management did not expect currently pending matters to have a material adverse effect.
- Reporting and audit: KPMG issued unqualified opinions on the financial statements and internal control over financial reporting. Revenue recognition for customized equipment was identified as a critical audit matter, involving judgment in estimating costs to complete.
Most important facts for investors to verify
- How much of the earnings improvement came from recurring operating performance versus the $555 million equity-investment fair-value gain and other non-operating items.
- Whether order growth and the $33.5 billion RPO convert to revenue, cash and expected margins on schedule, particularly in IET and LNG equipment.
- Cash-flow durability as receivables and inventories grow, and the effect of higher capital expenditures and planned 2024 tax payments.
- Debt maturities, liquidity access and the practical availability of cash held in foreign jurisdictions; the next stated debt maturity was June 2024.
- Execution and cost effects of restructuring, workforce reductions and supply-chain constraints, alongside the pace of North American and international OFSE activity.
- Developments in pending litigation, environmental obligations and guarantees, including the circumstances that could make contingent exposures material.