Baker Hughes Co (BKR)

History and Background

Baker Hughes Co was formed in 2017 through the merger of Baker Hughes and GE Oil & Gas. Its roots trace back to 1907 with the founding of Hughes Tool Company and 1912 with the formation of Baker Oil Tools. The company has evolved through numerous acquisitions and innovations, becoming a major player in the oilfield services industry.

Core Business Areas

• Oilfield Services & Equipment (OFSE): Provides products and services for drilling, evaluation, completion, production, and intervention of oil and gas wells.
• Industrial & Energy Technology (IET): Focuses on providing technology and services for energy transition, including carbon capture, hydrogen, and energy storage. Turbomachinery and process solutions.

Leadership and Structure

Lorenzo Simonelli is the Chairman, President and CEO. The organizational structure is divided into two main business segments: Oilfield Services & Equipment and Industrial & Energy Technology. They also have a strong corporate team managing shared services and strategic direction.

Key Offerings

• Drilling Services: Offers drilling fluids, drill bits, and drilling optimization services. Competitors include Schlumberger (SLB) and Halliburton (HAL). While specific market share data fluctuates, Baker Hughes consistently ranks among the top 3 providers globally. Revenue for 2023 was $6.4 Billion in OFSE.
• Subsea Production Systems: Manufactures and services subsea trees, manifolds, and controls. Competitors include TechnipFMC (FTI) and Aker Solutions. Market share estimated to be around 20-25% in the global subsea market. Revenue is included within the IET segment, which had revenues of $7 Billion in 2023.
• Turbomachinery and Process Solutions: Provides compressors, turbines, and pumps for the oil and gas, power generation, and industrial sectors. Competitors include Siemens Energy (ENR) and Mitsubishi Heavy Industries. A significant portion of IET revenues come from this group.

Industry Overview

The oilfield services industry is cyclical and highly competitive, influenced by oil and gas prices, drilling activity, and technological advancements. The energy transition is creating new opportunities in areas like carbon capture and hydrogen. IET is helping in this aspect.

Positioning

Baker Hughes Co holds a strong position as a major player in both traditional oilfield services and emerging energy technologies. Its competitive advantages include its technology portfolio, global reach, and established customer relationships.

Total Addressable Market (TAM)

The total addressable market is expansive and continuously evolving. Estimates for the oilfield services market range from $200-$300 billion globally. The energy transition market represents a multi-trillion dollar opportunity. Baker Hughes is positioning itself to capture a significant share of both markets, but its success depends on factors such as technology adoption and regulatory support.

Key Competitors

• SLB
• HAL
• NOV
• FTI

Competitive Landscape

Baker Hughes competes with Schlumberger and Halliburton across a broad range of oilfield services. They also face competition from smaller, specialized companies. Its competitive advantages include its technology portfolio and strong customer relationships, but high debt and cyclical exposure are challenges.

ARMS Reliability

• Year: 2021
• Acquisition Price (USD millions): 20
• Strategic Rationale: Expanded Asset Performance Management capabilities.

Compact Carbon Capture

• Year: 2022
• Acquisition Price (USD millions): 0
• Strategic Rationale: Enhanced carbon capture technology portfolio (terms of the deal were not disclosed).

Historical Growth: Historical growth has been volatile due to fluctuations in the oil and gas market. IET segment has shown more consistent growth due to secular trends in carbon management.

Future Projections: Analysts project moderate revenue growth in the coming years, driven by increasing energy demand and the energy transition. EPS is expected to improve as cost-cutting measures and strategic investments take effect.

Recent Initiatives: Recent initiatives include investments in carbon capture technology, partnerships with renewable energy companies, and restructuring efforts to improve efficiency.

Baker Hughes Co is a major player in the oilfield services and energy technology industries. While it benefits from a global presence and a diversified portfolio, it is susceptible to the cyclical nature of the oil and gas market. The company is making progress in the energy transition, but faces challenges related to debt and integration. Management is focused on improving profitability, and has a clear strategy to take advantage of macro trends, but they must control costs.

Data Sources:

• Baker Hughes Co. Investor Relations
• SEC Filings (10-K, 10-Q)
• Third-party financial analysis reports
• Company Press Releases

Disclaimers:

This analysis is based on publicly available information and is for informational purposes only. It does not constitute financial advice. Investors should conduct their own due diligence before making any investment decisions.