UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 3, 2019
(Exact name of registrant as specified in charter)
(State of Incorporation) | (Commission File No.) | (I.R.S. Employer Identification No.) | (State of Incorporation) | (Commission File No.) | (I.R.S. Employer Identification No.) | |||||
(Address of Principal Executive Offices) | (Zip Code) | |
Registrant’s telephone number, including area code: (713 ) 439-8600
(former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol | Name of each exchange on which registered |
- | ||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 7.01 Regulation FD Disclosure.
On September 3, 2019, the Chairman, President and Chief Executive Officer of Baker Hughes, a GE company (the “Company”), Lorenzo Simonelli, will present at the Barclays 2019 CEO Energy-Power Conference in New York at 11:00 a.m. Eastern time. A copy of the presentation is furnished with this Form 8-K as Exhibit 99.1 and incorporated into this Item 7.01 by reference. In accordance with General Instructions B.2. of Form 8-K, the information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.
In addition to financial results determined in accordance with generally accepted accounting principles (“GAAP”) that are included in the presentation, certain information included therein could be considered non-GAAP financial measures (as defined under the SEC’s Regulation G). Any non-GAAP financial measures should be considered in addition to, and not as an alternative for, or superior to, operating income (loss) cash flows or other measures of financial performance prepared in accordance with GAAP as more fully discussed in the Company’s financial statements, including the notes thereto, and filings with the SEC.
Item 9.01 Financial Statements and Exhibits. (Information furnished in this Item 9.01 is furnished pursuant to Item 9.01.)
(d) Exhibits.
101.SCH* | Inline XBRL Schema Document |
101.CAL* | Inline XBRL Calculation Linkbase Document |
101.LAB* | Inline XBRL Label Linkbase Document |
101.PRE* | Inline XBRL Presentation Linkbase Document |
101.DEF* | Inline XBRL Definition Linkbase Document |
104* | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* Furnished herewith.
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Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
BAKER HUGHES, A GE COMPANY | ||||
Dated: September 3, 2019 | By: | /s/ Lee Whitley | ||
Lee Whitley Corporate Secretary | ||||
BAKER HUGHES, A GE COMPANY, LLC | ||||
Dated: September 3, 2019 | By: | /s/ Lee Whitley | ||
Lee Whitley Corporate Secretary | ||||
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EXHIBIT INDEX
Exhibit No. | Description | |
101.SCH | Inline XBRL Schema Document | |
101.CAL | Inline XBRL Calculation Linkbase Document | |
101.LAB | Inline XBRL Label Linkbase Document | |
101.PRE | Inline XBRL Presentation Linkbase Document | |
101.DEF | Inline XBRL Definition Linkbase Document | |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | |
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Exhibit 99.1 2019 Barclays CEO Energy-Power Conference Lorenzo Simonelli Chairman & CEO September 3, 2019 Confidential. Not to be copied, distributed, or reproduced without prior approval.
This presentation (and oral statements made regarding the subjects of this release) may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, (each a “forward-looking statement”). The words “anticipate,” “believe,” “ensure,” “expect,” “if,” “intend,” “estimate,” “project,” “foresee,” “forecasts,” “predict,” “outlook,” “aim,” “will,” “could,” “should,” “potential,” “would,” “may,” “probable,” “likely,” and similar expressions, and the negative thereof, are intended to identify forward-looking statements. There are many risks and uncertainties that could cause actual results to differ materially from our forward-looking statements. These forward-looking statements are also affected by the risk factors described in the Company’s annual report on Form 10-K for the period ended December 31, 2018 and quarterly report on Form 10-Q for the period ended June 30, 2019 and those set forth from time to time in other filings with the Securities and Exchange Commission (“SEC”). The documents are available through the Company’s website at: www.investors.bhge.com or through the SEC’s Electronic Data Gathering and Analysis Retrieval (“EDGAR”) system at: www.sec.gov. We undertake no obligation to publicly update or revise any forward-looking statement. The Company presents its financial results in accordance with GAAP which includes the results of Baker Hughes and GE Oil & Gas from the transaction closing date of July 3, 2017. However, management believes that using additional non-GAAP measures will enhance the evaluation of the profitability of the Company and its ongoing operations. See Exhibit 99.1 in our Current Report on Form 8-K filed with the Securities and Exchange Commission on July 31, 2019 for a reconciliation of GAAP to non-GAAP financial measures. 2 © 2019 Baker Hughes, a GE company - All rights reserved
Macro environment challenges us to re-invent ourselves Recent commodity price volatility Current macro expectations $140 $6 • NAM oil production growing … +1.9 MMbd by $120 $5 end-2020 $100 $4 • Global oil supply flexible … NAM growth, OPEC $80 $3 group has 2.2 MMbd spare capacity $60 $2 $40 • Oil prices likely rangebound … sufficient supply, $20 $1 demand growth slowing $0 $0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 • Gas expected to outgrow other fossils … Brent Spot 3 Month Moving Avg. ($/Bbl) transition fuel Henry Hub 3 Month Moving Avg. ($/Mcf) In this changing environment, having a differentiated portfolio is more critical than ever Source: Bloomberg; EIA Short-Term Energy Outlook 3 © 2019 Baker Hughes, a GE company - All rights reserved
BHGE today is not an ordinary OFSE company ~70% Total company revenue outside NAM ~60% OFS revenue outside NAM Revenue more “industrial” in nature OFS revenue tied to production … (TPS, DS) … strong aftermarket ~40% ~40% artificial lift, chemicals service entitlement Net capex % of revenue since forming Total company aftermarket service 3.0% BHGE … less capital intensive than $15B backlog … TPS, OFE, DS peer group Our strategic priorities are focused on building a differentiated energy technology company 4 © 2019 Baker Hughes, a GE company - All rights reserved
Evolving our strategic priorities 2017/2018 2018/2019 Next twelve months 1 Re-establish presence with 1 Deliver on synergies – SG&A 1 Continue delivering on margin customers … commercial + product cost improvement … product cost framework + service delivery cost 2 Growth … regain lost share in 2 Deliver on synergies – SG&A OFS (International) … 2 Portfolio alignment with position for LNG wave highest returns activities 3 Integration … bring cultures together 3 Refine operating mechanisms 3 Continued focus on … simplification & digitization operations … service delivery, project execution 4 Define roles & responsibilities 4 Preparation for separation from GE GE separation 5 Maintain technology DNA + 4 leadership 5 Deliver on free cash flow & returns potential 5 © 2019 Baker Hughes, a GE company - All rights reserved
2018/2019 execution against goals 2018/2019 Deliver on Synergies – 1 Delivered synergies ~$100M above target in ’18 SG&A + product cost Growth … Regain lost share +10% orders, +5% revenue growth in ’18 … 1H’19 +9% orders, 2 in OFS (International) … +6% revenue growth vs. 1H’18 position for LNG wave Simplified regional org structure, TPS structure and footprint, enhanced execution accountability Refine operating 3 mechanisms … simplification & digitization +216bps improvement in total company adjusted operating income margins in ‘18 Preparation for separation 4 Commercial agreements with GE in place, initial sell-down Nov ‘18 from GE 6 © 2019 Baker Hughes, a GE company - All rights reserved
Clear strategic priorities for the next 12 months 1• Continue delivering on margin improvement … product cost + service delivery cost 2• Portfolio alignment with highest returns activities 3• Continued focus on operations … service delivery, project execution 4• GE separation 5• Deliver on free cash flow potential 7 © 2019 Baker Hughes, a GE company - All rights reserved
1 Continue margin improvement initiatives Significant progress on expanding margins … launching next wave of improvement areas Adjusted operating income %, growth from 2Q’17 to 2Q’19 Drive product cost-out … improved Improvement in total procurement , product standardization +380bps company adjusted operating income margins Improve service delivery … better efficiency, utilization, execution Improvement in OFS +610bps segment operating income margins Drive supply chain excellence … process redesign, lean, on-time delivery ↓ 304 Reduction in SG&A as % of Digitize processes … efficiency through bps revenue from 3Q’17 to 2Q’19 digital capability, artificial intelligence 8 © 2019 Baker Hughes, a GE company - All rights reserved
2 Evolving the portfolio … differentiation for the future 2014 2018 Future state Industrial / Chemical Value Chain Industrial / Chemical Value Chain Industrial / 7% 10% Chemical Value Downstream Downstream Upstream Chain 6% 5% Midstream 11% Midstream Downstream 25% Leveraged to production Upstream Upstream 75% 60% Midstream Capturing the energy transition … greater exposure to midstream, chemicals, and industrial markets 9 © 2019 Baker Hughes, a GE company - All rights reserved
2 Evolving the portfolio … taking action & focusing on returns High-grading portfolio Partnering to drive value Investing in the right areas Rotoflow – 3Q’18 ~2,700 $700M AC Compressors - 2Q’18 5% equity stake in 4Q’18 patents issued globally in 2018 2018 R&D spend Recips - 2Q’19 Drilling Leading LM9000 gas turbine launched … 2Q’19 JV to accelerate software next gen LNG driver development & AI deployment NGS - 3Q’18 Launched Subsea Connect & Aptara™ Acquired in 4Q’18; non-metallic MOU with Saudi Aramco Investing in global Production Chemicals ~$535M of proceeds ~$640M reinvested in footprint in KSA and from dispositions high returns areas Singapore Redeploying capital in accretive areas … focusing on returns 10 © 2019 Baker Hughes, a GE company - All rights reserved
3 Continued focus on operations … delivering for customers Strong international OFS growth Focused on executing for customers OFS international revenue indexed growth since 2Q’17 International rig count indexed growth since 2Q’17 +33% ADNOC • Drilled over 100k feet with 97% drilling efficiency Drilling • Saved more than 88 days of drilling time on first 8 wells +16% • Fully integrated 8 drilling units + 2 already existing 2Q'17 2017 2018 2Q'19 • More than 330k feet drilled with best-in-class Continued LNG success Equinor performance • Awarded two additional fields based on early drilling Sanctioned FID LNG Projects with BHGE performance technology selected (MTPA) 46 • Yamal Train 3 start-up one year ahead of schedule 21 Continued • Cheniere production increase to 4.7 – 5.0 MTPA per train excellence • Launched LM9000 gas turbine on Arctic-2 LNG 3 in LNG • Awarded contract for VG’s 10 MTPA Calcasieu Pass 2017 2018 2019 YTD Source: BHGE Rig Count, Company filings 11 © 2019 Baker Hughes, a GE company - All rights reserved
4 GE separation Commercial agreements in place … solidifies operational and commercial relationships for the long term … certainty for customers Initial sell-down in Nov ’18 … working collaboratively with GE as they pursue their orderly exit Investing in systems and processes that enable us to fully separate … e.g. IT, HR, and other back office systems 12 © 2019 Baker Hughes, a GE company - All rights reserved
5 Deliver on free cash flow potential Capital allocation actions since deal close Improving working capital processes Days Sales Days To Inventory $3 billion $1.6 billion -a) -a) Outstanding Pay Turns-a) Share buyback Dividends 103 99 executed paid 80 5.0 69 4.2 $1.4B / 3.0% $1.4 billion 2Q’17 2Q’19 2Q’17 2Q’19 2Q'17 2Q'19 CAPEX spend / Research & % of revenue development spend Goals going forward • Commitment to capital discipline … capex 160 bps A3 / A- up to 5% of revenue Reduction in Investment grade cost of debt rating • Delivering 90% free cash flow conversion • Returning excess capital to shareholders (a- Based on 5pt. combined business basis average. DSOs excludes 13 impact from monetization winddown © 2019 Baker Hughes, a GE company - All rights reserved
At BHGE we are committed to social responsibility Core elements embedded in how we operate Improving Health, Safety, and Environment “Perfect HSE days” achieved 153 in ‘18 … up 20% year-over-year Days without a recordable injury, vehicle accident, and serious environmental spills or releases People Planet Principles I AM Responsible for a Perfect HSE Day • Empower people in a culture of inclusion and support communities to be vibrant places to live and work Driving carbon footprint reduction • Stewards of the environment, inventing technologies Net-zero BHGE CO for reduced impact and using resources wisely 2 emissions by 2050 While investing in our portfolio of advanced • Grounded on sound governance, effective policies and technologies to enable customer’s reduction guidelines, and transparency Leading the energy transition 14 © 2019 Baker Hughes, a GE company - All rights reserved
Incentive compensation metrics aligned Short-term financial metrics Long-term performance metrics Revenue Relative return on invested capital Operating income Relative total Free cash flow shareholder return Our compensation metrics are aligned to shareholder returns 15 © 2019 Baker Hughes, a GE company - All rights reserved
Summary Priorities aligned BHGE is not an 5 clear focus to shareholder ordinary OFSE areas for the returns … company next year accretive share, margins, cash 16 © 2019 Baker Hughes, a GE company - All rights reserved
