Q4 2023 Baker Hughes Co Earnings Call

Good day, ladies and gentlemen, and welcome to the Baker Hughes Company fourth quarter 2023 earnings call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions.

<unk> will follow at that time as a reminder, this conference call is being recorded I would now like to introduce your host for today's conference. Mr. Chase Mulvehill, Vice President of Investor Relations, Sir you may begin.

Chase Mulvehill: Thank you.

Chase Mulvehill: Morning, everyone and welcome to Baker Hughes fourth quarter, and full year 2023 earnings conference call.

Chase Mulvehill: Here with me are our chairman and CEO, Lorenzo Simonelli, and our CFO Nancy busy.

Chase Mulvehill: The earnings release, we issued yesterday evening can be found on our website at Baker Hughes Dot com.

Chase Mulvehill: We will also be using a presentation with our prepared remarks during this webcast.

Chase Mulvehill: Which can also be found on our investor website.

Chase Mulvehill: As a reminder, during the course of this conference call. We will provide forward looking statements. These.

Chase Mulvehill: These statements are not guarantees of future performance and involve a number of risks and assumptions.

Chase Mulvehill: Please review, our SEC filings and website for factors that could cause actual results to differ materially.

Chase Mulvehill: Reconciliations of operating income and other GAAP to non-GAAP measures can be found in our earnings release with that I will turn the call over to Lorenzo.

Thank you Jay good morning, everyone and thanks for joining us <unk>.

Chase Mulvehill: 2023 proved to be a pivotal year for Baker Hughes as we continue our journey to reshape the company.

Chase Mulvehill: We successfully removed $150 million of costs.

Chase Mulvehill: Airlines, our IHT business and recently launched actions to further streamline our OFC business.

Chase Mulvehill: Our strategy to transform the way we operate is working.

Chase Mulvehill: Turning to slide four in.

Chase Mulvehill: In 2023, we set records for all primary financial metrics, including orders revenue EBIT.

Chase Mulvehill: Free cash flow and most importantly returns.

Chase Mulvehill: Adjusted EBITDA was up 26% year over year, our fad consecutive year of double digit increases in exceeding prior cycle peak levels by 25%.

Chase Mulvehill: Adjusted diluted earnings per share was.

Chase Mulvehill: The $1 67.

Chase Mulvehill: 76% above 2022 levels.

Chase Mulvehill: Free cash flow increased 83% year over year to just over $2 billion.

Chase Mulvehill: Total company orders increased 14% year over year as orders up $14 2 billion grew 12% when compared to last year's record orders and marked the third consecutive year of double digit growth.

Chase Mulvehill: New energy orders totaled $750 million up 45% year over year.

Chase Mulvehill: Sps orders increased by 27% to $3 9 billion the largest order year since 2014.

Chase Mulvehill: These record results highlight strong market tailwind across both segments and the significant operational improvements the company has accomplished since 2022.

Chase Mulvehill: Clearly we are pleased with the progress demonstrated in 2020 free and excited about where the company is headed in 2024 and beyond.

Chase Mulvehill: Turning to slide five fourth quarter adjusted EBITA of 1.09 billion came in above the midpoint of our guidance range due to the continued operational improvement and full realization of the $150 million of cost out.

Chase Mulvehill: Free cash flow of $633 million exceeded expectations and resulted in full year.

Chase Mulvehill: Our free cash flow conversion of 54%.

Chase Mulvehill: Orders remained strong exceeding $3 billion for the fifth consecutive quarter.

Chase Mulvehill: In addition, we were awarded more than $1 billion of CSA commitments.

Chase Mulvehill: And OFC, we continued to demonstrate solid margin improvement during the quarter with segment EBITDA margin, increasing to 17, 9% as RFS EBITA margins now exceed 20% both record margins.

Unnamed Host: Good day, ladies and gentlemen, and welcome to the Baker Hughes Company fourth quarter 2023 earnings call. At this time, all participants are in a listen-only mode.

Unnamed Host: Later, we will conduct a question and answer session, and instructions will follow at that time. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Chase Mulvihill, vice president of investor relations. Please, you may begin.

Chase Mulvehill: Turning to the macro on slide six oil prices have weakened considerably since peaking in late September.

Chase Mulvehill: Ultimately weaker than anticipated oil demand coupled with robust production growth led to an unexpected inventory builds into year end.

Thank you. Good morning, everyone, and welcome to Baker Hughes' fourth quarter and full year 2023 earnings conference call. Here with me are our chairman and CEO, Lorenzo Simonelli, and our CFO, Nancy Buese. 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 also be found on our investor website. As a reminder, during the course of this conference call, we will provide forward-looking statements. These statements are not guarantees of future performance and involve a number of risks and assumptions.

Chase Mulvehill: However prices still remain at levels that are favorable for growth across our core our FSC markets.

Chase Mulvehill: For 2020 for demand growth remains the biggest unknown in the face of global economic uncertainty and heightened geopolitical risks.

Chase Mulvehill: On the supply side, the biggest risk factor is non OPEC supply outpacing demand, possibly requiring OPEC plus to maintain the current level of cuts through the end of 2024.

Chase Mulvehill: The volatility in commodity prices experienced during the fourth quarter and so far in 2024 will likely have some influence on upstream development plans.

Lorenzo Simonelli: Please review our SEC filings and website for factors that could cause actual results to differ materially. Reconciliations of operating income and other gap-to-non-gap measures can be found in our earnings release. With that, I'll turn the call over to Lorenzo.

Chase Mulvehill: Accordingly, we now see international D&C spend growth decelerating into the high single digit range. This year, which is down slightly from our prior expectations for low double digit growth.

Lorenzo Simonelli: Thank you, Chase. Good morning, everyone, and thanks for joining us. 2023 proved to be a pivotal year for Baker Hughes as we continue our journey to reshape the company. We successfully removed $150 million of costs, realigned our IET business, and recently launched actions to further streamline our OFSC business. Our strategy to transform the way we operate is working.

Chase Mulvehill: Nevertheless, the international cycle remains healthy and we see no deviation from the long term development plan set in place amongst some of the world's largest nics.

Chase Mulvehill: The offshore cycle is maintaining the momentum built over the past couple of years and we have good visibility on the development pipeline, which is expected to support strong activity levels over the next several years.

Chase Mulvehill: In North America activity continues to lag and we are now anticipating no meaningful recovery in activity during the first half of the year.

Lorenzo Simonelli: In 2023, we set records for all primary financial metrics, including orders, revenue, EBITDA, EPS, free cash flow, and most importantly, returns. Adjusted EBITDA was up 26% year over year, a third consecutive year of double-digit increases and exceeding prior cycle peak levels by 25%. Adjusted diluted earnings per share was $1.60.

Chase Mulvehill: On our last quarterly call, we expected 2024, North American D&C spend to be flattish, but now expect spending down in low to mid single digits driven by mid single digit declines in U S land the.

Chase Mulvehill: The combination of a volatile commodity price environment sector consolidation and the inherent elasticity of shale versus conventional developments are all factors contributing to the slower ramp up in activity.

Lorenzo Simonelli: 76% above 2022 levels. Free cash flow increased 83% year over year to just over $2 billion. Total company orders increased 14% year over year, as IAT orders of $14.2 billion grew 12% when compared to last year's record orders and marked the third consecutive year of double-digit growth. New energy orders totaled $750 million, up 45% year over year. SSPS orders increased by 27% to $3.9 billion, the largest order year since 2014.

Chase Mulvehill: In OFC, we secured two significant multi year integrated services contracts with a Latin American operator for drilling completion, and plugging and abandonment services, highlighting the customers' confidence and Baker Hughes is diverse technology and service offering.

Chase Mulvehill: In the offshore market, we were awarded additional subsea trees during the quarter, bringing our total number of subsea tree awards in 2023% to 60%.

Chase Mulvehill: Turning to LNG on slide seven despite the recent weakness in LNG prices, we believe the long term outlook for the global LNG market remains solid in fact LNG prices remain at relatively strong levels compared to historical averages for example, 2023 European and Asian.

Lorenzo Simonelli: These record results highlight strong market tailwinds across both segments and the significant operational improvements the company has accomplished since 2022. Clearly, we are pleased with the progress demonstrated in 2023 and excited about where the company is headed in 2024 and beyond. Turning to slide five, fourth quarter adjusted EBITDA of $1.09 billion came in above the midpoint of our guidance range due to the continued operational improvement and full realization of the $150 million of cost out. Free cash flow of $633 million exceeded expectations and resulted in a full year free cash flow conversion of 54 percent. IAT orders remain strong, exceeding $3 billion for the fifth consecutive quarter.

Chase Mulvehill: Gas prices averaged about 20% above the 10 year average.

Chase Mulvehill: In the fourth quarter global LNG demand was up approximately 4% year over year.

Chase Mulvehill: For the full year global LNG demand reached record levels of 405, MTA up 2% compared to 2022, despite softer than anticipated gas demand in Europe.

Chase Mulvehill: LNG demand in Europe was around 115 MTA in line with 2022 levels.

Chase Mulvehill: Demand in China was 71, MTA up 10% year over year.

Chase Mulvehill: With estimated global nameplate capacity of 491, MTA last year effective utilization averaged 86%, which represents a tight LNG market.

Lorenzo Simonelli: In addition, we were awarded more than a billion dollars of CSA commitment. In OFSE, we continue to demonstrate solid margin improvement during the quarter, with segment EBITDA margin increasing to 17.9% as OFS EBITDA margins now exceed 20%, both record margins. Tadding to the macro on slide six, oil prices have weakened considerably since peaking in late September.

Chase Mulvehill: Looking into 2024, we forecast LNG demand to increase by 2%, which should result in utilization rates remaining at strong levels. As we forecast just 15 MTA of nameplate capacity coming online this year.

Chase Mulvehill: Looking out to 2025 and 2026, we see a similar trend of supply growth being balanced by demand growth, which should keep global LNG markets are good utilization levels.

Lorenzo Simonelli: Ultimately, weaker-than-anticipated oil demand, coupled with robust production growth, led to unexpected inventory builds into year-end. However, prices still remain at levels that are favorable for growth across our core OFSC market. For 2024, demand growth remains the biggest unknown in the face of global economic uncertainty and heightened geopolitical risk. On the supply side, the biggest risk factor is non-OPEC supply outpacing demand, possibly requiring OPEC plus to maintain the current level of cuts through the end of 2024. The volatility in commodity prices experienced during the fourth quarter and so far in 2024 will likely have some influence on upstream development plans. Accordingly, we now see international D&C spend growth decelerating into the high single-digit range this year, which is down slightly from our prior expectations for low double-digit growth.

Chase Mulvehill: With energy markets, including LNG still fundamentally tight.

Chase Mulvehill: Global coal demand set another record last year, increasing one 4% year over year to $8 5 billion tonnes.

Chase Mulvehill: We think this recent growth in coal demand provides additional long term growth opportunities for LNG, where we see cleaner burning natural gas, replacing high emission coal in the energy mix across many Asian countries, where coal is still the predominant energy source for electricity.

During the fourth quarter, we were pleased to be awarded by AD Nat gas on behalf of that not to electrical protection systems for the $9 six MTA ruse LNG project in the United Arab Emirates.

Chase Mulvehill: The LNG trains will be driven by Baker Hughes is 75 megawatt brush electric motor technology and will feature our state of the art compressor technology, making <unk> LNG one of the first all electric LNG projects in the Middle East.

Lorenzo Simonelli: Nevertheless, the international cycle remains healthy, and we see no deviation from the long-term development plans set in place among some of the world's largest NOCs. The offshore cycle is maintaining the momentum built over the past couple of years, and we have good visibility on the development pipeline, which is expected to support strong activity levels over the next several years. In North America, activity continues to lag, and we are now anticipating no meaningful recovery in activity during the first half of the year.

Chase Mulvehill: In 2020 free we were extremely pleased to book almost 80 MTA of LNG orders, which outpaced Fid's are 57, a M tpa.

Chase Mulvehill: This variance was the result of the timing difference between orders and <unk>, which has been accentuated by the tightening LNG equipment market.

Chase Mulvehill: The outlook for <unk> over the next few years remains strong and we see projects progressing across all markets.

Lorenzo Simonelli: On our last quarterly call, we expected 2024 North American DNC spend to be flattish, but now we expect spending down in low to mid-single digits, driven by mid-single-digit declines in U.S. lands. The combination of a volatile commodity price environment, sector consolidation, and the inherent elasticity of shale versus conventional developments are all factors contributing to the slower ramp-up in activity. In OFSC, we secured two significant multi-year integrated services contracts with a Latin American operator for drilling, completion, and plug-in abandonment services, highlighting the customer's confidence in Baker Hughes' diverse technology and service offerings. In the offshore market, we were awarded additional subsea trees during the quarter, bringing our total number of subsea tree awards in 2023 to 60.

Chase Mulvehill: For 2024, specifically, we expect LNG <unk> of around 65 M Tpa.

Chase Mulvehill: However, it is important to note. This includes a couple of major LNG orders that were booked during 2023.

Chase Mulvehill: As we look out to 2025 and 2026, we could see between 30 to 60 MTA of <unk> annually, bringing total potential LNG RFID to 125, MTA and 185 MTA through 2026.

Based on existing capacity projects under construction and future <unk> in the pipeline. We have line of sight for global LNG installed capacity to reach 800 <unk> by the end of 2030.

Chase Mulvehill: Representing an almost 75% increase in nameplate capacity from 2022 levels.

Chase Mulvehill: This provides good visibility for significant near term growth and gas tech equipment, where we have the broadest set of LNG solutions to suit customer needs, including our modular stick built onshore offshore floating and small scale LNG offerings.

Lorenzo Simonelli: Turning to LNG on slide 7, despite the recent weakness in LNG prices, we believe the long-term outlook for the global LNG market remains solid. In fact, LNG prices remain at relatively high levels compared to historical averages. For example, in 2023, European and Asian gas prices averaged about 20% above the 10-year average.

Chase Mulvehill: In addition, this expansion in our LNG installed base will provide long term structural growth for our gas Tech services.

Lorenzo Simonelli: In the fourth quarter, global LNG demand was up approximately 4% year over year. For the fall year, global LNG demand reached record levels of 405 MTPA, up 2% compared to 2022, despite softer-than-anticipated gas demand in Europe. LNG demand in Europe was around 115 MTPA, in line with 2022 levels. Demand in China was 71 MTPA, up 10% year over year.

Chase Mulvehill: Turning now to slide eight on the new energy front, we have seen a number of developments of the past quarter.

Chase Mulvehill: At Cop 28, which brought together 154 heads of state and other government officials.

Chase Mulvehill: <unk> was well represented by Baker Hughes I was particularly pleased to see the increased representation and participation from energy companies.

Chase Mulvehill: Key commitments from the conference include doubling the global average annual rate of energy efficiency improvements by 2030.

Chase Mulvehill: Net zero methane emissions and no routine flaring by 2030.

Lorenzo Simonelli: With an estimated global nameplate capacity of 491 MTPA last year, effective utilization averaged 86%, which represents a tight LNG market. Looking into 2024, we forecast LNG demand to increase by 2%, which should result in utilization rates remaining at strong levels, as we forecast just 15 MTPA of nameplate capacity coming online this year. Looking out to 2025 and 2026, we see a similar trend of supply growth being balanced by demand growth, which should keep global LNG markets at good utilization levels, with energy markets, including LNG, still fundamentally tight. Global coal demand set another record last year, increasing 1.4 percent year over year to 8.5 billion tons.

Chase Mulvehill: Endorsement for our global hydrogen certification standard and accelerating efforts towards the phase down of unabated coal power.

Chase Mulvehill: We also continued to see progress on the policy and permitting front in the United States that should help advanced emissions reductions progress.

Chase Mulvehill: We are pleased with the U S. As final ruling on the methane standards that should prevent an estimated 58 million tons of methane emissions from 2024 to 2038 according to the EPA.

Chase Mulvehill: Additionally, the state of Louisiana being granted primacy on classics World permitting should help to reduce <unk> U S project bottlenecks in that region of the United States.

Chase Mulvehill: In the area of hydrogen the U S. Treasury provided clarity on the 45, the hydrogen tax credits, which could impact the pace of green hydrogen development.

Lorenzo Simonelli: We think this recent growth in coal demand provides additional long-term growth opportunities for LNG, where we see cleaner-burning natural gas replacing high-emission coal in the energy mix across many Asian countries, where coal is still the predominant energy source for electricity. During the fourth quarter, we were pleased to be awarded by Adnok Gas, on behalf of Adnok, two electric liquefaction systems for the 9.6 MTPA RUES LMG project in the The LNG trains will be driven by Baker Hughes's 75 megawatt brush electric motor technology and will feature our state-of-the-art compressor technology, making Ruez LNG one of the first all-electric LNG projects in the Middle East.

Chase Mulvehill: We are hopeful that a pragmatic resolution will be reached that actually encourages rather than inhibits new investments in this critical industry that will play a vital role in decarbonizing hard to abate sectors.

Chase Mulvehill: As we have stated previously the energy transition will likely be more challenging and take longer than many expect.

Chase Mulvehill: This is why we at Baker Hughes are pursuing and all of the above strategy, where our technologies and capabilities have a key role to play in Decarbonizing the planet irrespective of the fuel source.

Chase Mulvehill: It is important to note the pace of the transition will not impact the ultimate size of the new energy market opportunity as.

Chase Mulvehill: As an illustration.

Chase Mulvehill: <unk> has size the annual clean energy investment at four five trillion.

Lorenzo Simonelli: In 2023, we were extremely pleased to book almost 80 MTPA of LNG orders, which outpaced FIDs of 57 MTPA. This variance was the result of the timing difference between orders and FIDs, which has been accentuated by the tightening LNG equipment market. The outlook for FIDs over the next few years remains strong, and we see projects progressing across all markets. For 2024, specifically, we expect LNG FIDs of around 65 MTPA. However, it is important to note this includes a couple of major LNG orders that were booked during 2023. As we look out to 2025 and 2026, we could see between 30 to 60 MTPA of FIDs annually, bringing total potential LNG FIDs to 125 MTPA and 185 MTPA through 2026. Based on existing capacity, projects under construction, and future FIDs in the pipeline, we have a line of sight for global LNG installed capacity to reach 800 MTPA by the end of 2030, representing an almost 75% increase in nameplate capacity from 2022 levels.

Chase Mulvehill: By the early 20, <unk> and $4 seven trillion by 2050 and that their net zero scenario.

Chase Mulvehill: In comparison investment in fossil fuels totaled just under one trillion dollars last year.

Turning to slide nine we are focused on executing our strategy over our free time horizons over the SaaS horizon, we're focused on unlocking the full potential of Baker Hughes successfully transforming our business and simplifying the way we work.

Chase Mulvehill: We are committed to developing and commercializing our new energy portfolio, while also evolving our digital offerings across both our FSC and <unk>.

Chase Mulvehill: These strategic investments along with better penetration across various underserved energy and industrial markets will be the underpinning for driving peer leading growth across.

Chase Mulvehill: Our next two time horizons.

While our activities in LNG and new energy have been the focus for investors in recent years I'd like to take this opportunity to shine a spotlight on parts of the broader portfolio.

Chase Mulvehill: And gas Tech.

Chase Mulvehill: 50% of our equipment business is focused on serving customers outside of LNG.

Chase Mulvehill: October machinery equipment generators motors and pumps have applications across multiple end markets, including upstream midstream refining petrochemical and various industrial end markets.

Lorenzo Simonelli: This provides good visibility for significant near-term growth in gas tech equipment, where we have the broadest set of LNG solutions to suit customer needs, including our modular, stick build, onshore, offshore, floating, and small-scale LNG offerings. In addition, this expansion in our LNG installed base will provide long-term structural growth for our gas tech services. Turning now to slide eight.

Chase Mulvehill: These segments have demonstrated exceptional growth since 2020, increasing by more than 50% and we have good visibility on a number of growth opportunities in the coming year.

Chase Mulvehill: Take the PSL markets. For example, we have booked more than $1 billion of awards over the past two years and expect the market could see a further seven to nine fps's take care.

Lorenzo Simonelli: On the new energy front, we have seen a number of developments in the past quarter at COP28, which brought together 154 heads of state and other government officials and was well represented by Baker Hughes. I was particularly pleased to see the increased representation and participation from energy companies. Key commitments from the conference include doubling the global average annual rate of energy efficiency improvements by 2030, net zero methane emissions and no routine flaring by 2030, endorsement of a global hydrogen certification standard, and accelerating efforts towards the phase down of unabated coal power. We also continue to see progress on the policy and permitting front in the United States that should help advance emissions reduction progress. We are pleased with the U.S.'s final ruling on the methane standards that should prevent an estimated 58 million tons of methane emissions from 2024 to 2038, according to the EPA. Additionally, the state of Louisiana being granted primacy on Class 6 wealth permitting should help to reduce CCUS project bottlenecks in that region of the United States.

Chase Mulvehill: Each share out to the latter part of this decade.

Chase Mulvehill: We are also seeing a lot of potential opportunities in onshore gas processing and pipelines as natural gas becomes an important aspect of the energy mix around the world, particularly in places like the middle East and Southeast Asia.

Chase Mulvehill: The diversity of our end markets and the opportunity set is not confined to equipment.

Chase Mulvehill: In gas tax services over 50% of our revenue has been generated from our transactional and upgrade services.

Chase Mulvehill: Which focus on maintaining our rotating equipment utilized in upstream midstream refining and petrochemical sectors.

Chase Mulvehill: Like LNG, which accounts for less than 40% of the gas Tech services revenue. These non LNG markets also have significant growth opportunities as our installed base expand significantly.

Chase Mulvehill: Our industrial Tech portfolio provides additional diversity into industrial markets like aerospace automotive steel and electronics.

Chase Mulvehill: In industrial solutions, we leverage our digital technology to monitor and maintain critical equipment.

Chase Mulvehill: We have a significant opportunity to extend this service beyond Dr critical equipment to the balance of plant.

Lorenzo Simonelli: In the area of hydrogen, the U.S. Treasury provided clarity on the 45-V hydrogen tax credits, which could impact the pace of green hydrogen development. We are hopeful that a pragmatic solution will be reached that actually encourages rather than inhibits new investments in this critical industry that will play a vital role in decarbonizing hard-to-abate sectors. As we have stated previously, the energy transition will likely be more challenging and take longer than many expect. This is why we at Baker Hughes are pursuing an all-of-the-above strategy, where our technologies and capabilities have a key role to play in decarbonizing the planet, irrespective of the fuel source. It is important to note the pace of the transition will not impact the ultimate size of the new energy market opportunity. As an illustration, the IEA has sized annual clean energy investment at $4.5 trillion by the early 2030s and $4.7 trillion by 2050 under its net zero scenario. In comparison, investment in fossil fuels totaled just under $1 trillion last year.

Chase Mulvehill: In industrial products, we are focused on increasing market penetration and high margin niche sectors.

Chase Mulvehill: Finally, and most importantly, we are able to leverage core technologies like compressors turbo Expanders and turbines across Cts is five targeted new energy markets. These are ccs hydrogen.

Chase Mulvehill: Geothermal.

Chase Mulvehill: Clean power and emissions management, providing additional long term growth for IAG.

Chase Mulvehill: As you can see we have a differentiated portfolio of technologies within that.

Chase Mulvehill: That provides baker Hughes, a unique opportunity to grow well beyond LNG.

Chase Mulvehill: Before turning it over to Nancy I would like to speak at a high level about our 2020 for outlook and.

Chase Mulvehill: And our FSC, we expect solid revenue growth led by international with a year of strong incremental margins as we continue to focus on reshaping the OCC cost structure and pursuit of 20% margins in 2025.

Chase Mulvehill: NIH.

Chase Mulvehill: Conversion of a record gas tech equipment, Apio will drive robust revenue growth with margins, improving despite increasing mix headwinds and putting us on a path toward our 20% margin target in 2026 with.

Lorenzo Simonelli: Turning to slide nine, we are focused on executing our strategy over our free time horizons. In the first Horizon, we're focused on unlocking the full potential of Baker Hughes, successfully transforming our business, and simplifying the way we work. We are committed to developing and commercializing our new energy portfolio while also evolving our digital offerings across both OFSE and IET. These strategic investments, along with better penetration across various underserved energy and industrial markets, will be the underpinning for driving peer-leading growth across the next two Time Horizons.

Speaker Change: With that I'll turn the call over to Nancy.

Nancy: Thanks, Laura Enzo I will begin on slide 11, with an overview of our consolidated results and then briefly talk to segment details before outlining our first quarter and full year 2024 outlook. We were very pleased with our fourth quarter and full year results. We made outstanding progress on all fronts during 2023.

Nancy: After another year of record orders in IEP capitalized on market tailwind to deliver robust revenue growth across both segments.

Nancy: Realize the full benefit of our $150 million cost out program and continue to transform how we operate.

Lorenzo Simonelli: While our activities in LNG and New Energy have been the focus for investors in recent years, I'd like to take this opportunity to shine a spotlight on parts of the broader IET portfolio. In gas tech, almost 50% of our equipment business is focused on serving customers outside of LNG. Our turbine machinery equipment, generators, motors, and pumps have applications across multiple end markets, including upstream, midstream, refining, petrochemical, and various industrial end

Nancy: For the fourth quarter adjusted EBITDA of 1.9 billion came in above the midpoint of our guidance range, which was due to a stronger margin performance across both segments.

Nancy: For the year EBITDA came in at the upper end of our original three six to $3 8 billion guidance range.

Nancy: Fourth quarter GAAP operating income was $651 million during the quarter adjusted operating income was $816 million.

Nancy: GAAP diluted earnings per share were <unk> 43.

Nancy: Excluding adjusting items earnings per share were <unk> 51.

Lorenzo Simonelli: These segments have demonstrated exceptional growth since 2020, increasing by more than 50 percent, and we have good visibility on a number of growth opportunities in the coming year. Take the FPSO markets, for example; we have booked more than one billion dollars of awards over the past two years and expect the market could see a further seven to nine FPSOs take FID each year out to the latter part of this decade. We are also seeing a lot of potential opportunities in onshore gas processing and pipelines as natural gas becomes an important aspect of the energy mix around the world, particularly in places like the Middle East and Southeast Asia.

Nancy: Which resulted in 2023 adjusted EPS of $1 60, a new record.

Total company orders of $6 $9 billion during the quarter maintained strong momentum highlighted by continued strength in <unk> orders for the year IGT orders totaled $14 2 billion.

Nancy: Which sets another record.

Nancy: Sps full year orders were a robust $3 $9 billion, which as Lorenzo mentioned marks our largest order intake for that business since 2014.

Nancy: Thanks to the sustained strength in orders.

Nancy: <unk> of $29 $9 billion ended the quarter at yet another record level.

Nancy: <unk> remained at a healthy $3 5 billion.

Lorenzo Simonelli: The diversity of our end markets and the opportunity set is not confined to equipment. In gas tech services, over 50% of our revenue has been generated from our transactional and upgrade services, which focus on maintaining our rotating equipment utilized in upstream, midstream, refining, and petrochemical sectors. Like LNG, which accounts for less than 40% of gas tech services revenue, these non-LNG markets also have significant growth opportunities as our installed base expands significantly. Our industrial tech portfolio provides additional diversity into industrial markets like aerospace, automotive, steel, and electronics. In Industrial Solutions, we leverage our digital technology to monitor and maintain critical equipment.

Nancy: Up 37% year over year.

Nancy: These <unk> levels provided exceptional revenue and earnings visibility over the coming years.

Nancy: Free cash flow outperformed our expectations coming in at $633 million for the full year, we generated over $2 billion of free cash flow, resulting in a conversion rate of 54% from adjusted EBITDA, which was above the high end of our expected range.

Nancy: In 2024, we are targeting free cash flow conversion of 45% to 50% and expect 50.

Nancy: Percent plus conversion rates through horizon, two and three.

Nancy: Turning to slide 12, our balance sheet remains strong as we ended the fourth quarter with cash of $2 65 billion net debt to trailing 12 month adjusted EBITDA ratio of <unk> nine times and liquidity of over $5 5 billion.

Lorenzo Simonelli: We have a significant opportunity to extend this service beyond our critical equipment to the balance of plants and industrial products; we are focused on increasing market penetration in high-margin niche sectors. Finally, and most importantly, we are able to leverage core technologies like compressors, turbo expanders, and turbines across CTS's five targeted new energy markets. These are CCUS, hydrogen, and geothermal.

Nancy: During the fourth quarter, we extended our $3 billion revolving credit facility by four years, which now has a maturity of November 2028, and we also used available cash to pay down $650 million of senior notes.

Nancy: Turning to capital allocation on slide 13.

Nancy: In 2023, we returned more than $1 3 billion to shareholders equivalent to 65% of free cash flow. This included almost $800 million of dividends, where we have increased the quarterly dividend twice over the past five quarters and.

Lorenzo Simonelli: Clean Power and Emissions Management, providing additional long-term growth for IET. As you can see, we have a differentiated portfolio of technologies within IET that provides BakerHughes a unique opportunity to grow well beyond LNG. Before turning it over to Nancy, I would like to speak at a high level about our 2024 outlook.

Nancy: In addition, we repurchased $538 million of Baker Hughes shares in 2023, including $321 million during the fourth quarter.

Nancy: We are committed to returning 60% to 80% of free cash flow to investors and have a strong track record.

Nancy: Since the company was formed in 2017, we've now returned $10 billion to shareholders through dividends and buybacks.

Nancy K. Buese: In OFSE, we expect solid revenue growth led by international with a year of strong incremental margins as we continue to focus on reshaping the OFSE cost structure in pursuit of 20% margins in 2025. In IET, conversion of our record gas tech equipment RPO will drive robust IET revenue growth, with margins improving despite increasing mix headwinds and putting us on a path toward our 20% margin target in 2026. With that, I'll turn the call over to Nancy.

Nancy: We plan to grow our dividend with increases driven by the structural earnings power and growth of the company. We will continue to utilize buybacks to reach our 60% to 80% target and we will remain opportunistic on buybacks within this range.

Nancy: Now I will walk you through the business segment results in more detail and provide our 2020 for outlook.

Nancy: Starting with oilfield services and equipment on slide 14, the segment performed slightly above expectations as <unk> margins exceeded the 20% level. Despite the softer U S land market, where rig activity fell 4% during the quarter.

Nancy: Sps orders of $654 million contributed to the highest order year since 2014.

Nancy K. Buese: Thanks, Lorenzo. I will begin on slide 11 with an overview of our consolidated results and then briefly talk about segment details before outlining our first quarter and full year 2024 outlook. We were very pleased with our fourth quarter and full year results. We made outstanding progress on all fronts during 2020. We booked another year of record orders in IET, capitalized on market tailwinds to deliver robust revenue growth across both segments, realized the full benefit of our $150 million cost-out program, and continue to transform how we operate. For the fourth quarter, adjusted EBITDA of $1.09 billion came in above the midpoint of our guidance, due to stronger margin performance across both segments. For the year, EBITDA came in at the upper end of our original 3.6 to 3.8 billion guidance. Fourth Quarter Gap Operating Income was $651 million during the quarter. Adjusted Operating Income was $860 million, and gap-diluted earnings per share were 43 cents, excluding adjusting items.

Nancy: With the offshore market expert acted to remains strong we expect Sps orders to persist at healthy levels in 2024 and beyond.

Nancy: Oh FSC revenue in the quarter was $3 95 billion up 11% year over year.

Nancy: Excluding Sps International revenue was up 2% sequentially as seasonal declines in Europe were more than offset by strength in Latin America and sub Saharan Africa.

Nancy: Excluding Sps North America revenue was down 3% sequentially as North America land declined during the quarter.

Nancy: Oh FSC EBITDA in the quarter was $709 million.

Nancy: Up 6% sequentially and up 16% year over year, while also slightly above our guidance midpoint of $705 million.

Nancy: Hello, FSC EBITDA margin rate was 17, 9%, increasing 99 basis points sequentially and 79 basis points year over year.

Nancy K. Buese: Earnings per share were $51,000, which resulted in 2023 adjusted EPS of $1.00. Total company orders of $6.9 billion during the quarter maintained strong momentum, highlighted by continued strength and IET. For the year, IET orders totaled $14.2 billion, which sets another record.

Nancy: Sps margins significantly improved year over year, increasing by 300 basis points to just over 8% driven by improved execution and commercial success.

Nancy: Now turning to industrial and energy technology on slide 15.

Nancy: This segment also performed above expectations during the quarter due to a better than expected gas tech margin.

Nancy: IGT orders were $3 billion.

Nancy K. Buese: SSPS full-year orders were a robust $3.9 billion, which, as Lorenzo mentioned, marks our largest order intake for that business since 2014. Thanks to the sustained strength in orders, IET RPO of $29.9 billion ended the quarter at yet another record level, while OFSC RPO remained at a healthy $3.5 billion, up 37% year-over-year. These RPO levels provide exceptional revenue and earnings visibility over the coming year. Free cash flow outperformed our expectations, coming in at $633 million. For the full year, we generated over $2 billion of free cash, resulting in a conversion rate of 54% from adjusted EBITDA, which was above the high end of our expected rate. In 2024, we are targeting free cash flow conversion of 45 to 50 percent and expect percent plus conversion rates through Horizon. Turning to slide 12, our balance sheet remains strong as we enter the fourth quarter with cash of $2.65 billion, net debt to trailing 12-month adjusted EBITDA ratio of 0.9 times. Thank you for joining us. Thank you. Thank you.

Nancy: Included more than $800 million of LNG equipment, bringing full year LNG equipment orders to approximately $5 6 billion.

Nancy: Orders in Cts, which now comprises igt's, new energy business increased to $123 million in the fourth quarter with about 80% of these orders representing projects across the clean power and emissions management market.

Nancy: <unk> ended the quarter at $29 9 billion up 4% sequentially gas.

Nancy: Gas Tech equipment, <unk> was $12 1 billion.

Nancy: Gas Tech services <unk> was $14 8 billion and included more than $1 $1 billion of newly signed CSA contracts.

Nancy: <unk> equipment book to Bill was one one times.

Nancy: 10th consecutive quarter above one.

Nancy: Turning to slide 16, IEP revenue for the quarter was $2 9 billion up 24% versus the prior year led by gas Tech equipment growth that was up more than 40% year over year, driven by execution of project backlog.

<unk> EBITDA was $463 million up 8% year over year and coming in above our guidance midpoint of $460 million.

Nancy K. Buese: During the fourth quarter, we extended our $3 billion revolving credit facility by four years, which now has a maturity of November 2028. And we also used available cash to pay down $650 million of. Turning to capital allocation on slide 13. In 2023, we will return more than $1.3 billion to shareholders, equivalent to 65% of free cash. This included almost $800 million of dividends, where we have increased the quarterly dividend twice over the past five quarters. In addition, we repurchased $538 million of BakerHughes shares in 2020, including $321 million during the fourth quarter.

Nancy: EBITDA margin was 16, 1% down 233 basis points year over year, a solid improvement in gas tech equipment margin was offset by mix and higher R&D spend related to our new energy investments.

Nancy: For 2023.

Nancy: R&D spending increased by approximately $70 million as we continue to advance our new energy investments as well as investing in other technology upgrades.

Nancy: Turning to slide 17, before detailing our outlook I'd like to provide an update on our business transformation activities and the path that lies ahead and unlocking the full potential of Baker Hughes.

Nancy: Over the course of the past 18 months the business has undertaken significant structural changes the delivered over $150 million of annualized cost synergies, providing sustainable benefits across the organization.

Nancy K. Buese: We are committed to returning 60-80% of free cash flow to investors and have a strong track record. Since the company was formed in 2017, we've now returned $10 billion to shareholders through dividends and by-payments. We plan to grow our dividend with increases driven by the structural earnings power and growth of the business. We will continue to utilize buybacks to reach our 60% to 80% target and will remain opportunistic on buybacks. Now I will walk you through the business segment results in more detail and provide our 2024 outlook, starting with oil field services and equipment on slide 14. The segment performed slightly above expectations, as OFS margins exceeded the 20% level. Despite the softer U.S. landscape, where RIG activity fell 4% during, SSPS orders of $654 million contributed to the highest order year since 2006.

Nancy: However, there is still more to do as we continue our transformation journey.

Nancy: Our focus is on operational excellence and continuous improvement in all that we do early this year, we launched actions in OFC to remove duplication and drive more cost efficiency across the business.

Nancy: These measures resulted in additional restructuring charges during the fourth quarter with these changes being executed during the first half of 2024.

Nancy: These charges are almost entirely related to severance costs.

Nancy: It's important to note that these discrete OFC actions will drive margin upside into the back half of this year and put the segment on a clear path to achieve 20% margins in 2025.

Nancy: As we continue our transformation work in 2024, we continue to focus on eliminating duplication remaining focused on execution and listening to our customers while ensuring the company is set up for success in the back half of this decade.

Nancy K. Buese: With the offshore market expected to remain strong, we expect SSPS orders to remain healthy levels. OFSC revenue in the quarter was $3.95 billion, up 11% year over year, including SSPS. International revenue was up 2% sequentially as seasonal declines in Europe were more than offset by strength in Latin America and Sub-Saharan Africa, including SSPS. North America revenue was down 3% sequentially as North American land declined during the quarter.

Nancy: In 2023, we laid the groundwork for improved execution accountability and transparency, we will draw on those foundational aspects to evolve Baker Hughes.

Nancy: We've begun the work of synchronizing, many diverse systems and working towards efficient and streamlined processes and reporting.

Nancy: These efforts will allow us efficiency gains improved data.

Nancy K. Buese: OFSC EBITDA in the quarter was $709 million, and up 16% year-over-year, while also slightly above our guidance midpoint of $705 million. The OFSC EBITDA margin rate was 17.9%, increasing 99 basis points sequentially and 79 basis points year-over-year. SSPS margins significantly improved year over year, increasing by 300 basis points to just over, driven by improved execution and commercial. Now turning to industrial and energy technology on the slide. This segment also performed above expectations during the quarter due to a better-than-expected gas price. IET orders were three billion dollars, which included more than $800 million of LNG. Full Year LNG Equipment Orders to approximately $5,000.

All oriented towards the goal of structural margin improvement.

Nancy: Further part of our transformation journey is centered around our approach to customers and meeting their needs as we've highlighted customers are increasingly looking for integrated solutions as they reduce the emissions footprint of their operations.

Nancy: It is critical that our OFC niet commercial teams collaborate and respond to these customer demands.

Driven by this developing customer trend, we see an opportunity for greater collaboration across the Baker Hughes organization, which will be a vitally important factor and unlocking the full commercial potential of our unique and differentiated service and technology portfolio.

Nancy: Next I'd like to update you on our outlook for the two business segments, which is detailed on slide 18.

Nancy: Overall, the outlook remains strong for both FSC and IGT with tailwind is expected to persist across each business in spite of macro uncertainty.

Nancy K. Buese: Orders in CTS, which now comprises IET's new energy, increased to $123 million in the fourth quarter, about 80% of these orders representing projects across the Clean Power and Emissions Management IETRPO ended the quarter at $29.9 billion, up 4%. Gas Tech Equipment RPO was $12.1 billion. GasTech Services RPO was $14.8 billion and included more than $1.1 billion of newly signed CSA. Gas Tech equipment booked to bill was Turning to slide 16, IET revenue for the quarter was $2.9 billion, up 24% versus the prior year, led by Gas Tech Equipment growth that was up more than 40% year-over-year driven by the execution of projects. IET EBITDA was $463 million, up 8% year over year, and coming in above our guidance midpoint of $463 million.

Nancy: This will be complemented by continued operational enhancements driving sustained improvement in backlog execution and margin upside as we pursue our 20% margin target across both segments.

Nancy: For Baker Hughes, we expect first quarter revenue to be between six one and $6 6 billion and EBITDA between $880 and $960 million.

Nancy: We expect first quarter results to reflect seasonal declines in both gas tech and industrial Tech businesses.

Nancy: However, due to improved linearity, we expect gas techs sequential declines to be less pronounced than prior years overall.

Nancy: Overall for <unk>, we expect first quarter revenue between two four and $2 65 billion and.

Nancy: And EBITDA between 340 and $380 million.

Nancy: The major factors driving this range will be the pace of backlog conversion and gas tech equipment and the impact of any aero derivative supply chain tightness in gas tech.

Nancy: FSC, we expect first quarter results to reflect the typical seasonal decline in international revenues as well as the slow start across U S land market.

Nancy K. Buese: David Dammarjian with 16.1%, down 233 basis points year over year, as solid improvement in gas tech equipment margin was offset by mix and higher R&D spend related to our new energy. IET R&D spending increased by approximately $70 million as we continue to advance our new energy investment, as well as invest in other IETs. Turning to slide 17.

Nancy: We therefore expect first quarter OFC revenue between three seven and $3 95 billion and EBITDA between $630 and $670 million.

Nancy: Factors driving this range include the pacing of 2020 for E&P budgets.

Nancy: Backlog conversion realization of further cost out initiatives and winter weather in the northern hemisphere.

Nancy: Turning to our full year outlook.

Nancy: For the full year 2024, we expect Baker Hughes' revenue to be between 26, 5% and $28 5 billion.

Nancy K. Buese: Before detailing our outlook, I'd like to provide an update on our business transformation activities and the path that lies ahead in unlocking the full potential of. Over the course of the past 18 months, the business has undertaken significant structural changes that delivered over $150 million in analyzed revenue, providing sustainable benefits across the organization. However, there is still more to do as we continue our transformation. Our focus is on operational excellence and continuous improvement in all that we do. Early this year, we launched actions in OFSE to remove duplication and drive more cost efficiency across. These measures resulted in additional restructuring charges during the fourth quarter, with these changes being implemented during the first half of 2024. These charges are almost entirely related to severance costs.

Nancy: And EBITDA between four one and $4 5 billion.

Nancy: In addition, we expect total company, new energy orders of $800 million to $1 billion.

Nancy: Which would amount to more than tripling of new energy orders since 2021.

Nancy: We expect orders to remain at robust levels. This year anticipating a range between 11, 5% to $13 $5 million driven.

Nancy: Driven by strong momentum across all aspects of the portfolio importantly, we expect a noticeable increase in non LNG gas equipment orders.

Nancy: As a result of this continued momentum in exceptional orders performance over the last two years, we expect full year <unk> revenue between $10 75, and $11 75 billion and EBITDA between $1 65, and $1 $85 billion.

Nancy K. Buese: It's important to note that these discrete OFSC actions will drive margin upside into the back half of the year and put the segment on a clear path to achieve 20% margin. As we continue our transformation work in 2024, we continue to focus on eliminating duplication, remaining focused on execution, and listening to our customers while ensuring the company is set up for success in the back half of the year. In 2023, we laid the groundwork for improved execution, accountability, and transparency; we will draw on those foundational aspects to evolve. We've begun the work of synchronizing many diverse systems and working towards efficient and streamlined processes and reports.

Nancy: For OFC, we forecast full year revenue between $15, 75% and $16 75 billion and EBITDA between two eight and $3 billion.

Nancy: As we expect softness in North America land to more than offset continued strength across international markets.

Nancy: In summary, 2023 was a strong year of execution for Baker Hughes, where we delivered results near the high end of our original guidance range and set records for all our primary financial metrics and.

Nancy: In 2024, we expect double digit EBITDA growth for the fourth consecutive year as we remain focused on execution driving further operational improvements and capitalizing on market tailwind with our unique solutions and equipment portfolio.

Nancy K. Buese: These efforts will allow us efficiency gains and improve data, all oriented towards the goal of structural margin. Further, part of our transformation journey is centered around our approach to customers and meeting their needs. As we've highlighted, customers are increasingly looking for integrated solutions as they reduce the emissions footprint of their operations. It is critical that our OFSC and IET commercial teams collaborate and respond to these customers.

Nancy: Lastly, we are intensely focused on achieving the guidance set for 2024, and 20% EBITDA margin targets for <unk> in 2025 and <unk> in 2026.

Nancy: And while 20% segment margins are important intermediate goals, we will continue to take transformative actions to exceed these levels overall.

Nancy: Overall, we are proud of the progress demonstrated by our 2023 results and remain very excited about the future of Baker Hughes.

Nancy: Turn the call back over to Lorenzo.

Nancy K. Buese: Driven by this developing customer trend, we see an opportunity for greater collaboration across the Baker Hughes organization, which will be a vitally important factor in unlocking the full commercial potential of our unique and differentiated service and technology. Next, I'd like to update you on our outlook for the two business segments, which are detail and sliding. Overall, the outlook remains strong for both OFSC and IE, with tailwinds expected to persist across each business in spite of macro. This will be complemented by continued operational enhancements driving sustained improvement and backlog execution, and Marjin Upside as we pursue our 20% margin target across. Baker Hughes, we expect first quarter revenue to be between 6.1 billion dollars and EBITDA between $880 and $950. For IET, we expect first quarter results to reflect seasonal declines in both gas tech and industrial technology.

Lorenzo Simonelli: Thank you Nancy as you can see from our strong 2023 results and the exceptionally strong margin improvement illustrated on Slide 20, Baker Hughes is on its way to becoming a leaner and more efficient energy technology company.

We continue to carefully execute a plan to drive margins meaningfully higher put simply we remain relentless in transforming the way we operate.

Lorenzo Simonelli: We also have a unique technology portfolio that will drive growth across all three of our horizons irrespective of the pace of the energy transition.

Lorenzo Simonelli: In addition, our versatile OFC and IHT portfolios provide significant growth opportunities across underserved end markets.

Lorenzo Simonelli: This broad based portfolio that underpinned, our 17% EBITDA compounded annual growth rate from 2020 through 2023.

Lorenzo Simonelli: Given our balanced portfolio untapped market opportunities and overhauled cost structure.

Nancy K. Buese: However, due to improved linearity, we expect GASTEC sequential declines to be less pronounced than prior years. Overall, for IET, we expect first-quarter revenue between $2.4 and $2.65 billion and EBITDA between $340 and $380 million. The major factors driving this range will be the pace of backlog conversion in gas technology and the impact of any aeroderivative supply chain tightening. For OFSE, we expect first quarter results to reflect the typical seasonal decline in international revenues, as well as a slow start across U.S. economies.

Lorenzo Simonelli: Baker Hughes is becoming less cyclical in nature, and therefore should generate more durable earnings and free cash flow across cycles.

Lorenzo Simonelli: Finally, while on this journey, we remain committed to our employees customers and shareholders as we continue to push Baker Hughes forward.

Lorenzo Simonelli: With that I'll turn the call back over to Chase.

Chase Mulvehill: Thanks Lorenzo.

Chase Mulvehill: Later, let's open the call for questions.

Chase Mulvehill: Thank you.

Chase Mulvehill: As a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, one moment for questions.

Nancy K. Buese: We therefore expect first quarter OFSC revenue between $3.7 and $3.95 billion and EBITDA between $630 and $670 billion. Factors driving this range include the pacing of 2024 EMP budgets, SSPS backlog conversions, Realization of Further Cost-Out Initiatives, and Winter Weather in the Northern... Turning to our full year outlook. For the full year 2024, we expect Baker Hughes revenue to be between $26.5 and $28.5 billion and EBITDA between $4.1 and $4.5 billion. In addition, we expect total company new energy orders to be between $800 million and $1 billion, which would amount to more than tripling new energy orders since 2020. We expect IET orders to remain at robust levels this year.

Speaker Change: Our first question comes from James West with Evercore ISI you May proceed.

James Carlyle West: Hey, good morning, Lorenzo it Nancy.

James Carlyle West: Hi, James.

James Carlyle West: So.

James Carlyle West: There's a lot of versatility in the portfolio that you guys have put together here.

James Carlyle West: And you talked a bunch about.

About in your prepared remarks, but I'm curious to know.

James Carlyle West: Which of the end markets.

James Carlyle West: Today do you see the biggest opt.

James Carlyle West: Opportunities for growth.

Speaker Change: Yeah definitely James and.

Speaker Change: We've said it before and we wanted to state it more clearly.

Speaker Change: Business has a very expansive portfolio of equipment and solutions, which really play across many different end markets, including upstream midstream refining petrochemical and a number of industrial end markets Aerospace automotive and we think that's been underappreciated state and largely because there's been a large focus switch.

Nancy K. Buese: We anticipate a range between $11.5 to $13.5 million, driven by strong momentum across all aspects of the IET portfolio. And importantly, we expect a noticeable increase in non-LNG gas technology. As a result of this continued momentum and exceptional order performance over the last two years, we expect full-year IET revenue between $10.75 and $11.75 billion, and EBITDA between $1.65 and $1.85 billion. For OFSE, we forecast full-year revenue between $15.75 and $16.75 billion, and EBITDA between $2.8 and $3 billion, as we expect softness in North America land to more than offset continued strength across international borders.

Speaker Change: Quite reasonably on LNG, and new energy and we're very proud of our LNG business. We've worked hard over the years to build it and we've got differentiated solutions and we're going to be committed to continue being the market leader for liquefaction solutions across all of the LNG market and we think that LNG is still very positive with.

Speaker Change: LNG awards over the next two to three years and also reaching the market installed capacity of 800, MTP a by 'twenty Friday, but our gas deck equipment is also more than that we've demonstrated exceptional growth since 2020, increasing by more than 50%.

Nancy K. Buese: In summary, 2023 was a strong year of execution for Big, where we delivered results near the high end of our original guidance range and set records for all our primary. In 2024, we expect double-digit EBITDA growth for the fourth consecutive year as we remain focused on economic growth, driving further operational improvement, and capitalizing on market tailwinds with our unique solution. Lastly, we are intensely focused on achieving the guidance set for 2024 and our 20% EBITDA margin targets for OFSC in 2025 and IET in 2021. And while 20% segment margins are important intermediate goals, we will continue to take transformative actions to exceed them. Overall, we are proud of the progress demonstrated by our 2023 results and remain very excited about the future. I turn the call back over to Nancy. Thank you.

Speaker Change: In other areas and we've got good visibility on a number of growth opportunities in the coming years couple of examples as you look at onshore.

Speaker Change: Onshore offshore production.

Speaker Change: We've got a leadership position in <unk> and we see a seven to nine <unk> over the course of the next few years.

Speaker Change: And onshore production, we're seeing the emergence of a number of.

Speaker Change: Opportunities associated with pipeline and the processing of gas in particular as that continues to grow in places like the middle East and also exposure to petrochemicals, which is ultimately anticipate it to continue to grow and we've got the new Nova class of turbines compressors valves pumps gears.

Speaker Change: <unk> solutions so.

Speaker Change: Put all in all it boils down to an exceptionally versatile portfolio that provides us significant growth opportunities as we serve many of the strengthening underserved market in the coming years.

Lorenzo Simonelli: As you can see from our strong 2023 results and the exceptionally strong margin improvement illustrated on slide 20, Baker Hughes is on its way to becoming a leaner and more efficient energy technology company. We continue to carefully execute our plan to drive margins meaningfully higher. Put simply, we remain relentless in transforming the way we operate.

Speaker Change: Alright, great. So that's great.

Speaker Change: Huge opportunities there and then maybe a follow up for me on the new energies business.

Speaker Change: Clearly orders ramping significantly $400 million to $750 million.

Lorenzo Simonelli: We also have a unique technology portfolio that will drive growth across all three of our horizons, irrespective of the pace of the energy transition. In addition, our versatile OFSC and IET portfolios provide significant growth opportunities across underserved and mature markets. It's this broad-based portfolio that underpins our 17% EBITDA compounded annual growth rate from 2020 through 2023. Given our balanced portfolio, untapped market opportunities, and overhauled cost structure. Baker Hughes is becoming less cyclical in nature and should generate more durable earnings and free cash flow across cycles. Finally, while on this journey, we remain committed to our employees, customers, and shareholders as we continue to push Baker Hughes forward. With that, I'll turn the call back over to Chase.

Speaker Change: Her name is guidance for this year.

Speaker Change: Continued growth there.

Speaker Change: Which parts of the new introduce portfolio kind of similar question to the.

Speaker Change: IAC broadly but.

Speaker Change: Do you see the most potential near term growth, whereas the biggest demand today.

Speaker Change: Definitely we've been very pleased with the progress of new energy orders and you saw last year that we continue to.

Speaker Change: Also our guidance on your energy and as you correctly stated we've given guidance for this year relative to the 800 and also the $1 billion and we really think that this growth continues going forward.

Speaker Change: Markets are growing maturing across both <unk> and OFC portfolio technologies and when you look at it. It really is a sequence of carbon capture technologies that we have in our portfolio compact carbon capture mosaic as you look at direct air capture you look at the partnership we have with net power.

Thanks, Lorenzo. Operator, let's open the call for questions. Thank you. As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again.

Speaker Change: Sure supplying tableau Expanders and also as you look at hydrogen and you've seen the growing emphasis on hydrogen and hot to a beta areas, but also geothermal and looking at emissions management and that the flaring and I think.

Unnamed Host: One moment for questions. Our first question comes from James West with Evercore ISI. You may proceed. Hey, good morning, Lorenzo and Nancy. Hi, James.

Speaker Change: Again as a consequence of some of the discussions of Cop 28, there's a clear move towards accelerating some of these as we continue to move forward.

Speaker Change: Our total addressable market, we've mentioned it before for new energy in 'twenty fatty is between $60 billion to $70 billion across the five major markets that we serve and we believe we can book, 6% to $7 billion of new energy orders by 20 Friday. So again, it's something that we see as a growing area of the business.

James Carlyle West: So, Lorenzo, there's a lot of versatility in the IET portfolio that you guys have put together here, and you talked a lot about it in your remarks, but I'm curious to know, you know, which of the end markets today do you see the biggest opportunities for growth? Yeah, definitely, James.

Speaker Change: I feel confident in that $6 billion to $7 billion of new LNG orders in 2030.

Perfect. Thanks, Linda.

Lorenzo Simonelli: And, you know, we've said it before, and we wanted to state it more clearly, our IAT business has a very expansive portfolio of equipment and solutions that really play across many different end markets, including upstream, midstream, refining, petrochemical, and a number of industrial end markets, aerospace, automotive. And we think that's been underappreciated to date, largely because there's been a large focus, which And we're very proud of our LNG business. We've worked hard over the years to build it, and we have differentiated solutions. And we're going to be committed to continue being the market leader for liquefaction solutions across all of the LNG markets. And we think that LNG is still very positive with LNG awards over the next two to three years and also reaching the market installed capacity of 800 MTPA by 2030. But our gas tech equipment is also more than that.

Linda: Thanks Jay.

Speaker Change: Thank you.

Speaker Change: One moment for questions.

Speaker Change: Our next question comes from Luke Lemoine with Piper Sandler you May proceed.

Luke Lemoine: Hey, good morning, Lorenzo Nancy.

Luke Lemoine: Okay.

Your 24 quantitative outlooks pretty clear you gave us the international North America, obviously growth rates as well, but I want to see if you could just loosely walk us through some of the qualitative aspects of the 24 also seen margin increase along with the drivers of the increase in <unk>.

Luke Lemoine: Restaurant margins.

Yeah. So thanks Louise for the question, Yes, we've been really pleased with our performance in 'twenty three we generated record EBITDA at levels last year that were about 25% before above type prior cycle peaks.

Luke Lemoine: On our consolidated data at EBITDA margins for 'twenty, three re averaged about 200 bps above the 18 and 19 levels. So at the midpoint of our guidance. This implies another year of strong EBITDA in the mid teens range, which would mark crest, the fourth consecutive year of double digit growth.

Lorenzo Simonelli: We've demonstrated exceptional growth since 2020, increasing by more than 50% in other areas. And we've got good visibility on a number of growth opportunities in the coming years. A couple of examples, as you look at onshore and offshore production, OOP, you know, we've got a leadership position in FPSOs, and we see another seven to nine FPSOs over the course of the next few years. In onshore production, you know, we're seeing the emergence of a number of opportunities associated with pipelines and the processing of gas, in particular, as that continues to grow in places like the Middle East And also exposure to petrochemicals, which is ultimately anticipated to continue to grow.

Luke Lemoine: And then when we think about 2024, we're going to show another material step up in margins for the total company up about 100 basis points for overall company results.

And then to your question about the segments. They both demonstrate margin improvement with potential upside as we continue to execute further cost optimization initiatives across the organization and then in OFC in particular, the cost initiatives that we launched early here in 2024 will really helped drive that margin upside into the back half of the year and we.

Luke Lemoine: The <unk> business to average about 20% EBITDA margins in 2024, so theres still a lot of macro and geopolitical uncertainty as we think about our 2000 and for guidance and we also have concerns still about the aero derivative supply chain tightness that we're managing through all of 2024 for gas Tac I would say also in OFC, we see.

Lorenzo Simonelli: And we've got the new Nova class of turbines, compressors, valves, pumps, gears, and digital solutions. So, put all together, it boils down to an exceptionally versatile IAT portfolio that provides us with significant growth opportunities as we serve many of the strengthening underserved markets in the coming years. Right, great. That's great.

Luke Lemoine: Questions for us about the U S land market in 2024, but our view on guidance overall is really based on on where we sit in the market conditions, where we operate and so that's really where we.

James Carlyle West: Great to hear. I think there are huge opportunities there. And maybe a follow-up for me on the New Energies business. Clearly, orders are ramping up significantly, 400 to 750 million. And I heard Nancy's guidance for this year is being, you know, continued growth there. Which parts of the New Energies portfolio, kind of a similar question to the IET broadly, but do you see the most potential near-term growth? Where's the biggest demand today? Definitely

Luke Lemoine: We've come from as a source of our guidance numbers for 2024, and we're taking what I would call a really prudent and balanced approach to our guidance. We've got a lot of confidence in our numbers and were working hard as we demonstrated in 2023 unpredictability. So I would say net net knowing what we know today, we think the midpoint of our guidance range appropriately balances.

Luke Lemoine: All of the risks and opportunities that we see across both the <unk> I know FSC businesses.

Speaker Change: Alright Luke.

Speaker Change: Thing I'd just mention is it shows significant growth across both segments and continuing the trajectory that we've laid out very clearly with the targets set forth for 25 and 26 on the EBITDA rate as well as then the free cash flow. So I feel very confident on the execution of the strategy that we've laid out.

Lorenzo Simonelli: We've been very pleased with the progress of new energy orders, and you saw last year that we continue to take up our guidance on new energy. And as you correctly stated, we've given guidance for this year relative to the 800 and also the billion, and we really think that this growth will continue going forward. The markets are growing and maturing across both IET and OFSC portfolio technologies. And when you look at it, it really is a progression of carbon capture technologies that we have in our portfolio. Compact carbon capture, Mosaic.

Speaker Change: Okay. Thanks, and then maybe just touch on that a little more lines of that 20% EBITDA margin targets for <unk>.

Speaker Change: <unk> 25 in 2000.

And 26 can you walk us through how you see those business lines unfolding to achieve those targets kind of relative to your 24 guidance.

Speaker Change: Yes, sure I'll, let Nancy walk through the details it's a combination of a number of things and.

Lorenzo Simonelli: As you look at direct air capture, you see the partnership we have with NetPower supplying turbo expanders. And also, as you look at hydrogen, and you've seen the growing emphasis on hydrogen in hard-to-abate areas, but also geothermal, and looking at emissions management and deflaring. And I think, again, as a consequence of some of the discussions at COP 28, there's a clear move towards accelerating some of these as we continue to move forward. And, you know, our total addressable market, we've mentioned it before, for new energy in 2030 is between 60 to 70 billion dollars across the five major markets that we serve. And we believe we can book six to seven billion dollars of new energy orders by 2030. So, again, it's something that we see as a growing area of the business and feel confident about that six to seven billion dollars of new energy orders by 2030. Perfect. Thanks, Lindsay.

Nancy: Actions that we've already put in place so yes.

Nancy: We remain as we said very committed to those 20% EBITDA targets for both the OFC and Aida, we have a clearly defined path on how we're going to get to each of those targets and as we highlighted on the call. Today. There is a number of actions, we're taking to make structural changes to the way, we operate and truly streamline our overall cost profile and thats going to really help aid.

Nancy: That market margin progression in the timeline, we've indicated and again, what we've said earlier this year about Oh FSC, we've taken those charges in the fourth quarter. Those are largely severance with a very short payback period, that's going to clear that path for the OFC business to get to those 20% margins by 2025.

Nancy: And also drive some some good margin ups.

Nancy: Upside in the back half of this year.

Nancy: No wait for US there and then this is in addition to the more than $60 million of costs, we already removed from the office business. Following a combination of ofa with Sanofi at the end of 2022.

James Carlyle West: Thanks, Jay. Thank you. One moment for questions. Our next question comes from Luke Lemoine with Piper Sandler. You may proceed. Hey, good morning, Lorenzo, Nancy.

Nancy: And then also in IGT recall that we accomplish the $50 million of cost synergies by combining TPS and <unk> businesses in that same timeframe. So when we think about the building blocks from the 2023 <unk> margin of 15% to 20% in 2026. That's also a combination of steps I would outline those is.

Luke Lemoine: Thank you. Your 24 quantitative outlook is pretty clear, and you gave us the International and North America OFSE growth rates as well, but I wanted to see if you could just loosely walk us through some of the qualitative aspects of a 24 OFSE margin increase, along with the drivers of the increase in IET refs and margins. Yeah, so thanks, Luke, for the question. Yeah, we've been really pleased with our performance in 23. We generated record EBITDA at levels last year that were about 25% above the prior cycle peak. On our consolidated EBITDA margins for 2023, we averaged about 200 BPS above the 18 and 19 levels. So at the midpoint of our guidance, this implies another year of strong EBITDA in the mid-teens range, which would mark for us the fourth consecutive year of double-digit growth.

Nancy: The first is the conversion of higher margin backlog with improved volume improve pricing.

Nancy: Secondly, thinking about variable cost productivity in terms of supply chain engineering design and other areas for improvement.

Nancy: We also in the industrial Tech business plan to return to historical margin rates, which we've been working on.

Nancy: Also new digital offerings and enhanced services models in that space and then finally, I would say base cost productivity, which we have elevated R&D now that will start to normalize and then also working towards further business simplification. There. So we have a path for both segments to get to that 20% margin rate, we're working that hard in a series of planned.

Luke Lemoine: And then when we think about 2024, we're gonna show another material step-up in margins for the total company, up about 100 basis points for overall company results. And then to your question about the segments, they both demonstrate margin improvement with potential upside as we continue to execute further cost optimization initiatives across the organization. And then in OFSC, in particular, the cost initiatives that we launched early here in 2024 will really help drive that margin upside into the back half of the year, and we expect the OFS business to average about 20% EBITDA margins in 2024. So there's still a lot of macro and geopolitical uncertainty as we think about our 24 guidance. And we also have concerns still about the aeroderivative supply chain tightness that we're managing through all of 2024 for gas tax. Say also in OFSC, we see your questions for us about the U.S. land market in 2024, but our view on guidance overall is really based on where we sit and the market conditions where we operate, and so that's really where we've come from as a source of our guidance numbers for 2024 And we're taking what I would call a really prudent and balanced approach to our guidance.

Nancy: Calculated executable steps and I would say overall, we're very proud of what we've accomplished so far where we're coming along ways, but we know we are far from done and we remain intensely focused on driving these margins and the returns higher and ultimately.

Nancy K. Buese: We've got a lot of confidence in our numbers, and we're working hard, as we demonstrated in 2023, on predictability. So, net-net, knowing what we know today, we think the midpoint of our guidance range appropriately balances all the risks and opportunities that we see across both the IET and OFS-ED. Luke, I think the other thing I just mentioned is that it shows significant growth across both segments and continues the trajectory that we've laid out very clearly with the targets set forth for 25 and 26 on the EBITDA rate, as well as then the free cash flow. So I feel very confident in the execution of the strategy that we've laid out. Okay, thanks.

Luke Lemoine: And then maybe just to touch on that a little more, Lorenzo, that 20% even on market targets. OFSC in 25 and 26, or IET in 26. Can you walk us through how you see those business minds unfolding to achieve those targets kind of relative to your 24 guidance? Yeah, sure.

Lorenzo Simonelli: I'll let Nancy walk through the details. It's a combination of a number of things and actions that we've already put in place. We remain, as we said, very committed to those 20% EBITDA targets for both OFSC and IET. We have a clearly defined path on how we're going to get to each of those targets. And as we highlighted on the call today, there's a number of actions we're taking to make structural changes to the way we operate and truly streamline our overall cost profile, and that's going to really help aid that margin progression on the timeline we've indicated. And again, what we said earlier this year about OFSC, we took those charges in the fourth quarter. Those are largely severance packages with a very short payback period.

Nancy K. Buese: That's going to clear that path for the OFSC business to get to those 20% margins by 2025, and they'll also drive some good margin upside in the back half of this year, paving the way for us there. And then this is in addition to the more than $60 million of costs we already removed from the OFSC business following the combination of OFS and OFE at the end of, and then also in IET. Recall that we accomplished $50 million of cost synergies by combining TPS and DS businesses at the same time. So when we think about the building blocks from the 2023 IET margin of 15% to 20% in 2026, that's also a combination of steps. I would outline those first as the conversion of higher-margin backlog with improved volume and improved pricing.

Nancy K. Buese: Secondly, thinking about variable cost productivity in terms of supply chain, engineering, design, and other areas for improvement. We also, in the industrial tech business, plan to return to historical margin rates, which we've been working on, as well as new digital offerings and enhanced services models in that space. And then finally, I would say base cost productivity, which we have elevated R&D now, that will start to normalize, and we are also working towards further business simplification there. So we have a path for both segments to get to that 20% margin rate. We're working that hard in a series of planned, calculated, executable steps, and I would say overall that we're very proud of what we've accomplished so far. We've come a long way, but we know we are far from done, and we remain intensely focused on driving these margins and the returns higher. And ultimately,