Lorenzo Simonelli
Chairman's Letter to shareholders

"2020 was a year of strong performance in the face of a challenging environment."

Lorenzo Simonelli

Chairman, President, and Chief Executive Officer



Dear fellow shareholders,

2020 was an incredibly challenging year for Baker Hughes and the entire global community. As the COVID-19 pandemic and oil price volatility unfolded in 2020, we moved quickly to mitigate the impact of these events through a series of financial, operational, and safety actions, guided by our strategy and core values. Overall, we maintained solid financial and operational performance while navigating a turbulent environment.

In addition to transforming our business into a structurally leaner organization, we also accelerated the execution of our strategy to lead the energy transition. As the world’s focus on climate change accelerated in 2020, so too did our focus on building a unique energy technology company — a company that can provide decarbonization solutions to multiple industries and develop technologies for a new frontier of lower-carbon solutions.

Our broad and diverse technological capabilities were never more necessary — or on display — than in 2020. Throughout the year, we positioned our portfolio to compete across the energy value chain and deliver innovative solutions for our customers. We remain optimistic about the long-term economics of the industry, and we are well positioned to evolve with the overall energy landscape.



2020 highlights

Performance

$20.7B

in revenue

$518M

in free cash flow*

~45%

of revenue is more industrial in nature



Technology and innovation

$595M

in research and development

3,066

patents awarded

73%

of drilling jobs completed remotely



Responsibility

AA

rating by MSCI

31%

reduction in CO2 emissions**

200

HSE perfect days



* Free cash flow is a non-GAAP measure. Please refer to the GAAP to non-GAAP measures table at the end of this document for a reconciliation

** 2019 full year performance versus 2012 baseline



Our 2020 performance

Despite the challenges of the pandemic-induced downturn, Baker Hughes delivered operationally and commercially. For the full year 2020, we generated $518 million in free cash flow*, booked $6.4 billion in TPS orders, and executed on our substantial cost-out and restructuring programs, predominantly in Oilfield Services (OFS). We were also able to deliver for our customers during a challenging year, with a number of important commercial awards.

In OFS, we executed 73% of global drilling services jobs remotely across 30 countries, compared to 50% in 2019. OFS remote operations have led to consistently better outcomes for customers. After establishing a successful remote drilling track record in North America, the North Sea, and China, we expanded our capabilities in 2020 to improve efficiencies and lower costs for customers around the world.

In Oilfield Equipment (OFE), despite a difficult offshore environment, we secured several key awards during the year. Flexible Pipe Systems (FPS) was the most resilient product line in OFE, and won a contract for high-temperature subsea flexible jumpers and associated equipment in China. We were pleased to see continued traction in our onshore FPS and nonmetallic materials product offerings.

In Turbomachinery & Process Solutions (TPS), our team achieved another successful year commercially after a record 2019, despite headwinds from the pandemic and the industry downturn. We secured a major liquefied natural gas (LNG) order with longtime partner Qatar Petroleum to supply multiple main refrigerant compressors and power generation equipment for Qatar Petroleum’s North Field East (NFE) project. As part of Baker Hughes’ commitment to support customers in decarbonizing their operations, the latest compression technology for the NFE project is expected to reduce emissions by ~5% versus previous technologies.

TPS was also awarded a major contract by South Gas Company in Iraq for the design, manufacture, and construction of an integrated natural gas processing and production facility. The facility is expected to have a capacity of 200 million standard cubic feet of natural gas per day and utilize previously flared natural gas from the Nassiriya and Gharraf oil fields, reducing emissions by an estimated 6+ million tons of carbon dioxide annually.

In Digital Solutions (DS), we won a major three-year framework agreement with Petrobras for our Bently Nevada, Nexus Controls, and Panametrics product lines to enhance the customer’s operations through risk mitigation and performance improvements. We also won an important contract with Petrobras to provide a suite of digital solutions and services to optimize productivity, reduce operational and safety risks, and lower carbon emissions across Petrobras sites in Brazil. Petrobras will accelerate its digital transformation, adopting the latest Bently Nevada condition monitoring and protection platform, as well as remote monitoring and diagnostics capability. Given the challenging macro-environment in 2020, our goal throughout the year was to maintain a strong balance sheet and remain disciplined in our capital allocation, while advancing our strategy. Overall, we were successful in achieving our goals and believe we are well positioned going forward.

 

Baker Hughes Product Revenue

 

Our future

2020 was a year of strong performance in the face of a challenging environment. We continued to execute on our strategy by transforming our core businesses, investing for growth in strategic areas, and positioning the company for new frontiers as a leader in the energy transition.

I want to thank our customers, employees, and shareholders for their support and trust. Most importantly, I want to thank everyone for staying safe and for your continued commitment to our success. Together we are taking energy forward.

Sincerely, 

Lorenzo Simonelli Signature

Lorenzo Simonelli

Chairman, President, and Chief Executive Officer



Explore further

Position for new frontiers

Our strategy

Our progress on taking energy forward in 2020

Baker Hughes EIC Lab

Our commitment to responsibility

Environmental, social and governance progress

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