Strategy summary

Overview

During 2020 we accelerated our strategy with a goal of building an energy technology company that provides decarbonization solutions across multiple industries. We remain committed to leading the energy transition and focusing on areas that are highly differentiated, in order to generate better returns and more stable earnings and cash flow.

Our customers expect new models and outcomebased solutions to deliver sustainable productivity improvements, leverage economies of scale, and lower their carbon footprint. Our strategy is focused on improving our core competitiveness and delivering higher productivity solutions today, while positioning for the future.

In order to drive our strategy forward, we developed a three-pronged approach to guide our execution, which consists of transforming our core, investing for growth, and positioning for new frontiers in the energy space

Transform the core

Transforming the core represents our focus on improving margins and cash flow across our businesses through cost improvements, portfolio rationalization, and new business models.

As part of this strategy, we have divested non-core businesses like rod lift, surface pressure control flow, and specialty polymers, and shut down low-return and non-core product lines in multiple geographies.

We also drove significant operational improvements during the year by integrating systems and processes, and began rationalizing our global facilities footprint. We made the difficult decision to reduce our workforce to both adjust for market realities and lower our structural costs, with many of these reductions in OFS. As a result of these actions, we have already seen significant financial and operational benefits that will ultimately strengthen our competitive position.

Another pillar of our transformation is the expanded use of remote operations, which we view as a key driver of greater cost productivity and performance for the oilfield services industry. Through digital enablement and automation, we see the possibility for lower costs and reduced HSE risk.

 

Remote operations

 

We also utilized digital and remote technology to run virtual string and gas turbine tests in our TPS business. Our iCenters in Florence, Houston, and Kuala Lumpur monitor more than 900 customer assets, and have accumulated more than 15 million hours of equipment data. This enabled us to deliver a wide range of remote support for field activities, including during installation, outage and upgrade activities, and remote combustion system optimization.

The advancement of digital technology and artificial intelligence (AI) complements our efforts in cost productivity and remote operations. We believe AI can be the next frontier in unlocking energy industry productivity.

Through BakerHughesC3.ai (BHC3), our partnership with C3 AI, we have launched two software solutions — BHC3 Reliability and BHC3 Production Optimization. They were designed to help our customers add AIderived insights to their risk management practices and operations. We view our partnership with C3 AI as a key differentiator to drive digital transformation for ourselves and our customers.

Invest for growth

Invest for growth centers around expansion in highpotential segments such as industrial power, industrial asset management, non-metallic materials, and chemicals.

Baker Hughes seeks to develop a solid industrial platform by leveraging the strongest core competencies within our TPS and DS segments. This platform will focus on delivering energy efficiency and process solutions to adjacent non-energy industrial sectors, including power, food and beverage, mining, and manufacturing.

We believe the non-metallic materials segment provides significant opportunity for growth, due to its lower carbon footprint and synergies with our upstream and chemicals businesses. In 2020 we formed a joint venture — Novel — with Saudi Aramco to develop and commercialize a broad range of nonmetallic products for applications in the energy sector. We also expanded our manufacturing capabilities for onshore flexible composite pipe with a state-of-theart facility in Houston.

In chemicals, we see opportunities to grow internationally in the midstream and downstream segments, and potentially into adjacent specialty chemicals markets. We invested in new plants in Saudi Arabia and Singapore to position our chemicals business for further growth across the Middle East and Southeast Asia.

Flexible pipe systems

Position for new frontiers

Position for new frontiers underscores our commitment to help meet global energy demand by offering lowercarbon solutions across industries. We have deployed existing solutions for customers, while making strategic long-term investments in carbon capture, hydrogen, and energy storage.

Carbon emissions reduction is a real and pressing need for many industries, and we provide technology and solutions to help our customers meet their carbon-reduction goals. We have deployed advanced methane-detection equipment and services for our customers, and we continue to innovate and pilot new installations. Our sensing and control technologies, including Flare.IQ, help eliminate venting, reduce flaring, and pinpoint fugitive emissions which represent half of oil and gas sector emissions. Energy efficiency is key to reducing emissions, and our gas turbine technology is among the highest efficiency in the industry.

CCUS is a critical solution to help meet the Paris Climate Agreement goals, and to achieve decarbonization of the oil and gas sector. We provide solutions across the CCUS value chain including pre- and post-combustion capture, compression, subsurface storage, and long-term integrity and monitoring. The acquisition of Compact Carbon Capture (3C) in 2020 enhanced our CCUS capabilities globally, and we intend to scale and commercialize this technology for our customers in the future.

 

NovaLT 16

 

As hydrogen technology evolves, many believe it has significant potential as a zero-emissions fuel source in the coming decades. Baker Hughes’ first application in hydrogen was in 1962 through hydrogen compression and we have over 2,000 hydrogen compressors in operation today around the world. We reconfigured our NovaLT turbine to run on 100% hydrogen. In 2020 we completed testing with SNAM, Europe’s largest gas network operator, for the world's first "hybrid" hydrogen turbine designed for natural gas transportation infrastructure. In addition to generation, we believe our compression technology will have applications in hydrogen storage, liquefaction and transportation, as well as production. Our current capabilities touch multiple parts of the hydrogen value chain, and we see meaningful growth opportunities as producing hydrogen at scale will require even higher technology solutions.

Finally, as renewable energy continues to grow, energy storage will play an increasingly large role in energy systems. Our initial focus is on liquid air storage and compressed air storage, which leverage our core turbomachinery technology.

I am proud of our entire team’s work in leading the energy transition. We are transforming the industry from within, and we will continue to evolve our portfolio to lead the energy transition.