Fourth-quarter highlights

• IET orders of $3,030 million, the fifth consecutive quarter above $3 billion.
• Net income attributable to the Company of $439 million, up $257 million year-over-year.
• GAAP diluted EPS of $0.43 and adjusted diluted EPS* of $0.51.
• Adjusted EBITDA* of $1,091 million, above $1 billion for the first time in company history.
• Cash flows from operating activities were $932 million and free cash flow* was $633 million.
• Shareholder distributions of $521 million, including $320 million of share repurchases.

Full-year highlights

• IET orders of $14.18 billion, 12% higher than last year's prior record level.
• Net income attributable to the Company of $1,943 million, up $2,544 million year-over-year.
• Adjusted EBITDA* of $3.76 billion, increasing 26% year-over-year.
• GAAP diluted EPS of $1.91 and adjusted diluted EPS* of $1.60, a 76% increase over 2022.
• Cash flows from operating activities were $3.06 billion and free cash flow* of $2.05 billion, a 54% conversion rate from adjusted EBITDA*.
• Shareholder distributions of $1.32 billion, including $538 million of share repurchases.

Baker Hughes Company announced results this week for the fourth-quarter and full-year 2023.

"As we continue our journey, 2023 proved to be a pivotal year for Baker Hughes. We successfully removed $150 million of costs, realigned our Industrial & Energy Technology (IET) segment, and recently launched actions to further streamline our Oilfield Services & Equipment segment (OFSE). Our strategy to transform the way we operate is working. In 2023, our adjusted EBITDA* was up double digits for the third consecutive year and exceeded prior cycle's peak levels by 25%. I would like to thank our employees for their hard work and commitment to achieve our goals, delivering for our customers, and pushing the Company forward," said Lorenzo Simonelli, Baker Hughes chairman and chief executive officer.

"During the fourth quarter, adjusted EBITDA* came in above the mid-point of our guidance range due to continued operational improvement and full realization of the $150 million of cost-out. IET orders remained strong, exceeding $3 billion for the fifth consecutive quarter. Additionally, we were awarded more than $1 billion of contractual service agreements (CSA), while we booked the previously announced 9.6 MTPA Ruwais Liquefied Natural Gas (LNG) project in the United Arab Emirates."

"In OFSE, we continue to demonstrate solid margin improvement, with segment EBITDA margin* increasing to 17.9% and Oilfield Services EBITDA margins* now exceeding 20% – both record margins. In new energy, orders of $169 million in the fourth quarter brought the full-year total to $750 million."

"As you can see from our strong 2023 results, 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," concluded Simonelli.

* Non-GAAP measure. See reconciliations in the section titled "Reconciliation of GAAP to non-GAAP Financial Measures."

Quarter Highlights

The OFSE business segment secured two significant, multi-year integrated solutions contracts in Latin America for drilling, completions, and plug and abandonment services. One contract comprises offshore exploration, while the other is for land development. The awards reflect confidence in Baker Hughes' solutions, contributing to our strategy of strengthening the core by increasing market penetration.

Strong orders performance continued across IET in the fourth quarter. In Gas Technology Equipment, momentum continues in the offshore market. Baker Hughes was awarded an important contract by SBM Offshore to provide turbogenerators, turbocompressors, electric motor-driven compressors, as well as commissioning spare parts, for a Floating Production, Storage and Offloading vessel (FPSO).

Gas Technology Equipment also secured an important contract from a consortium for one electric motor driven sour gas booster compression package, to support the development of offshore natural gas fields in the Middle East. During the fourth quarter Baker Hughes also confirmed the previously announced award to supply two electric liquefaction systems for the 9.6 MTPA Ruwais LNG project in the United Arab Emirates, one of the first all-electric LNG projects in the Middle East.

Gas Technology Services secured several orders across multiple geographies and applications, as well CSA commitments worth more than $1 billion primarily driven by LNG and offshore projects in North America and the Middle East. Also in the quarter, Gas Technology Services secured several important upgrade orders, particularly in Europe for both refinery and gas network applications to provide operators with solutions that can enable efficiency gains and emissions reduction.

IET's Industrial Solutions product line expanded the reach of its Cordant™ digital solutions and reached a multi-year contract deal with Shell to centralize asset condition and performance monitoring (System 1™) across 33 sites. India's Oil and Natural Gas Corporation Limited (ONGC) awarded IET a multi-year contract for asset health software and services, pursuant to which Baker Hughes will implement asset health (System 1™) software across 12 offshore platforms and build a center of excellence in ONGC's Mumbai headquarters.

In new energy in the fourth quarter, IET secured a Climate Technology Solutions order for two Brush synchronous condenser systems to be installed by a distribution and transmission network operator for one of its substation extension projects in the U.K. The order also includes installation, commissioning and a multi-year services and maintenance contract. OFSE also continued to make progress on the new energy front, supporting a Middle Eastern customer's energy transition goals and its first geothermal application by deploying the PYRO-DRILL high-temperature drilling fluid. This followed a strong year of geothermal awards, the Q3 launch of the complete portfolio of Vulcanix geothermal drill bits, and this quarter's launch of Baker Hughes' ThermaStim solution to unlock full well potential and lessen environmental burden.

Revenue for the quarter was $6,835 million, an increase of 3% sequentially and an increase of 16% year-over-year. The increase in revenue was driven by higher volume in both IET and OFSE.

The Company's total book-to-bill ratio in the quarter was 1.0; the IET book-to-bill ratio in the quarter was 1.1.

Operating income on a GAAP basis for the fourth quarter of 2023 was $651 million. Operating income decreased $62 million sequentially and decreased $12 million year-over-year. Total segment operating income was $904 million for the fourth quarter of 2023, up 12% sequentially and up 14% year-over-year.

Adjusted operating income (a non-GAAP measure) for the fourth quarter of 2023 was $816 million, which excludes adjustments totaling $165 million before tax.

Depreciation and amortization for the fourth quarter of 2023 was $274 million.

Adjusted EBITDA (a non-GAAP measure) for the fourth quarter of 2023 was $1,091 million, which excludes adjustments totaling $165 million before tax.

The sequential increase in adjusted operating income and adjusted EBITDA was driven by higher volume in IET and price in OFSE, partially offset by higher research and development (R&D) spend in IET. The year-over-year increase in adjusted operating income and adjusted EBITDA was driven by volume and pricing in both segments and structural cost-out initiatives, partially offset by cost inflation in both segments, and higher equipment mix and higher R&D spend in IET.

Corporate costs were $88 million in the fourth quarter of 2023, down 7% sequentially and down 12% year-over-year.

Other Financial Items

Remaining Performance Obligations (RPO) in the fourth quarter ended at $33.5 billion, an increase of $1.0 billion from the third quarter of 2023. OFSE RPO was $3.5 billion, down 2% sequentially, while IET RPO was $29.9 billion, up 4% sequentially. Within IET RPO, Gas Technology Equipment RPO was $12.1 billion and Gas Technology Services RPO was $14.8 billion.

Income tax expense in the fourth quarter of 2023 was $72 million.

Other non-operating loss in the fourth quarter of 2023 was $84 million. Included in other non-operating loss were net mark-to-market loss in fair value for certain equity investments of $84 million.

Capital expenditures, net of proceeds from disposal of assets, were $298 million for the fourth quarter of 2023. Capital expenditures, net of proceeds from disposal of assets, were $221 million for OFSE, and $71 million for IET.