LNG

Production companies seeking efficient and cost-effective methods of increasing their output are forecast to increase spending by almost 20 percent in 2023 to total $58 billion for additional oil and natural gas resources to satisfy global demand for energy such as LNG and pipeline gas and for necessary activities like petroleum refining and chemicals production to make products such as pharmaceuticals.

Baker Hughes, the liquefied natural gas equipment-maker and energy services company, has told investors it was well positioned to capitalize on multi-year growth in LNG and new energy projects.

The company, which has main offices in Houston and London and is led by Chairman and Chief Executive Lorenzo Simonelli said it had an “exciting portfolio” of emerging energy transition technologies and solutions.

In its most recent earnings, Baker Hughes recorded strong orders from its Turbomachinery and Process Solutions (TPS) division and said the LNG order cycle continued to unfold.

The company believes that the industry has entered another constructive LNG cycle, which is being expedited by the current geopolitical situation, particularly for US LNG projects and it forecast that global liquefaction capacity could be expected to almost double by 2040.

“We have compelling growth profile driven by range of energy transition initiatives,” said Baker Hughes in a presentation to investors.

“Multiple areas could drive extended growth cycles over the next 5-10 years and beyond,” stated Baker Hughes.

Contracts

Baker Hughes was most recently awarded the contract for the LNG driver system for the first phase of US company Venture Global’s Plaquemines LNG project, located south of New Orleans on the Mississippi River in Louisiana.

The company said it now had orders booked for 150 million tonnes per annum of LNG capacity.

Baker Hughes has four divisions and in addition to LNG equipment through the Turbomachinery and Process unit it also offers oil field services, oil field equipment and digital energy solutions.

New LNG wave

“Gas fundamentals, particularly in Europe and Asia have tightened significantly. The current backdrop supports a new wave of LNG projects being sanctioned to fill the liquefaction capacity supply-demand gap,” it said,.

“there has also been a significant increase in long-term contracting activity and this has helped projects secure funding and progress to final investment decisions,” it noted.

In oil services, the company stated that sustained underinvestment had started to impact supply in the oil market.

“Capital discipline and the escalating focus on shareholder returns has restrained spending and ESG pressures have driven the strategies of major international oil companies away from fossil fuels,” said Baker Hughes.

It cited in particular the members of the Organization of Petroleum Exporting Countries.

“OPEC countries, struggling to meet quotas, have seen spare capacity shrinking and global oil inventories trending significantly below average,” said Baker Hughes.

The company stated that the demand recovery in oil and LNG is set to exceed pre-Covid-19 levels despite increasing pressure to reduce hydrocarbon consumption.

Baker Hughes said the spending surge was fuelled by strong economic recovery in developed economies and long-term structural growth in emerging economies.

Baker Hughes, the LNG equipment-maker and energy services company, reported an increase in first-quarter revenues to $4.83 billion and a 70 percent jump in operating income to $279 million while forecasting LNG final investment decisions on up to 150 million tonnes per annum of projects in the next two years.

The company, which has main offices in Houston and London, reported net income of $72M in the quarter to the end of March 2022 versus a loss of $452M in the same three months of 2021.

“Our first quarter results reflect operating in a very volatile market environment during the first few months of 2022,” said Lorenzo Simonelli, Baker Hughes Chairman and Chief Executive.

“On the positive side, we recorded strong orders from Turbomachinery and Process Solutions (TPS) as the LNG order cycle continues to unfold,” stated the CEO.

The company said TPS orders totalled $3Bln for the second consecutive quarter, driven again by strong orders in LNG.

“We believe that we are at the beginning of another constructive LNG cycle, which is being expedited by the current geopolitical situation, particularly for US LNG projects,” stated Simonelli.

“As these market dynamics play out, a number of projects should accelerate, and we now believe that 100 to 150 MTPA of LNG FIDs will be authorized over the next two years with additional FIDs becoming more likely in 2024 and 2025,” declared the CEO.

Record orders

Orders in the quarter were $3.0Bln, up $1.6Bln year-over-year and a new quarterly record for TPS.

Simonelli said that equipment orders were up $1.5Bln year-over-year, driven by a significant award to provide an LNG system for the first phase of US company Venture Global’s Plaquemines LNG project, located south of New Orleans on the Mississippi River in Louisiana.

Service orders in the quarter were up 8 percent year-over-year, primarily driven by growth in contractual and transactional services, partially offset by lower order volumes in upgrades.

Overall orders in the quarter were $6.8Bln, up 3 percent versus the three months to the end of 2021, driven by Oil Field Equipment and TPS, partially offset by a decrease in Digital Solutions and OFS.

Year-over-year, revenue was up 1 percent compared with $4.78Bln in the prior-year quarter, driven by increases in OFS and Digital Solutions, partially offset by decreases in OFE and TPS.

Adjusted operating income was $348M, which excluded $70M of restructuring, separation and other charges.

Russia issue

As regards the conflict in Ukraine, Baker Hughes said Russia represented roughly 4 percent of total company revenue in the first quarter.

“We recently announced that we have halted all new investment in the country,” said the company.

Oilfield Services revenues in the quarter amounted to $2.5Bln, down 3 percent from the previous three months.

“International revenue was down 7 percent sequentially led by declines in the North Sea, Russia Caspian, the Middle East, and Latin America,” said Baker Hughes.

Moving to the Oilfield Equipment division, the company said that orders for the quarter were $739M, double the $394M achieved in the same three months of 2021.

It added that the strong orders performance was driven by subsea production systems (SPS), supported by a large subsea tree contract in Asia, along with growth in flexibles, surface pressure control and services.

“As a reminder, we removed Subsea Drilling Systems from consolidated OFE operations when we completed the merger with MHWirth in the fourth quarter of 2021,” Baker Hughes explained.

The company concluded that revenue in the division was $528M, down 16 percent year-over-year, primarily driven by SPS, SPC and the removal of SDS, partially offset by growth in services and flexibles.