Business Wire | Jan 20, 2022 07:00AM EST

Baker Hughes Company Announces Fourth Quarter and Total Year 2021 Results

Jan. 20, 2022

LONDON & HOUSTON--(BUSINESS WIRE)--Jan. 20, 2022--Baker Hughes Company (Nasdaq: BKR) ("Baker Hughes" or the "Company") announced results today for the fourth quarter and total year 2021.

Three Months Ended Variance

December September December Year-over(in millions except per 31, 30, 31, Sequentialshare amounts) year 2021 2021 2020

Orders $ 6,656 $ 5,378 $ 5,188 24 % 28 %

Revenue 5,519 5,093 5,495 8 % - %

Operating income 574 378 182 52 % F

Adjusted operating income 571 402 462 42 % 23 %(non-GAAP)

Adjusted EBITDA (non-GAAP) 844 664 770 27 % 10 %

Net income attributable to 294 8 653 F (55 )%Baker Hughes

Adjusted net income (loss)(non-GAAP) attributable to 224 141 (50 ) 59 % FBaker Hughes

Diluted EPS attributable to 0.32 0.01 0.91 F (64 )%Class A shareholders

Adjusted diluted EPS(non-GAAP) attributable to 0.25 0.16 (0.07 ) 50 % FClass A shareholders

Cash flow from operating 773 416 378 86 % Factivities

Free cash flow (non-GAAP) 645 305 250 F F

"F" is used in most instances when variance is above 100%. Additionally, "U" is used in most instances when variance is below (100)%.

"We are pleased with our fourth quarter results as we generated another quarter of strong free cash flow, solid margin rate improvement, and strong orders from TPS. For the full year, we were pleased with our performance and took several important steps to accelerate our strategy and help position the Company for the future. Overall, 2021 proved to be successful on many fronts for Baker Hughes, with key commercial successes and developments in the LNG and new energy markets, as well as record cash flow from operations and free cash flow, and peer-leading capital allocation. I would like to thank our employees for their hard work and commitment to achieve our goals, deliver for our customers and move the Company forward," said Lorenzo Simonelli, Baker Hughes chairman and chief executive officer.

"As we look ahead to 2022, we expect the pace of global economic growth to remain strong although slightly moderate compared to 2021. We believe the broader macro recovery should translate into rising energy demand for 2022 and relatively tight supplies for oil and natural gas, providing an attractive investment environment for our customers and a strong tailwind for many of our product companies."

"We are very excited with the strategic direction of Baker Hughes and believe the Company is well-positioned to capitalize on near-term cyclical recovery and for long-term change in the energy and industrial markets. We look forward to another year of supporting our customers, continuing to advance our strategy, and delivering for shareholders in 2022," concluded Simonelli.

Quarter Highlights

Supporting our Customers

OFS secured a contract with LUKOIL to begin developing 14 offshore wells in the Baltic Sea's D33 field. The contract will feature the first-ever combined deployment of Baker Hughes' electrical submersible pumps (ESP) and LUKOIL's Permanent Magnet Motors (PMM) since the two companies announced a collaboration on energy efficient technologies in June 2021. Baker Hughes' ESP technology has unsurpassed levels of efficiency, reliability, and performance, while LUKOIL's PMM technology enables a 15-20% reduction in energy consumption compared to current artificial lift processes.

OFS also secured a two-year contract for technology and services for a major operator in the Permian Basin. The contract combines best-in-class technology and services from the Artificial Lift, Oilfield & Industrial Chemicals, and Reservoir Technical Services product lines, including the CENesis PHASE Artificial Lift system, which optimizes production, extends asset life, increases personnel safety, lowers lifting costs and reduces environmental footprint.

The TPS segment continued to maintain its LNG leadership. TPS secured a major contract from Bechtel to provide high-efficiency gas turbines and centrifugal compressors to support the expansion of the Pluto LNG onshore processing facility in Australia, which is operated by Woodside. The contract will provide six LM6000PF+ aeroderivative gas turbines, 14 centrifugal compressors and additional equipment for Pluto LNG's second train, leading to an additional expected capacity of approximately 5 million tons per annum (MTPA) and helping to maximize efficiency and flexibility while lowering greenhouse gas emissions.

TPS secured a contract with NOVATEK PAO to provide advanced turbomachinery equipment for a feed gas boosting station in Russia. TPS will provide five turbo-compressors, driven by Frame 5/2D gas turbines, to support the facility, stabilizing the pressure and flow rate of feed gas to maintain maximum carrying capacity. Baker Hughes and NOVATEK have a long history of collaboration, and TPS' gas turbines have operated successfully at NOVATEK's projects since 2017.

OFE secured a major 10-year contract from Abu Dhabi National Oil Company (ADNOC) for the Surface Pressure Control (SPC) product line to manufacture, supply, store, and service surface wellheads and tree systems. The contract includes ADNOC's onshore and offshore fields in the UAE as well as a long-term service contract to cover repair, maintenance and spares for the project's equipment.

The DS segment continued to gain traction in multiple industrial end markets, particularly in the automotive and electronics sectors. The Waygate Technologies product line continued to lead in market share for industrial computed tomography (CT) systems, achieving record revenue in the fourth quarter for battery inspection and securing contracts with major electric vehicle manufacturers and battery suppliers in Europe and Asia.

Executing on Priorities

Baker Hughes and Shell signed a broad strategic collaboration agreement to accelerate the global energy transition. Shell will provide select Baker Hughes sites in the U.S. with power and renewable energy credits, as well as negotiate renewable power for Baker Hughes sites in Europe and Singapore. The two companies will also identify opportunities to accelerate each other's transition to net-zero carbon emissions by 2050, such as Baker Hughes providing low-carbon solutions for Shell's LNG fleet through technology upgrades and compressor re-bundles. Baker Hughes will also help Shell develop digital solutions to accelerate decarbonization across Shell's global assets and operations. The two companies will also explore potential opportunities to co-invest and participate in new models to decarbonize the energy and industrial sectors.

Baker Hughes saw continued customer interest in carbon capture, utilization and storage (CCUS) applications. TPS secured a contract with Santos, a leading natural gas producer in Australia, to supply turbomachinery equipment for the Moomba CCS project, which will serve a gas processing plant and permanently store 1.7 million tons of carbon dioxide (CO2) annually. The equipment scope includes PGT25+G4 aeroderivative gas turbine, MCL compressor, and PCL compressor technologies to compress CO2 captured at Moomba CCS for transportation and subsequent injection for storage.

TPS continued to support the growth of the hydrogen economy, securing a contract with Air Products to supply advanced compression technology for the NEOM carbon-free hydrogen project in the Kingdom of Saudi Arabia. The contract follows the two companies' hydrogen collaboration agreement announced in mid-2021.

Baker Hughes announced an approximately 20% investment in Ekona Power Inc, a growth stage company developing novel hydrogen production technology. The two companies have joined efforts to accelerate the scale up and industrialization of the technology by identifying suitable pilot projects and leveraging Baker Hughes' leading turbomachinery portfolio as well as established technical expertise in providing modular and scalable solutions for global hydrogen and natural gas projects. Baker Hughes has also assumed a seat on Ekona's Board of Directors.

DS continued to secure important contracts with key energy and industrial customers for condition monitoring and industrial asset management solutions. The Bently Nevada product line secured a contract with a major oil company to deploy System 1 asset management software as a standardized platform for enterprise-wide condition monitoring across 28 facilities worldwide. In addition, Bently Nevada secured a five-year service agreement for a major customer in the mining segment to provide asset strategy consulting services and support the customer's digital transformation to help increase production and improve equipment reliability.

Bently Nevada also secured a contract with Yara, one of the world's leading fertilizer companies, to enable digital transformation and improve asset reliability and efficiency. The enterprise-wide contract will enable data availability between Yara's plant operations and the cloud across 23 sites using Bently Nevada's latest System 1 asset management software, accompanied by a maintenance, support and services agreement.

Baker Hughes continued to invest in industrial asset management capabilities, announcing an investment and multi-year commercial alliance with Augury, a machine health solution provider, to deliver an expanded integrated asset performance management solution through Bently Nevada. Through the alliance, customers will benefit from end-to-end visibility into the health and performance of critical assets and the entire balance of plant, leading to reduced downtime, increased availability and lower maintenance costs.

Leading with Innovation

The BakerHughesC3.ai joint venture alliance (BHC3) secured several key contracts with oil & gas customers to deploy AI-based applications and accelerate digital transformation. In the Middle East, BHC3 and TPS secured a contract to deploy the BHC3(tm) Reliability application for LNG facilities and will deliver predictive insights at scale. The application will be deployed on the Microsoft Azure cloud platform and integrate with the Baker Hughes iCenter software to improve maintenance planning of critical industrial equipment and expand on the customer's current monitoring services across its installed turbomachinery equipment.

The Druck product line in DS also saw increased demand for its pressure measurement technologies for the electronic component and semiconductor manufacturing sectors, including a significant contract with a major Asian semiconductor supplier. To support the sector's rapid growth, Druck has also commercialized and improved the world's fastest pressure controller, the PACE CM3, allowing customers to have greater flexibility, accuracy, speed and stability in pressure measurement.

Consolidated Results by Reporting Segment

Consolidated Orders by Reporting Segment

"F" is used in most instances when variance is above 100%. Additionally, "U" isused in most instances when variance is below (100)%.

"We are pleased with our fourth quarter results as we generated another quarter of strong free cash flow, solid margin rate improvement, and strong orders from TPS. For the full year, we were pleased with our performance and took several important steps to accelerate our strategy and help position the Company for the future. Overall, 2021 proved to be successful on many fronts for Baker Hughes, with key commercial successes and developments in the LNG and new energy markets, as well as record cash flow from operations and free cash flow, and peer-leading capital allocation. I would like to thank our employees for their hard work and commitment to achieve our goals, deliver for our customers and move the Company forward," said Lorenzo Simonelli, Baker Hughes chairman and chief executive officer.

"As we look ahead to 2022, we expect the pace of global economic growth to remain strong although slightly moderate compared to 2021. We believe the broader macro recovery should translate into rising energy demand for 2022 and relatively tight supplies for oil and natural gas, providing an attractive investment environment for our customers and a strong tailwind for many of our product companies."

"We are very excited with the strategic direction of Baker Hughes and believe the Company is well-positioned to capitalize on near-term cyclical recovery and for long-term change in the energy and industrial markets. We look forward to another year of supporting our customers, continuing to advance our strategy, and delivering for shareholders in 2022," concluded Simonelli.

Quarter Highlights

Supporting our Customers

OFS secured a contract with LUKOIL to begin developing 14 offshore wells in the Baltic Sea's D33 field. The contract will feature the first-ever combined deployment of Baker Hughes' electrical submersible pumps (ESP) and LUKOIL's Permanent Magnet Motors (PMM) since the two companies announced a collaboration on energy efficient technologies in June 2021. Baker Hughes' ESP technology has unsurpassed levels of efficiency, reliability, and performance, while LUKOIL's PMM technology enables a 15-20% reduction in energy consumption compared to current artificial lift processes.

OFS also secured a two-year contract for technology and services for a major operator in the Permian Basin. The contract combines best-in-class technology and services from the Artificial Lift, Oilfield & Industrial Chemicals, and Reservoir Technical Services product lines, including the CENesis PHASE Artificial Lift system, which optimizes production, extends asset life, increases personnel safety, lowers lifting costs and reduces environmental footprint.

The TPS segment continued to maintain its LNG leadership. TPS secured a major contract from Bechtel to provide high-efficiency gas turbines and centrifugal compressors to support the expansion of the Pluto LNG onshore processing facility in Australia, which is operated by Woodside. The contract will provide six LM6000PF+ aeroderivative gas turbines, 14 centrifugal compressors and additional equipment for Pluto LNG's second train, leading to an additional expected capacity of approximately 5 million tons per annum (MTPA) and helping to maximize efficiency and flexibility while lowering greenhouse gas emissions.

TPS secured a contract with NOVATEK PAO to provide advanced turbomachinery equipment for a feed gas boosting station in Russia. TPS will provide five turbo-compressors, driven by Frame 5/2D gas turbines, to support the facility, stabilizing the pressure and flow rate of feed gas to maintain maximum carrying capacity. Baker Hughes and NOVATEK have a long history of collaboration, and TPS' gas turbines have operated successfully at NOVATEK's projects since 2017.

OFE secured a major 10-year contract from Abu Dhabi National Oil Company (ADNOC) for the Surface Pressure Control (SPC) product line to manufacture, supply, store, and service surface wellheads and tree systems. The contract includes ADNOC's onshore and offshore fields in the UAE as well as a long-term service contract to cover repair, maintenance and spares for the project's equipment.

The DS segment continued to gain traction in multiple industrial end markets, particularly in the automotive and electronics sectors. The Waygate Technologies product line continued to lead in market share for industrial computed tomography (CT) systems, achieving record revenue in the fourth quarter for battery inspection and securing contracts with major electric vehicle manufacturers and battery suppliers in Europe and Asia.

Executing on Priorities

Baker Hughes and Shell signed a broad strategic collaboration agreement to accelerate the global energy transition. Shell will provide select Baker Hughes sites in the U.S. with power and renewable energy credits, as well as negotiate renewable power for Baker Hughes sites in Europe and Singapore. The two companies will also identify opportunities to accelerate each other's transition to net-zero carbon emissions by 2050, such as Baker Hughes providing low-carbon solutions for Shell's LNG fleet through technology upgrades and compressor re-bundles. Baker Hughes will also help Shell develop digital solutions to accelerate decarbonization across Shell's global assets and operations. The two companies will also explore potential opportunities to co-invest and participate in new models to decarbonize the energy and industrial sectors.

Baker Hughes saw continued customer interest in carbon capture, utilization and storage (CCUS) applications. TPS secured a contract with Santos, a leading natural gas producer in Australia, to supply turbomachinery equipment for the Moomba CCS project, which will serve a gas processing plant and permanently store 1.7 million tons of carbon dioxide (CO2) annually. The equipment scope includes PGT25+G4 aeroderivative gas turbine, MCL compressor, and PCL compressor technologies to compress CO2 captured at Moomba CCS for transportation and subsequent injection for storage.

TPS continued to support the growth of the hydrogen economy, securing a contract with Air Products to supply advanced compression technology for the NEOM carbon-free hydrogen project in the Kingdom of Saudi Arabia. The contract follows the two companies' hydrogen collaboration agreement announced in mid-2021.

Baker Hughes announced an approximately 20% investment in Ekona Power Inc, a growth stage company developing novel hydrogen production technology. The two companies have joined efforts to accelerate the scale up and industrialization of the technology by identifying suitable pilot projects and leveraging Baker Hughes' leading turbomachinery portfolio as well as established technical expertise in providing modular and scalable solutions for global hydrogen and natural gas projects. Baker Hughes has also assumed a seat on Ekona's Board of Directors.

DS continued to secure important contracts with key energy and industrial customers for condition monitoring and industrial asset management solutions. The Bently Nevada product line secured a contract with a major oil company to deploy System 1 asset management software as a standardized platform for enterprise-wide condition monitoring across 28 facilities worldwide. In addition, Bently Nevada secured a five-year service agreement for a major customer in the mining segment to provide asset strategy consulting services and support the customer's digital transformation to help increase production and improve equipment reliability.

Bently Nevada also secured a contract with Yara, one of the world's leading fertilizer companies, to enable digital transformation and improve asset reliability and efficiency. The enterprise-wide contract will enable data availability between Yara's plant operations and the cloud across 23 sites using Bently Nevada's latest System 1 asset management software, accompanied by a maintenance, support and services agreement.

Baker Hughes continued to invest in industrial asset management capabilities, announcing an investment and multi-year commercial alliance with Augury, a machine health solution provider, to deliver an expanded integrated asset performance management solution through Bently Nevada. Through the alliance, customers will benefit from end-to-end visibility into the health and performance of critical assets and the entire balance of plant, leading to reduced downtime, increased availability and lower maintenance costs.

Leading with Innovation

The BakerHughesC3.ai joint venture alliance (BHC3) secured several key contracts with oil & gas customers to deploy AI-based applications and accelerate digital transformation. In the Middle East, BHC3 and TPS secured a contract to deploy the BHC3(tm) Reliability application for LNG facilities and will deliver predictive insights at scale. The application will be deployed on the Microsoft Azure cloud platform and integrate with the Baker Hughes iCenter software to improve maintenance planning of critical industrial equipment and expand on the customer's current monitoring services across its installed turbomachinery equipment.

The Druck product line in DS also saw increased demand for its pressure measurement technologies for the electronic component and semiconductor manufacturing sectors, including a significant contract with a major Asian semiconductor supplier. To support the sector's rapid growth, Druck has also commercialized and improved the world's fastest pressure controller, the PACE CM3, allowing customers to have greater flexibility, accuracy, speed and stability in pressure measurement.

Consolidated Results by Reporting Segment

Consolidated Orders by Reporting Segment

(in millions) Three Months Ended Variance

December September December Year-over-Consolidated segment 31, 30, 31, Sequentialorders year 2021 2021 2020

Oilfield Services $ 2,567 $ 2,412 $ 2,266 6 % 13 %

Oilfield Equipment 510 724 561 (30 ) % (9 ) %

Turbomachinery & Process 2,974 1,719 1,832 73 % 62 %Solutions

Digital Solutions 605 523 528 16 % 14 %

Total $ 6,656 $ 5,378 $ 5,188 24 % 28 %

Orders for the quarter were $6,656 million, up 24% sequentially and up 28% year-over-year. The sequential increase was a result of higher order intake in Turbomachinery & Process Solutions, Digital Solutions, and Oilfield Services, partially offset by lower orders in Oilfield Equipment. Equipment orders were up 38% sequentially and service orders were up 12%.

Year-over-year, the increase in orders was a result of higher order intake in Turbomachinery & Process Solutions, Digital Solutions, and Oilfield Services, partially offset by lower orders in Oilfield Equipment. Year-over-year equipment orders were up 42% and service orders were up 17%.

The Company's total book-to-bill ratio in the quarter was 1.2; the equipment book-to-bill ratio in the quarter was 1.4.

Remaining Performance Obligations (RPO) in the fourth quarter ended at $23.6 billion, an increase of $0.1 billion from the third quarter of 2021. Equipment RPO was $8.2 billion, up 9% sequentially. Services RPO was $15.3 billion, down 4% sequentially.

Consolidated Revenue by Reporting Segment

(in millions) Three Months Ended Variance

December September December Year-over-Consolidated segment 31, 30, 31, Sequentialrevenue year 2021 2021 2020

Oilfield Services $ 2,566 $ 2,419 $ 2,282 6 % 12 %

Oilfield Equipment 619 603 712 3 % (13 ) %

Turbomachinery & Process 1,776 1,562 1,946 14 % (9 ) %Solutions

Digital Solutions 558 510 556 9 % - %

Total $ 5,519 $ 5,093 $ 5,495 8 % - %

Revenue for the quarter was $5,519 million, an increase of 8%, sequentially. The increase was driven by higher volume across all four segments.

Compared to the same quarter last year, revenue was flat, driven by higher volume in Oilfield Services, offset by Oilfield Equipment and Turbomachinery & Process Solutions.

Consolidated Operating Income by Reporting Segment

(in millions) Three Months Ended Variance

December September December Year-over-Segment operating income 31, 30, 31, Sequential year 2021 2021 2020

Oilfield Services $ 256 $ 190 $ 142 35 % 81 %

Oilfield Equipment 23 14 23 68 % 1 %

Turbomachinery & Process 346 278 332 24 % 4 %Solutions

Digital Solutions 51 26 76 97 % (33 ) %

Total segment operating 676 508 573 33 % 18 %income

Corporate (106 ) (105 ) (111 ) - % 5 %

Inventory impairment - - (27 ) - % F

Restructuring, impairment 11 (14 ) (229 ) F F& other

Separation related (8 ) (11 ) (24 ) 27 % 67 %

Operating income 574 378 182 52 % F

Adjusted operating 571 402 462 42 % 23 %income*

Depreciation and 273 262 307 4 % (11 ) %amortization

Adjusted EBITDA* $ 844 $ 664 $ 770 27 % 10 %

*Non-GAAP measure.

"F" is used in most instances when variance is above 100%. Additionally, "U" is used in most instances when variance is below (100)%.

On a GAAP basis, operating income for the fourth quarter of 2021 was $574 million. Operating income increased $196 million sequentially and increased $393 million year-over-year. Total segment operating income was $676 million for the fourth quarter of 2021, up 33% sequentially and up 18% year-over-year.

Adjusted operating income (a non-GAAP measure) for the fourth quarter of 2021 was $571 million, which excludes adjustments totaling $3 million before tax, mainly related to restructuring and separation activities. A complete list of the adjusting items and associated reconciliation from GAAP has been provided in Table 1a in the section entitled "Reconciliation of GAAP to non-GAAP Financial Measures." Adjusted operating income for the fourth quarter of 2021 was up 42% sequentially, driven by higher volume and margin expansion across all segments. Adjusted operating income was up 23% year-over-year driven by margin expansion in Oilfield Services, Turbomachinery and Process Solutions, and Oilfield Equipment, partially offset by margin contraction in Digital Solutions.

Depreciation and amortization for the fourth quarter of 2021 was $273 million.

Adjusted EBITDA (a non-GAAP measure) for the fourth quarter of 2021 was $844 million which excludes adjustments totaling $3 million before tax, mainly related to restructuring and separation related activities. Adjusted EBITDA for the fourth quarter was up 27% sequentially and up 10% year-over-year.

Corporate costs were $106 million in the fourth quarter of 2021, flat sequentially and down 5% year-over-year.

Other Financial Items

Income tax expense in the fourth quarter of 2021 was $352 million. Income tax expense includes $103 million in charges that are recoverable as they related to liabilities indemnified under the Tax Matters Agreement with General Electric. These tax charges have an offsetting income in the other non-operating income line of our income statement.

Other non-operating income in the fourth quarter of 2021 was $208 million. Included in other non-operating income are gains from the change in fair value of our investment in ADNOC Drilling, and losses from the change in fair value of our investment in C3 AI.

GAAP diluted earnings per share was $0.32. Adjusted earnings per share was $0.25. Excluded from adjusted earnings per share were all items listed in Table 1a in the section entitled "Reconciliation of GAAP to non-GAAP Financial Measures" as well as the "other adjustments (non-operating)" found in Table 1c.

Cash flows generated from operating activities were $773 million for the fourth quarter of 2021. Free cash flow (a non-GAAP measure) for the quarter was $645 million. A reconciliation from GAAP has been provided in Table 1d in the section entitled "Reconciliation of GAAP to non-GAAP Financial Measures."

Capital expenditures, net of proceeds from disposal of assets, were $129 million for the fourth quarter of 2021.

Results by Reporting Segment

The following segment discussions and variance explanations are intended to reflect management's view of the relevant comparisons of financial results on a sequential or year-over-year basis, depending on the business dynamics of the reporting segments.

Oilfield Services

*Non-GAAP measure.

"F" is used in most instances when variance is above 100%. Additionally, "U" isused in most instances when variance is below (100)%.

On a GAAP basis, operating income for the fourth quarter of 2021 was $574 million. Operating income increased $196 million sequentially and increased $393 million year-over-year. Total segment operating income was $676 million for the fourth quarter of 2021, up 33% sequentially and up 18% year-over-year.

Adjusted operating income (a non-GAAP measure) for the fourth quarter of 2021 was $571 million, which excludes adjustments totaling $3 million before tax, mainly related to restructuring and separation activities. A complete list of the adjusting items and associated reconciliation from GAAP has been provided in Table 1a in the section entitled "Reconciliation of GAAP to non-GAAP Financial Measures." Adjusted operating income for the fourth quarter of 2021 was up 42% sequentially, driven by higher volume and margin expansion across all segments. Adjusted operating income was up 23% year-over-year driven by margin expansion in Oilfield Services, Turbomachinery and Process Solutions, and Oilfield Equipment, partially offset by margin contraction in Digital Solutions.

Depreciation and amortization for the fourth quarter of 2021 was $273 million.

Adjusted EBITDA (a non-GAAP measure) for the fourth quarter of 2021 was $844 million which excludes adjustments totaling $3 million before tax, mainly related to restructuring and separation related activities. Adjusted EBITDA for the fourth quarter was up 27% sequentially and up 10% year-over-year.

Corporate costs were $106 million in the fourth quarter of 2021, flat sequentially and down 5% year-over-year.

Other Financial Items

Income tax expense in the fourth quarter of 2021 was $352 million. Income tax expense includes $103 million in charges that are recoverable as they related to liabilities indemnified under the Tax Matters Agreement with General Electric. These tax charges have an offsetting income in the other non-operating income line of our income statement.

Other non-operating income in the fourth quarter of 2021 was $208 million. Included in other non-operating income are gains from the change in fair value of our investment in ADNOC Drilling, and losses from the change in fair value of our investment in C3 AI.

GAAP diluted earnings per share was $0.32. Adjusted earnings per share was $0.25. Excluded from adjusted earnings per share were all items listed in Table 1a in the section entitled "Reconciliation of GAAP to non-GAAP Financial Measures" as well as the "other adjustments (non-operating)" found in Table 1c.

Cash flows generated from operating activities were $773 million for the fourth quarter of 2021. Free cash flow (a non-GAAP measure) for the quarter was $645 million. A reconciliation from GAAP has been provided in Table 1d in the section entitled "Reconciliation of GAAP to non-GAAP Financial Measures."

Capital expenditures, net of proceeds from disposal of assets, were $129 million for the fourth quarter of 2021.

Results by Reporting Segment

The following segment discussions and variance explanations are intended to reflect management's view of the relevant comparisons of financial results on a sequential or year-over-year basis, depending on the business dynamics of the reporting segments.

Oilfield Services

(in millions) Three Months Ended Variance

December September December Year-over-Oilfield Services 31, 30, 31, Sequential year 2021 2021 2020

Revenue $ 2,566 $ 2,419 $ 2,282 6 % 12 %

Operating income $ 256 $ 190 $ 142 35 % 81 %

Operating income 10.0 % 7.9 % 6.2 % 2.1 pts 3.8 ptsmargin

Depreciation & $ 193 $ 183 $ 211 5 % (9 ) %amortization

EBITDA* $ 449 $ 373 $ 353 20 % 27 %

EBITDA margin* 17.5 % 15.4 % 15.5 % 2.1 pts 2 pts

Oilfield Services (OFS) revenue of $2,566 million for the fourth quarter increased by $147 million, or 6%, sequentially.

North America revenue was $742 million, up 4% sequentially. International revenue was $1,824 million, an increase of 7% sequentially, led by increases in Sub-Saharan Africa, the North Sea, Russia, Latin America and the Middle East.

Segment operating income before tax for the quarter was $256 million. Operating income for the fourth quarter of 2021 was up $66 million, or 35%, sequentially, driven by higher volume, price, mix and cost productivity.

Oilfield Equipment

(in millions) Three Months Ended Variance

December September December Year-over-Oilfield Equipment 31, 30, 31, Sequential year 2021 2021 2020

Orders $ 510 $ 724 $ 561 (30 ) % (9 ) %

Revenue $ 619 $ 603 $ 712 3 % (13 ) %

Operating income $ 23 $ 14 $ 23 68 % 1 %

Operating income 3.8 % 2.3 % 3.2 % 1.5 pts 0.5 ptsmargin

Depreciation & $ 22 $ 22 $ 33 - % (32 ) %amortization

EBITDA* $ 46 $ 36 $ 56 26 % (18 ) %

EBITDA margin* 7.4 % 6.0 % 7.9 % 1.4 pts -0.5 pts

Oilfield Equipment (OFE) orders were down $51 million, or 9%, year-over-year, driven primarily by lower order intake in Subsea Production Systems and from the removal of Subsea Drilling Services from consolidated OFE operations, partially offset by higher order intake in Services and Flexibles. Equipment orders were down 26% year-over-year and services orders were up 26% year-over-year.

OFE revenue of $619 million for the quarter decreased $92 million, or 13%, year-over-year. The decrease was driven by lower volume in Subsea Productions Systems and Surface Pressure Control Projects, and from the removal of Subsea Drilling Services from consolidated OFE operations. These decreases were partially offset by higher volume in Services.

Segment operating income before tax for the quarter was $23 million, flat year-over-year. The volume decrease year-over-year was offset by productivity gains.

*Non-GAAP measure.

Turbomachinery & Process Solutions

(in millions) Three Months Ended Variance

December September December Year-over-Turbomachinery & Process 31, 30, 31, SequentialSolutions year 2021 2021 2020

Orders $ 2,974 $ 1,719 $ 1,832 73 % 62 %

Revenue $ 1,776 $ 1,562 $ 1,946 14 % (9 ) %

Operating income $ 346 $ 278 $ 332 24 % 4 %

Operating income margin 19.5 % 17.8 % 17.1 % 1.7 pts 2.4 pts

Depreciation & $ 30 $ 30 $ 31 1 % (2 ) %amortization

EBITDA* $ 375 $ 308 $ 362 22 % 4 %

EBITDA margin* 21.1 % 19.7 % 18.6 % 1.4 pts 2.5 pts

Turbomachinery & Process Solutions (TPS) orders were up $1,142 million, or 62% year-over-year. Equipment orders were up $1,067 million year-over-year and service orders were up $75 million or 7% year-over-year.

TPS revenue of $1,776 million for the quarter decreased $170 million, or 9%, year-over-year. The decrease was driven by lower equipment and projects revenue, partially offset by higher contractual services volume. Equipment revenue in the quarter represented 41% of total segment revenue, and Services revenue represented 59% of total segment revenue.

Segment operating income before tax for the quarter was $346 million, up $14 million, or 4%, year-over-year. The increase was driven primarily by favorable mix as a result of higher Services revenue.

*Non-GAAP measure.

Digital Solutions

(in millions) Three Months Ended Variance

December September December Year-over-Digital Solutions 31, 30, 31, Sequential year 2021 2021 2020

Orders $ 605 $ 523 $ 528 16 % 14 %

Revenue $ 558 $ 510 $ 556 9 % - %

Operating income $ 51 $ 26 $ 76 97 % (33 ) %

Operating income 9.2 % 5.1 % 13.8 % 4.1 pts -4.6 ptsmargin

Depreciation & $ 22 $ 22 $ 25 1 % (11 ) %amortization

EBITDA* $ 73 $ 48 $ 101 53 % (28 ) %

EBITDA margin* 13.1 % 9.4 % 18.2 % 3.8 pts -5.1 pts

Digital Solutions (DS) orders were up $76 million, or 14% year-over-year, driven by higher order intake in Digital Solutions businesses with the exception of the Nexus Controls business.

DS revenue of $558 million for the quarter increased $2 million, year-over-year, driven by higher volume in the Waygate Technologies, Process & Pipeline Services and Reuter-Stokes businesses, offset by lower volume in the Nexus Controls and Bently Nevada businesses.

Segment operating income before tax for the quarter was $51 million, down $25 million, or 33% year-over-year. The decrease year-over-year was primarily driven by lower cost productivity.

*Non-GAAP measure.

2021 Total Year Results

Twelve Months Ended

December 31, December 31, VarianceOrders 2021 2020 Year-over-year

Oilfield Services $ 9,538 $ 10,119 (6 )%

Oilfield Equipment 2,260 2,184 3 %

Turbomachinery and Process Solutions 7,653 6,424 19 %

Digital Solutions 2,217 1,986 12 %

Total Orders $ 21,668 $ 20,714 5 %



Revenue

Oilfield Services $ 9,542 $ 10,140 (6 )%

Oilfield Equipment 2,486 2,844 (13 )%

Turbomachinery and Process Solutions 6,451 5,705 13 %

Digital Solutions 2,057 2,015 2 %

Total Revenue $ 20,536 $ 20,705 (1 )%



Segment operating income

Oilfield Services $ 761 $ 487 56 %

Oilfield Equipment 69 19 F

Turbomachinery and Process Solutions 1,050 805 30 %

Digital Solutions 126 193 (35 )%

Total segment operating income 2,006 1,504 33 %

Corporate (429 ) (464 ) 8 %

Inventory impairment - (246 ) F

Goodwill impairment - (14,773 ) F

Restructuring, impairment & other (209 ) (1,866 ) 89 %

Separation related (60 ) (134 ) 55 %

Operating income (loss) 1,310 (15,978 ) F

Adjusted operating income ^(1) 1,576 1,040 52 %

Depreciation and amortization 1,105 1,317 (16 )%

Adjusted EBITDA ^(2) $ 2,681 $ 2,357 14 %

"F" is used in most instances when variance is above 100%. Additionally, "U" is used in most instances when variance is below (100)%.

"F" is used in most instances when variance is above 100%. Additionally, "U" isused in most instances when variance is below (100)%.

(1)

Adjusted operating income, a non-GAAP measure, excludes inventory impairment, goodwill impairment, restructuring, impairment & other charges, and separation related costs from GAAP operating income (loss).

(2)

Adjusted EBITDA, a non-GAAP measure, adds depreciation and amortization to adjusted operating income.

Reconciliation of GAAP to non-GAAP Financial Measures

Management provides non-GAAP financial measures because it believes such measures are widely accepted financial indicators used by investors and analysts to analyze and compare companies on the basis of operating performance and liquidity, and that these measures may be used by investors to make informed investment decisions.

Table 1a. Reconciliation of Operating Income to Adjusted Operating Income

^ Adjusted operating income, a non-GAAP measure, excludes inventory(1) impairment, goodwill impairment, restructuring, impairment & other charges, and separation related costs from GAAP operating income (loss).

^ Adjusted EBITDA, a non-GAAP measure, adds depreciation and amortization to(2) adjusted operating income.

Reconciliation of GAAP to non-GAAP Financial Measures

Management provides non-GAAP financial measures because it believes such measures are widely accepted financial indicators used by investors and analysts to analyze and compare companies on the basis of operating performance and liquidity, and that these measures may be used by investors to make informed investment decisions.

Table 1a. Reconciliation of Operating Income to Adjusted Operating Income

Three Months Ended

December 31, September 30, December 31,(in millions) 2021 2021 2020

Operating income (GAAP) $ 574 $ 378 $ 182

Separation related 8 11 24

Restructuring, impairment & other (11 ) 14 229

Inventory impairment - - 27

Total operating income adjustments (3 ) 24 281

Adjusted operating income (non-GAAP) $ 571 $ 402 $ 462

Table 1a reconciles operating income, which is the directly comparable financial result determined in accordance with Generally Accepted Accounting Principles (GAAP), to adjusted operating income (a non-GAAP financial measure). Adjusted operating income excludes the impact of certain identified items.

Table 1b. Reconciliation of Operating Income to EBITDA and Adjusted EBITDA

Three Months Ended

December 31, September 30, December 31,(in millions) 2021 2021 2020

Operating income (GAAP) $ 574 $ 378 $ 182

Depreciation & amortization 273 262 307

EBITDA (non-GAAP) 847 640 489

Total operating income adjustments ^(1) (3 ) 24 281

Adjusted EBITDA (non-GAAP) $ 844 $ 664 $ 770

(1)

See Table 1a for the identified adjustments to operating income.

Table 1b reconciles operating income, which is the directly comparable financial result determined in accordance with GAAP, to EBITDA (a non-GAAP financial measure). Adjusted EBITDA (a non-GAAP financial measure) excludes the impact of certain identified items.

Table 1c. Reconciliation of Net Income Attributable to Baker Hughes to Adjusted Net Income (Loss) Attributable to Baker Hughes

^(1) See Table 1a for the identified adjustments to operating income.

Table 1b reconciles operating income, which is the directly comparable financial result determined in accordance with GAAP, to EBITDA (a non-GAAP financial measure). Adjusted EBITDA (a non-GAAP financial measure) excludes the impact of certain identified items.

Table 1c. Reconciliation of Net Income Attributable to Baker Hughes to Adjusted Net Income (Loss) Attributable to Baker Hughes

Three Months Ended

December September December(in millions, except per share amounts) 31, 30, 31,

2021 2021 2020

Net income attributable to Baker Hughes (GAAP) $ 294 $ 8 $ 653

Total operating income adjustments ^(1) (3 ) 24 281

Other adjustments (non-operating) ^(2) (77 ) 140 (1,412 )

Tax effect on total adjustments and other tax 1 (3 ) 114 items ^(3)

Total adjustments, net of income tax (79 ) 161 (1,017 )

Less: adjustments attributable to noncontrolling (9 ) 28 (314 )interests

Adjustments attributable to Baker Hughes (70 ) 133 (703 )

Adjusted net income (loss) attributable to Baker $ 224 $ 141 $ (50 )Hughes (non-GAAP)





Denominator:

Weighted-average shares of Class A common stock 906 857 713 outstanding diluted

Adjusted diluted earnings (loss) per Class A $ 0.25 $ 0.16 $ (0.07 )share (non-GAAP)

(1)

See Table 1a for the identified adjustments to operating income.

(2)

4Q'21 primarily due to the gain from the change in fair value of our investment in ADNOC Drilling, partially offset by the loss from the change in fair value of our investment in C3 AI. 3Q'21 primarily due to losses from the change in fair value of our investment in C3 AI. 4Q'20 primarily related to the gain from the change in fair value of our investment in C3 AI.

(3)

4Q'20 includes tax expense related to a business disposition.

Table 1c reconciles net income attributable to Baker Hughes, which is the directly comparable financial result determined in accordance with GAAP, to adjusted net income (loss) attributable to Baker Hughes (a non-GAAP financial measure). Adjusted net income (loss) attributable to Baker Hughes excludes the impact of certain identified items.

Table 1d. Reconciliation of Cash Flow From Operating Activities to Free Cash Flow

^ See Table 1a for the identified adjustments to operating income.(1)

4Q'21 primarily due to the gain from the change in fair value of our investment in ADNOC Drilling, partially offset by the loss from the change^ in fair value of our investment in C3 AI. 3Q'21 primarily due to losses(2) from the change in fair value of our investment in C3 AI. 4Q'20 primarily related to the gain from the change in fair value of our investment in C3 AI.

^ 4Q'20 includes tax expense related to a business disposition.(3)

Table 1c reconciles net income attributable to Baker Hughes, which is the directly comparable financial result determined in accordance with GAAP, to adjusted net income (loss) attributable to Baker Hughes (a non-GAAP financial measure). Adjusted net income (loss) attributable to Baker Hughes excludes the impact of certain identified items.

Table 1d. Reconciliation of Cash Flow From Operating Activities to Free Cash Flow

Three Months Ended Twelve Months Ended

December September December December 31, 31, 30, 31,

(in millions) 2021 2021 2020 2021 2020

Cash flow from operating $ 773 $ 416 $ 378 $ 2,374 $ 1,304 activities (GAAP)

Add: cash used for capitalexpenditures, net of proceeds (129 ) (111 ) (127 ) (541 ) (787 )from disposal of assets

Free cash flow (non-GAAP) $ 645 $ 305 $ 250 $ 1,832 $ 518

Table 1d reconciles net cash flows from operating activities, which is the directly comparable financial result determined in accordance with GAAP, to free cash flow (a non-GAAP financial measure). Free cash flow is defined as net cash flows from operating activities less expenditures for capital assets plus proceeds from disposal of assets.

Financial Tables (GAAP)

Condensed Consolidated Statements of Income

(Unaudited)

Three Months Ended

December September December(In millions, except per share amounts) 31, 30, 31,

2021 2021 2020

Revenue $ 5,519 $ 5,093 $ 5,495

Costs and expenses:

Cost of revenue 4,315 4,083 4,486

Selling, general and administrative 633 607 574

Restructuring, impairment and other (11 ) 14 229

Separation related 8 11 24

Total costs and expenses 4,945 4,715 5,313

Operating income 574 378 182

Other non-operating income (loss), net 208 (102 ) 1,407

Interest expense, net (95 ) (67 ) (69 )

Income before income taxes 688 209 1,520

Provision for income taxes (352 ) (193 ) (568 )

Net income 335 16 952

Less: Net income attributable to 42 8 299 noncontrolling interests

Net income attributable to Baker Hughes $ 294 $ 8 $ 653 Company



Per share amounts:

Basic income per Class A common share $ 0.33 $ 0.01 $ 0.92

Diluted income per Class A common share $ 0.32 $ 0.01 $ 0.91



Weighted average shares:

Class A basic 896 851 713

Class A diluted 906 857 717



Cash dividend per Class A common share $ 0.18 $ 0.18 $ 0.18



Condensed Consolidated Statements of Income (Loss)

(Unaudited)

Year Ended December 31,

(In millions, except per share amounts) 2021 2020 2019

Revenue $ 20,536 $ 20,705 $ 23,838

Costs and expenses:

Cost of revenue 16,487 17,506 19,406

Selling, general and administrative 2,470 2,404 2,832

Goodwill impairment - 14,773 -

Restructuring, impairment and other 209 1,866 342

Separation related 60 134 184

Total costs and expenses 19,226 36,683 22,764

Operating income (loss) 1,310 (15,978 ) 1,074

Other non-operating income (loss), net (583 ) 1,040 (84 )

Interest expense, net (299 ) (264 ) (237 )

Income (loss) before income taxes 428 (15,202 ) 753

Provision for income taxes (758 ) (559 ) (482 )

Net income (loss) (330 ) (15,761 ) 271

Less: Net income (loss) attributable to (111 ) (5,821 ) 143 noncontrolling interests

Net income (loss) attributable to Baker Hughes $ (219 ) $ (9,940 ) $ 128 Company



Per share amounts:

Basic & diluted income (loss) per Class A $ (0.27 ) $ (14.73 ) $ 0.23 common share



Weighted average shares:

Class A basic 824 675 555

Class A diluted 824 675 557



Cash dividend per Class A common share $ 0.72 $ 0.72 $ 0.72

Condensed Consolidated Statements of Financial Position

(Unaudited)

December 31,

(In millions) 2021 2020

ASSETS

Current Assets:

Cash and cash equivalents $ 3,853 $ 4,132

Current receivables, net 5,651 5,622

Inventories, net 3,979 4,421

All other current assets 1,582 2,280

Total current assets 15,065 16,455

Property, plant and equipment, less accumulated depreciation 4,877 5,358

Goodwill 5,959 5,977

Other intangible assets, net 4,131 4,397

Contract and other deferred assets 1,638 2,001

All other assets 3,678 3,819

Total assets $ 35,348 $ 38,007

LIABILITIES AND EQUITY

Current Liabilities:

Accounts payable $ 3,745 $ 3,532

Short-term debt and current portion of long-term debt 40 889

Progress collections and deferred income 3,272 3,454

All other current liabilities 2,111 2,352

Total current liabilities 9,168 10,227

Long-term debt 6,687 6,744

Liabilities for pensions and other postretirement benefits 1,110 1,217

All other liabilities 1,637 1,577

Equity 16,746 18,242

Total liabilities and equity $ 35,348 $ 38,007



Outstanding Baker Hughes Company shares:

Class A common stock 909 724

Class B common stock 117 311

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Three Months Twelve Months Ended Ended December 31, December 31,

(In millions) 2021 2021 2020

Cash flows from operating activities:

Net income (loss) $ 336 $ (330 ) $ (15,761 )

Adjustments to reconcile net income (loss) to net cash flows from operating activities:

Depreciation and amortization 273 1,105 1,317

(Gain) loss on equity securities (110 ) 845 (1,417 )

Provision for deferred income taxes 109 133 160

Other asset impairments (14 ) 7 1,436

Goodwill impairment - - 14,773

Loss on sale of business - - 353

Working capital 10 480 216

Other operating items, net 170 134 227

Net cash flows from operating activities 773 2,374 1,304

Cash flows from investing activities:

Expenditures for capital assets, net of (129 ) (541 ) (787 )proceeds from disposal of assets

Other investing items, net (122 ) 78 169

Net cash flows used in investing activities (251 ) (463 ) (618 )

Cash flows from financing activities:

Net repayment of debt and other borrowings (1,294 ) (1,354 ) (246 )

Proceeds from (repayments of) commercial - (832 ) 737 paper

Proceeds from issuance of long-term debt 1,250 1,250 500

Dividends paid (156 ) (592 ) (488 )

Distributions to GE (30 ) (157 ) (256 )

Repurchase of Class A common stock (328 ) (434 ) -

Other financing items, net - (24 ) (22 )

Net cash flows from (used in) financing (558 ) (2,143 ) 225 activities

Effect of currency exchange rate changes on (38 ) (47 ) (28 )cash and cash equivalents

Increase (decrease) in cash and cash (73 ) (279 ) 883 equivalents

Cash and cash equivalents, beginning of 3,926 4,132 3,249 period

Cash and cash equivalents, end of period $ 3,853 $ 3,853 $ 4,132

Supplemental cash flows disclosures:

Income taxes paid, net of refunds $ 133 $ 314 $ 441

Interest paid $ 101 $ 305 $ 289

Supplemental Financial Information

Supplemental financial information can be found on the Company's website at: investors.bakerhughes.com in the Financial Information section under Quarterly Results.

Conference Call and Webcast

The Company has scheduled an investor conference call to discuss management's outlook and the results reported in today's earnings announcement. The call will begin at 8:30 a.m. Eastern time, 7:30 a.m. Central time on Thursday, January 20, 2022, the content of which is not part of this earnings release. The conference call will be broadcast live via a webcast and can be accessed by visiting the Events and Presentations page on the Company's website at: investors.bakerhughes.com. An archived version of the webcast will be available on the website for one month following the webcast.

Forward-Looking Statements

This news release (and oral statements made regarding the subjects of this release) may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, (each a "forward-looking statement"). The words "anticipate," "believe," "ensure," "expect," "if," "intend," "estimate," "project," "foresee," "forecasts," "predict," "outlook," "aim," "will," "could," "should," "potential," "would," "may," "probable," "likely," and similar expressions, and the negative thereof, are intended to identify forward-looking statements. There are many risks and uncertainties that could cause actual results to differ materially from our forward-looking statements. These forward-looking statements are also affected by the risk factors described in the Company's annual report on Form 10-K for the annual period ended December 31, 2020; the Company's subsequent quarterly reports on Form 10-Q for the quarterly periods ended March 31, 2021, June 30, 2021 and September 30, 2021; and those set forth from time to time in other filings with the Securities and Exchange Commission ("SEC"). The documents are available through the Company's website at: www.investors.bakerhughes.com or through the SEC's Electronic Data Gathering and Analysis Retrieval ("EDGAR") system at: www.sec.gov. We undertake no obligation to publicly update or revise any forward-looking statement.

Our expectations regarding our business outlook and business plans; the business plans of our customers; oil and natural gas market conditions; cost and availability of resources; economic, legal and regulatory conditions, and other matters are only our forecasts regarding these matters.

These forward-looking statements, including forecasts, may be substantially different from actual results, which are affected by many risks, along with the following risk factors and the timing of any of these risk factors:

COVID-19 - The continued spread of the COVID-19 virus and the continuation of the measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place orders, and shutdowns, and the related uncertainties.

Economic and political conditions - the impact of worldwide economic conditions; the effect that declines in credit availability may have on worldwide economic growth and demand for hydrocarbons; foreign currency exchange fluctuations and changes in the capital markets in locations where we operate; and the impact of government disruptions and sanctions.

Orders and RPO - our ability to execute on orders and RPO in accordance with agreed specifications, terms and conditions and convert those orders and RPO to revenue and cash.

Oil and gas market conditions - the level of petroleum industry exploration, development and production expenditures; the price of, volatility in pricing of, and the demand for crude oil and natural gas; drilling activity; drilling permits for and regulation of the shelf and the deepwater drilling; excess productive capacity; crude and product inventories; liquefied natural gas supply and demand; seasonal and other adverse weather conditions that affect the demand for energy; severe weather conditions, such as tornadoes and hurricanes, that affect exploration and production activities; Organization of Petroleum Exporting Countries ("OPEC") policy and the adherence by OPEC nations to their OPEC production quotas.

Terrorism and geopolitical risks - war, military action, terrorist activities or extended periods of international conflict, particularly involving any petroleum-producing or -consuming regions; labor disruptions, civil unrest or security conditions where we operate; potentially burdensome taxation, expropriation of assets by governmental action; cybersecurity risks and cyber incidents or attacks; epidemic outbreaks.

About Baker Hughes:

Baker Hughes (Nasdaq: BKR) is an energy technology company that provides solutions for energy and industrial customers worldwide. Built on a century of experience and with operations in over 120 countries, our innovative technologies and services are taking energy forward - making it safer, cleaner and more efficient for people and the planet. Visit us at bakerhughes.com

View source version on businesswire.com: https://www.businesswire.com/news/home/20220120005131/en/

CONTACT: Investor Relations Jud Bailey +1 281-809-9088 investor.relations@bakerhughes.com

CONTACT: Media Relations Thomas Millas +1 713-879-2862 thomas.millas@bakerhughes.com