Baker Hughes Incurs Loss in Russia, but Sees Promise in LNG

---

Researched by Industrial Info Resources (Sugar Land, Texas)--The one-two punch of inflation and the war in Ukraine clobbered Baker Hughes (NYSE:BKR) (Houston, Texas) in the second quarter. The oilfield services provider incurred a $426 million non-operating loss related to its suspended business in Russia, which equaled more than half of its $839 million net loss for the period. Executives acknowledged "the demand outlook for the next 12 to 18 months is deteriorating" as inflation eats away at consumers' pocketbooks. Industrial Info is tracking about $35 billion in active projects involving Baker Hughes, including $16 billion worth in the U.S.

Component shortages and supply-chain inflation also weighed heavily on Baker Hughes' results, although the company's holdings in Russia--which it now lists as "held for sale"--proved to be the most immediate problem. Revenues of $5.05 billion were down only 1.85% from the same period last year, but the $839 million net loss far exceeded the $68 million loss in second-quarter 2021.

Click on the image at right for a graph detailing Baker Hughes' active LNG projects, by country.

Baker Hughes announced earlier this year that it would halt all new investments in Russia, and that it had stopped servicing Russia's liquefied natural gas (LNG) projects. The company generated up to 5% of its total sales from Russia, according to Bloomberg, and said it would continue with its already-contracted work there. But at least one such project, Novatek PAO's (Tarko-Sale, Russia) partial conversion of the Yamal LNG Liquefaction plant's natural gas-fired turbines to hydrogen, has been sidelined indefinitely by the Russia-Ukraine war and resulting sanctions. Subscribers to Industrial Info's Global Market Intelligence (GMI) Oil & Gas Production Project Database can read more in a detailed project report.

Lorenzo Simonelli, the chief executive officer for Baker Hughes, said in a quarterly earnings-related press release that he still sees an upside to the dominant market forces: "Due to years of underinvestment globally and the potential need to replace Russian barrels, broader supply constraints can realistically keep commodity prices at elevated levels, even in a scenario of moderate demand destruction. As a result, we believe the outlook for oil prices remains volatile, but still supportive of strong activity levels, as higher spending is required to re-order the global energy map and likely offsets demand destruction in most recessionary scenarios."

In particular, Baker Hughes "is well-positioned to benefit from a strong LNG cycle and a multi-year upstream spending cycle," Simonelli said. LNG projects account for more than $29 billion of the company's $35 billion in active global projects, including Venture Global LNG Incorporated's (Arlington, Virginia) Plaquemines LNG plant and Calcasieu Pass terminal in Louisiana, the latter having started operations earlier this year.

At Plaquemines, Baker Hughes is serving as technology provider for two projects slated to begin construction toward the end of this year: a liquefaction terminal that will produce 11.2 million metric tons per year of LNG for export, and a natural gas-fired, combined-cycle power unit, which will generate 720 megawatts (MW) for the facility. Subscribers can read detailed project reports on the terminal and power unit, and learn about recent developments in IIR's May 27 article - Enbridge to Supply More Natural Gas to Venture Global's LNG Export Project.

Venture also has Baker Hughes working as a technology provider on a $2.5 billion expansion of its Calcasieu Pass terminal, which will increase the facility's output from 6 million to 11 million metric tons per year of LNG. The expansion began in September 2021 and is expected to wrap up in early 2023. Subscribers can learn more from Industrial Info's project report.

Some of Baker Hughes' most profitable contracts are in the Middle East, which was among the regions where the company reported profit growth in the second quarter. Qatar Energy's (Doha, Qatar) Ras Laffan LNG project in Al Khawr, Qatar, one of the largest LNG projects in the world, also began construction in September, with Baker Hughes as an equipment supplier. Currently set to wrap up in late 2025, the project comprises four LNG trains with a total output of 32 million metric tons per year. Subscribers can learn more from Industrial Info's detailed project report.

Subscribers to Industrial Info's GMI Project Database can click here for a full list of detailed reports for projects mentioned in this article, and click here for a full list of related plant profiles.

Subscribers can click here for a full list of reports for active global projects involving Baker Hughes.

Industrial Info Resources (IIR) is the world's leading provider of market intelligence across the upstream, midstream and downstream energy markets and all other major industrial markets. IIR's Global Market Intelligence Platform (GMI) supports our end-users across their core businesses, and helps them connect trends across multiple markets with access to real, qualified and validated project opportunities. Follow IIR on: LinkedIn.