Baker Hughes 10-Q 2024-06-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

For the quarterly period ended June 30, 2024

OR

For the transition period from_________to__________

Commission File Number 1-38143

(Exact name of registrant as specified in its charter)

Registrant's telephone number, including area code: (713) 439-8600

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer" "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☑

As of July 17, 2024, the registrant had outstanding 993,423,677 shares of Class A Common Stock, $0.0001 par value per share.

Baker Hughes Company

Table of Contents

Baker Hughes Company 2024 Second Quarter Form 10-Q | i

PART I — FINANCIAL INFORMATION

Baker Hughes Company

Condensed Consolidated Statements of Income (Loss)

(Unaudited)

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

Baker Hughes Company 2024 Second Quarter Form 10-Q | 1

Baker Hughes Company

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

Baker Hughes Company 2024 Second Quarter Form 10-Q | 2

Baker Hughes Company

Condensed Consolidated Statements of Financial Position

(Unaudited)

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

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Baker Hughes Company

Condensed Consolidated Statements of Changes in Equity

(Unaudited)

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Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the condensed consolidated financial statements and the related notes included in Item 1 thereto, as well as our Annual Report on Form 10-K for the year ended December 31, 2023 ("2023 Annual Report").

Baker Hughes Company ("Baker Hughes," "the Company," "we," "us," or "our") is an energy technology company with a broad and diversified portfolio of technologies and services that spans the energy and industrial value chain. We conduct business in more than 120 countries and employ approximately 57,000 employees. We operate through our two business segments: Oilfield Services & Equipment ("OFSE") and Industrial & Energy Technology ("IET"). We sell products and services primarily in the global oil and gas markets, within the upstream, midstream and downstream segments, as well as broader industrial and new energy markets.

EXECUTIVE SUMMARY

Market Conditions

In the second quarter of 2024, we saw strong momentum across the Company with meaningful improvement in our financial results over the second quarter of 2023, including key commercial successes, growth in revenue and expansion of operating margins.

As we look at the second half of 2024, we remain balanced on the oil and gas outlook and continue to see areas of strength across our broad portfolio. We also maintain our expectation for a multiyear upstream spending cycle.

In OFSE, on the back of slowing global demand growth and ongoing economic uncertainty, the recent Organization of the Petroleum Exporting Countries production cut extension, coupled with rising geopolitical risks and firming oil demand in June 2024 have helped to keep global oil markets more balanced. In the remainder of 2024, we expect growth in international markets to be only partially offset by year-over-year decline in activity in North America. Beyond 2024, we maintain our expectation for growth, although at a decelerating pace, led by international and offshore markets, as well as increased focus on optimizing production from existing assets.

In IET, we maintain an optimistic outlook for the development of natural gas and liquefied natural gas ("LNG"). We expect strength in LNG and gas infrastructure to be complemented by continued momentum in new energy and growing opportunities in other addressable end markets. In onshore and offshore production, we are optimistic about international demand for onshore processing and offshore production, storage and offloading. In downstream, we expect positive momentum in refinery conversion to bio-feedstock, and growth in ethylene and ammonia markets. We also expect increased power consumption growth to positively impact demand for turbomachinery and power solutions.

Global geopolitical tensions continue to add to the uncertainty across the oil and gas markets. While there has not been a material impact on our operations, we will continue to monitor and assess these risks. Furthermore, in IET, we will continue to manage the tightness in the aeroderivative supply chain.

Financial Results and Key Company Initiatives

In the second quarter of 2024, the Company generated revenue of $7,139 million, compared to $6,315 million in the second quarter of 2023, increasing $825 million or 13%. The increase in revenue was primarily driven by higher volume in IET on Gas Technology Equipment ("GTE") project backlog execution and to a lesser degree by improved activity in OFSE. Income before tax was $824 million in the second quarter of 2024 compared to $614 million in the second quarter of 2023, increasing $210 million. The increase in income before tax was driven primarily by higher volume and price in both segments and structural cost-out initiatives, partially offset by the decrease of the positive effect from the change in fair value on certain equity securities compared to the second quarter of 2023.

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As we continue our transformation, the business has undertaken significant structural changes and we see the operating benefits coming through in the margin performance. We have made progress in our efforts to improve efficiencies and modernize how the business operates, including in our cost-optimization initiatives announced in OFSE earlier this year.

Baker Hughes remains committed to a flexible capital allocation policy that balances returning cash to shareholders and investing in growth opportunities. In the second quarter of 2024, we returned a total of $375 million to shareholders in the form of dividends and share repurchases.

Outlook

Our business is exposed to a number of macro factors, which influence our outlook and expectations given the current volatile conditions in the industry. All of our outlook expectations are purely based on the market as we see it today and are subject to changing conditions in the industry.

• OFSE North America activity: North America activity declined during the second quarter, and we now expect relatively stable activity during the second half of 2024.

• OFSE International activity: We expect spending outside of North America to experience solid growth in 2024, as compared to 2023.

• IET LNG projects: We remain optimistic on the LNG market long-term and view natural gas as a transition and destination fuel. We continue to view the long-term economics of the LNG industry as positive.

We have other businesses in our portfolio that are more correlated with various industrial metrics, including global GDP growth. We also have businesses within our portfolio that are exposed to new energy solutions, specifically focused around reducing carbon emissions of the energy and broader industry, including: hydrogen; geothermal; carbon capture, utilization and storage; energy storage; clean power; and emissions abatement solutions. We expect to see continued growth in these businesses as new energy solutions become a more prevalent part of the broader energy mix.

Overall, we believe our portfolio is well positioned to compete across the energy value chain and deliver comprehensive solutions for our customers. We remain optimistic about the long-term economics of the oil and gas industry, but we are continuing to operate with flexibility. Over time, we believe the world's demand for energy will continue to rise, and that hydrocarbons will play a major role in meeting the world's energy needs for the foreseeable future. As such, we remain focused on delivering innovative, low-emission, and cost-effective solutions that deliver step changes in operating and economic performance for our customers.

Environmental, Social and Governance

We believe we have an important role to play in society as an industry leader and partner. We view the area of environmental, social, and governance as a key lever to transform the performance of our Company and our industry. In January 2019, we made a commitment to reduce Scope 1 and 2 carbon dioxide equivalent emissions from our operations by 50% by 2030 and achieve net zero emissions by 2050. We continue to make progress on emissions reductions, and reported in our 2023 Corporate Sustainability Report a 28.3% reduction in our Scope 1 and 2 carbon dioxide equivalent emissions as compared to our 2019 base year.

BUSINESS ENVIRONMENT

The following discussion and analysis summarizes the significant factors affecting our results of operations, financial condition and liquidity position as of and for the three and six months ended June 30, 2024 and 2023, and should be read in conjunction with the condensed consolidated financial statements and related notes of the Company.

Our revenue is predominately generated from the sale of products and services to major, national, and independent oil and natural gas companies worldwide, and is dependent on spending by our customers for oil and natural gas exploration, field development and production. This spending is driven by a number of factors, including our customers' forecasts of future energy demand and supply, their access to resources to develop and produce oil

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and natural gas, their ability to fund their capital programs, the impact of new government regulations, and their expectations for oil and natural gas prices as a key driver of their cash flows.

Oil and Natural Gas Prices

Oil and natural gas prices are summarized in the table below as averages of the daily closing prices during each of the periods indicated.

(1)Energy Information Administration ("EIA") Europe Brent Spot Price per Barrel

(2)EIA Cushing, OK West Texas Intermediate ("WTI") spot price

(3)EIA Henry Hub Natural Gas Spot Price per million British Thermal Unit

Outside North America, customer spending is influenced by Brent oil prices, which increased from the same quarter last year, ranging from a high of $93.12/Bbl in April 2024 to a low of $75.33/Bbl in June 2024. For the six months ended June 30, 2024, Brent oil prices averaged $83.79/Bbl, which represented an increase of $4.21/Bbl from the same period last year.

In North America, customer spending is influenced by WTI oil prices, which increased from the same quarter last year. Overall, WTI oil prices ranged from a high of $87.69/Bbl in April 2024 to a low of $74.27/Bbl in June 2024. For the six months ended June 30, 2024, WTI oil prices averaged $79.69/Bbl, which represented an increase of $4.96/Bbl from the same period last year.

In North America, natural gas prices, as measured by the Henry Hub Natural Gas Spot Price, averaged $2.07/mmBtu in the second quarter of 2024, representing a 4% decrease from the same quarter in the prior year. Throughout the quarter, Henry Hub Natural Gas Spot Prices ranged from a high of $2.80/mmBtu in June 2024 to a low of $1.36/mmBtu in April 2024.

Baker Hughes Rig Count

The Baker Hughes rig counts are an important business barometer for the drilling industry and its suppliers. When drilling rigs are active, they consume products and services produced by the oil service industry. Rig count trends are driven by the exploration and development spending by oil and natural gas companies, which in turn is influenced by current and future price expectations for oil and natural gas. The counts may reflect the relative strength and stability of energy prices and overall market activity; however, these counts should not be solely relied on as other specific and pervasive conditions may exist that affect overall energy prices and market activity.

We have been providing rig counts to the public since 1944. We gather all relevant data through our field service personnel, who obtain the necessary data from routine visits to the various rigs, customers, contractors and other outside sources as necessary. We base the classification of a well as either oil or natural gas primarily upon filings made by operators in the relevant jurisdiction. This data is then compiled and distributed to various wire services and trade associations and is published on our website. We believe the counting process and resulting data is reliable; however, it is subject to our ability to obtain accurate and timely information. Rig counts are compiled weekly for the United States of America ("U.S.") and Canada and monthly for all international rigs. Published international rig counts do not include rigs drilling in certain locations such as onshore China because this information is not readily available.

Rigs in the U.S. and Canada are counted as active if, on the day the count is taken, the well being drilled has been started but drilling has not been completed and the well is anticipated to be of sufficient depth to be a potential consumer of our drill bits. In international areas, rigs are counted on a weekly basis and deemed active if drilling activities occurred during the majority of the week. The weekly results are then averaged for the month and

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published accordingly. The rig count does not include rigs that are in transit from one location to another, rigging up, being used in non-drilling activities including production testing, completion and workover, and are not expected to be significant consumers of drill bits.

The rig counts are summarized in the table below as averages for each of the periods indicated.

The worldwide rig count was 1,701 for the second quarter of 2024, a decrease of 5% as compared to the same period last year primarily due to a decrease in North America. Within North America, the decrease was primarily driven by the U.S. rig count, which was down 16% when compared to the same period last year, partially offset by an increase in the Canada rig count, which was up 16% when compared to the same period last year. Internationally, the rig count was flat when compared to the same period last year.

The worldwide rig count was 1,749 for the six months ended June 30, 2024, a decrease of 5% as compared to the same period last year primarily due to a decrease in North America. Within North America, the decrease was driven by the U.S. rig count, which was down 17% when compared to the same period last year. Internationally, the rig count increase was driven by an increase in the Africa, Asia-Pacific, Middle East, and Europe regions of 16%, 5%, 5%, and 3%, respectively.

RESULTS OF OPERATIONS

The discussions below relating to significant line items from our condensed consolidated statements of income (loss) are based on available information and represent our analysis of significant changes or events that impact the comparability of reported amounts. Where appropriate, we have identified specific events and changes that affect comparability or trends and, where reasonably practicable, have quantified the impact of such items. In addition, the discussions below for revenue and cost of revenue are on a total basis as the business drivers for product sales and services are similar. All dollar amounts in tabulations in this section are in millions of dollars, unless otherwise stated. Certain columns and rows may not add due to the use of rounded numbers.

Our condensed consolidated statements of income (loss) displays sales and costs of sales in accordance with the Securities and Exchange Commission ("SEC") regulations under which "goods" is required to include all sales of tangible products and "services" must include all other sales, including other service activities. For the amounts shown below, we distinguish between "equipment" and "product services," where product services refer to sales under product services agreements, including sales of both goods (such as spare parts and equipment upgrades) and related services (such as monitoring, maintenance and repairs), which is an important part of our operations. We refer to "product services" simply as "services" within the Business Environment section of Management's Discussion and Analysis.

Our results of operations are evaluated by the Chief Executive Officer on a consolidated basis as well as at the segment level. The performance of our operating segments is primarily evaluated based on segment operating income (loss), which is defined as income (loss) before income taxes and before the following: net interest expense, net other non-operating income (loss), corporate expenses, significant restructuring plans, impairment and other charges, inventory impairments, and certain gains and losses not allocated to the operating segments.

In evaluating the segment performance, the Company primarily uses the following:

Volume: Volume is defined as the increase or decrease in products and/or services sold period-over-period excluding the impact of foreign exchange and price. The volume impact on profit is calculated by multiplying the prior period profit rate by the change in revenue volume between the current and prior period. Volume also includes price, which is defined as the change in sales price for a comparable product or service period-over-period and is calculated as the period-over-period change in sales prices of comparable products and services.

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Foreign Exchange ("FX"): FX measures the translational foreign exchange impact, or the translation impact of the period-over-period change on sales and costs directly attributable to change in the foreign exchange rate compared to the U.S. dollar. FX impact is calculated by multiplying the functional currency amounts (revenue or profit) with the period-over-period FX rate variance, using the average exchange rate for the respective period.

(Inflation)/Deflation: (Inflation)/deflation is defined as the increase or decrease in direct and indirect costs of the same type for an equal amount of volume. It is calculated as the year-over-year change in cost (i.e. price paid) of direct material, compensation and benefits, and overhead costs.

Productivity: Productivity is measured by the remaining variance in profit, after adjusting for the period-over-period impact of volume and price, foreign exchange and (inflation)/deflation as defined above. Improved or lower period-over-period cost productivity is the result of cost efficiencies or inefficiencies, such as cost decreasing or increasing more than volume, or cost increasing or decreasing less than volume, or changes in sales mix among segments. This also includes the period-over-period variance of transactional foreign exchange, aside from those foreign currency devaluations that are reported separately for business evaluation purposes.

Orders and Remaining Performance Obligations

Orders: We recognized orders of $7.5 billion for the three months ended June 30, 2024 and 2023.

We recognized OFSE orders of $4.0 billion and $4.2 billion, and IET orders of $3.5 billion and $3.3 billion for the three months ended June 30, 2024 and 2023, respectively. Within IET, Gas Technology orders were $2.3 billion and $2.3 billion, Industrial Technology orders were $0.8 billion and $0.8 billion, and Climate Technology Solutions ("CTS") orders were $0.4 billion and $0.2 billion, for the three months ended June 30, 2024 and 2023, respectively. References to total new energy orders incorporates CTS in IET of $0.4 billion.

We recognized orders of $14.1 billion and $15.1 billion for the six months ended June 30, 2024 and 2023, respectively.

We recognized OFSE orders of $7.7 billion and $8.3 billion, and IET orders of $6.4 billion and $6.8 billion for the six months ended June 30, 2024 and 2023, respectively. Within IET, Gas Technology orders were $4.2 billion and $4.7 billion, Industrial Technology orders were $1.6 billion and $1.7 billion, and CTS orders were $0.6 billion and $0.4 billion, for the six months ended June 30, 2024 and 2023, respectively. References to total new energy orders incorporates CTS in IET of $0.6 billion.

Remaining Performance Obligations ("RPO"): As of June 30, 2024, the aggregate amount of the transaction price allocated to the unsatisfied (or partially unsatisfied) performance obligations was $33.5 billion. As of June 30, 2024, OFSE remaining performance obligations totaled $3.3 billion, and IET remaining performance obligations totaled $30.2 billion.

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Revenue and Operating Income

Summarized financial information for the Company's segments is shown in the following tables.

(1)The sale of our controls business was completed in April 2023.

The following table presents OFSE revenue by geographic region:

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The following table presents segment operating income through to net income for the Company.

(1)Charges for inventory impairments are reported in "Cost of goods sold" in the condensed consolidated statements of income (loss).

Segment Revenues and Segment Operating Income

Second Quarter of 2024 Compared to the Second Quarter of 2023

Revenue increased $825 million, or 13%, driven by increased activity across both segments. OFSE increased $134 million and IET increased $691 million. Total segment operating income increased $207 million, driven by both segments.

Oilfield Services & Equipment

OFSE revenue of $4,011 million increased $134 million, or 3%, in the second quarter of 2024 compared to the second quarter of 2023, driven by an increased execution in Subsea & Surface Pressure Systems ("SSPS"). International revenue was $2,988 million in the second quarter of 2024, an increase of $152 million from the second quarter of 2023, primarily driven by the Europe/CIS/Sub-Saharan Africa and Middle East/Asia regions, partially offset by the Latin America region. North America revenue was $1,023 million in the second quarter of 2024, a decrease of $18 million from the second quarter of 2023.

OFSE segment operating income was $493 million in the second quarter of 2024 compared to $417 million in the second quarter of 2023. The increase in operating income was primarily driven by higher volume, price, and cost-out initiatives partially offset by unfavorable business mix and inflationary pressure.

Industrial & Energy Technology

IET revenue of $3,128 million increased $691 million, or 28%, in the second quarter of 2024 compared to the second quarter of 2023. The increase was primarily driven by higher volume in GTE and, to a lesser extent, in CTS, Industrial Technology and Gas Technology Services ("GTS").

IET segment operating income was $442 million in the second quarter of 2024 compared to $311 million in the second quarter of 2023. The operating income performance in the second quarter of 2024 was driven by higher volume, price and cost-out initiatives, partially offset by unfavorable business mix and inflationary pressure.

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Corporate

In the second quarter of 2024, corporate expenses were $88 million compared to $97 million in the second quarter of 2023. The decrease of $9 million was driven by savings related to our corporate optimization process.

Inventory Impairment

In the second quarter of 2023, we recorded inventory impairments of $15 million predominately in our OFSE segment. Charges for inventory impairments are reported in "Cost of goods sold" in the condensed consolidated statements of income (loss).

Restructuring, Impairment and Other

In the second quarter of 2024, we recognized $14 million of restructuring, impairment, and other charges, compared to $102 million in the second quarter of 2023. The charges in the second quarter of 2023 primarily relate to employee termination expenses driven by actions taken to facilitate our reorganization into two segments and to optimize our corporate structure. In addition, costs were incurred related to exit activities at specific locations in our segments to align with our current market outlook and to rationalize our manufacturing supply chain footprint.

Other Non-Operating Income, Net

In the second quarter of 2024, we recorded $38 million of other non-operating income. Included in this amount was a net gain of $19 million from the change in fair value for certain equity investments. In the second quarter of 2023, we recorded $158 million of other non-operating income. Included in this amount was a net gain of $148 million from the change in fair value for certain equity investments.

Interest Expense, Net

In the second quarter of 2024, we incurred net interest expense of $47 million, which includes interest income of $26 million. Net interest expense decreased $11 million compared to the second quarter of 2023, primarily driven by higher interest income.

Income Taxes

In the second quarter of 2024, the provision for income taxes was $243 million. The difference between the U.S. statutory tax rate of 21% and the effective tax rate is primarily related to income in jurisdictions with tax rates higher than in the U.S. and losses with no tax benefit due to valuation allowances, partially offset by income subject to U.S. tax at an effective rate less than 21% due to valuation allowances.

In the second quarter of 2023, the provision for income taxes was $200 million. The difference between the U.S. statutory tax rate of 21% and the effective tax rate is primarily related to income in jurisdictions with tax rates higher than in the U.S., which is partially offset by tax benefits related to uncertain tax positions.

In 2021, as part of the Organization for Economic Co-operation and Development's ("OECD") Inclusive Framework, 140 member countries agreed to the implementation of the Pillar Two Global Minimum Tax ("Pillar Two") of 15%. The OECD continues to release additional guidance, including administrative guidance on how Pillar Two rules should be interpreted and applied by jurisdictions as they adopt Pillar Two. A number of countries have utilized the administrative guidance as a starting point for legislation that went into effect January 1, 2024. Based on current enacted legislation, Baker Hughes estimates the impact of Pillar Two to be immaterial to the Company for 2024.

The First Six Months of 2024 Compared to the First Six Months of 2023

Revenue increased $1,527 million, or 13%, driven by increased activity across both segments. OFSE increased $340 million and IET increased $1,187 million. Total segment operating income increased $346 million, driven by both segments.

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Oilfield Services & Equipment

OFSE revenue of $7,794 million increased $340 million, or 5%, in the first six months of 2024 compared to the first six months of 2023, as a result of SSPS project execution and increase in international activity, partially offset by North America activity. International revenue was $5,781 million in the first six months of 2024, an increase of $360 million from the first six months of 2023, primarily driven by the Europe/CIS/Sub-Saharan Africa and Middle East/Asia regions, partially offset by the Latin America region. North America revenue was $2,013 million in the first six months of 2024, a decrease of $20 million from the first six months of 2023.

OFSE segment operating income was $915 million in the first six months of 2024 compared to $789 million in the first six months of 2023. The increase in operating income was primarily driven by higher volume, price, and cost-out initiatives partially offset by unfavorable business mix and inflationary pressure.

Industrial & Energy Technology

IET revenue of $5,763 million increased $1,187 million, or 26%, in the first six months of 2024 compared to the first six months of 2023. The increase was primarily driven by higher volume in GTE and, to a lesser extent, in CTS, Industrial Technology and GTS.

IET segment operating income was $772 million in the first six months of 2024 compared to $552 million in the first six months of 2023. The operating income performance in the first six months of 2024 was driven by higher volume, price and cost-out initiatives, partially offset by unfavorable business mix and inflationary pressure.

Corporate

In the first six months of 2024, corporate expenses were $180 million compared to $197 million in the first six months of 2023. The decrease of $17 million was driven by savings related to our corporate optimization process.

Inventory Impairment

In the first six months of 2023, we recorded inventory impairments of $33 million, predominately in the OFSE segment related to exit activities at specific locations. Charges for inventory impairments are reported in "Cost of goods sold" in the condensed consolidated statements of income (loss).

Restructuring, Impairment and Other

In the first six months of 2024, we recognized $21 million of restructuring, impairment, and other charges, compared to $158 million in the first six months of 2023. The charges in the first six months of 2023 primarily relate to employee termination expenses driven by actions taken to facilitate the reorganization into two segments and to optimize our corporate structure. In addition, costs were incurred related to exit activities at specific locations in our segments to align with our current market outlook and to rationalize our manufacturing supply chain footprint.

Other Non-Operating Income, Net

In the first six months of 2024, we recorded $67 million of other non-operating income. Included in this amount was a gain of $71 million from the change in fair value for certain equity investments. For the first six months of 2023, we recorded $544 million of other non-operating income. Included in this amount was a gain of $540 million from the change in fair value for certain equity investments.

Interest Expense, Net

In the first six months of 2024, we incurred net interest expense of $88 million, which includes interest income of $56 million. Net interest expense decreased $34 million compared to the first six months of 2023, primarily driven by higher interest income.

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Income Taxes

In the first six months of 2024, the provision for income taxes was $421 million. The difference between the U.S. statutory tax rate of 21% and the effective tax rate is primarily related to income in jurisdictions with tax rates higher than in the U.S. and losses with no tax benefit due to valuation allowances, partially offset by income subject to U.S. tax at an effective rate less than 21% due to valuation allowances.

In the first six months of 2023, the provision for income taxes was $379 million. The difference between the U.S. statutory tax rate of 21% and the effective tax rate is primarily related to income in jurisdictions with tax rates higher than in the U.S., which is partially offset by tax benefits related to uncertain tax positions. Further, the tax rate is also partially reduced by income subject to U.S. tax at an effective rate less than 21% due to valuation allowances.

LIQUIDITY AND CAPITAL RESOURCES

Our objective in financing our business is to maintain sufficient liquidity, adequate financial resources and financial flexibility in order to fund the requirements of our business. We continue to maintain solid financial strength and liquidity. At June 30, 2024, we had cash and cash equivalents of $2.3 billion compared to $2.6 billion at December 31, 2023.

In the U.S. we held cash and cash equivalents of approximately $0.6 billion and $0.6 billion and outside the U.S. of approximately $1.7 billion and $2.0 billion as of June 30, 2024 and December 31, 2023, respectively. A substantial portion of the cash held outside the U.S. at June 30, 2024 has been reinvested in active non-U.S. business operations. If we decide at a later date to repatriate certain cash to the U.S., we may incur other additional taxes that would not be significant to the total tax provision.

As of June 30, 2024 and December 31, 2023, we had $683 million and $637 million, respectively, of cash held in countries with currency controls that limit the flow of cash out of the jurisdiction or limit our ability to transfer funds without potentially incurring substantial costs. These funds are available to fund operations and growth in their respective jurisdictions, and we do not currently anticipate a need to transfer these funds to the U.S.

We have a $3.0 billion committed unsecured revolving credit facility ("the Credit Agreement") with commercial banks maturing in November 2028. The Credit Agreement contains certain representations and warranties, certain affirmative covenants and negative covenants, in each case we consider customary. No related events of default have occurred. The Credit Agreement is fully and unconditionally guaranteed on a senior unsecured basis by Baker Hughes. At June 30, 2024 and December 31, 2023, there were no borrowings under the Credit Agreement.

Certain Senior Notes contain covenants that restrict our ability to take certain actions. See "Note 8. Debt" of the Notes to Unaudited Condensed Consolidated Financial Statements in this Quarterly Report for further details. At June 30, 2024, we were in compliance with all debt covenants. Our next debt maturity is December 2026.

We continuously review our liquidity and capital resources. If market conditions were to change, for instance due to the uncertainty created by geopolitical events, a global pandemic or a significant decline in oil and gas prices, and our revenue was reduced significantly or operating costs were to increase significantly, our cash flows and liquidity could be negatively impacted. Additionally, it could cause the rating agencies to lower our credit ratings. There are no ratings triggers that would accelerate the maturity of any borrowings under our committed credit facility; however, a downgrade in our credit ratings could increase the cost of borrowings under the credit facility. Should this occur, we could seek alternative sources of funding, including borrowing under the credit facility.

During the six months ended June 30, 2024, we dispersed cash to fund a variety of activities including certain working capital needs, capital expenditures, the payment of dividends, and repurchases of our common stock.

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Cash Flows

Cash flows provided by (used in) each type of activity were as follows for the six months ended June 30:

Operating Activities

Cash flows from operating activities generated cash of $1,132 million and $1,320 million for the six months ended June 30, 2024 and 2023, respectively.

Our largest source of operating cash is payments from customers, of which the largest component is collecting cash related to our sales of products and services, including advance payments or progress collections for work to be performed. The primary use of operating cash is to pay our suppliers, employees, tax authorities, and others for a wide range of goods and services.

For the six months ended June 30, 2024, cash generated from operating activities were primarily driven by net income adjusted for certain noncash items (including depreciation, amortization, gain on equity securities, stock-based compensation cost, and deferred tax provision). Net working capital cash usage was $36 million for the six months ended June 30, 2024, mainly due to an increase in inventory and contract assets as we continue to build for growth, partially offset by accounts payable. Included in the cash flows from operating activities for the six months ended June 30, 2024 are payments of $130 million made primarily for employee severance as a result of our restructuring activities.

For the six months ended June 30, 2023, cash generated from operating activities were primarily driven by net income adjusted for certain noncash items (including depreciation, amortization, gain on equity securities, stock-based compensation cost, deferred tax provision, and the impairment of certain assets). Net working capital cash generation was $176 million for the six months ended June 30, 2023, mainly due to strong progress collections on equipment contracts, partially offset by an increase in receivables and inventory as we build for growth.

Investing Activities

Cash flows from investing activities used cash of $530 million and $414 million for the six months ended June 30, 2024 and 2023, respectively.

Our principal recurring investing activity is the funding of capital expenditures including property, plant and equipment ("PP&E") and software, to support and generate revenue from operations. Expenditures for capital assets were $625 million and $587 million for the six months ended June 30, 2024 and 2023, respectively, partially offset by cash flows from the disposal of PP&E of $101 million and $87 million for the six months ended June 30, 2024 and 2023, respectively. Proceeds from the disposal of assets are primarily related to equipment that was lost-in-hole, predominantly in OFSE, and PP&E no longer used in operations that was sold throughout the period.

During the six months ended June 30, 2023, we completed the acquisition of businesses for total cash consideration of $282 million, net of cash acquired, which consisted primarily of the acquisition of Altus Intervention in the OFSE segment. We also completed the sale of businesses and received total cash consideration of $293 million, which consisted primarily of the sale of our Nexus Controls business in the IET segment.

Financing Activities

Cash flows from financing activities used cash of $929 million and $550 million for the six months ended June 30, 2024 and 2023, respectively.

During the six months ended June 30, 2024, we repaid long-term debt of $125 million primarily related to debentures that matured in June. We increased our quarterly dividend during the six months ended June 30, 2024

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by one cent to $0.21 per share. We paid dividends of $419 million and $384 million to our Class A shareholders during the six months ended June 30, 2024 and 2023, respectively.

We repurchased and canceled 10.5 million shares of Class A common stock for a total of $324 million during the six months ended June 30, 2024. During the six months ended June 30, 2023, we repurchased and canceled 3.6 million shares of Class A common stock for a total of $99 million.

Cash Requirements

We believe cash on hand, cash flows from operating activities, the available revolving credit facility, access to our uncommitted lines of credit, and availability under our existing shelf registrations of debt will provide us with sufficient capital resources and liquidity in the short-term and long-term to manage our working capital needs, meet contractual obligations, fund capital expenditures and dividends, repay debt, repurchase our common stock, and support the development of our short-term and long-term operating strategies.

Our capital expenditures can be adjusted and managed by us to match market demand and activity levels. We continue to believe that based on current market conditions, capital expenditures in 2024 are expected to be made at a rate that would equal up to 5% of annual revenue. The expenditures are expected to be used primarily for normal, recurring items necessary to support our business.

We currently anticipate making income tax payments in the range of $900 million to $950 million in 2024.

Other Factors Affecting Liquidity

Customer receivables: In line with industry practice, we may bill our customers for services provided in arrears dependent upon contractual terms. In a challenging economic environment, we may experience delays in the payment of our invoices due to customers' lower cash flow from operations or their more limited access to credit markets. While historically there have not been material non-payment events, we attempt to mitigate this risk through working with our customers to restructure their debts. A customer's failure or delay in payment could have a material adverse effect on our short-term liquidity and results of operations. Our gross customer receivables in the U.S. were 17% and in Mexico 10% as of June 30, 2024. No other country accounted for more than 10% of our gross customer receivables at this date.

International operations: Our cash that is held outside the U.S. is 75% of the total cash balance as of June 30, 2024. Depending on the jurisdiction or country where this cash is held, we may not be able to use this cash quickly and efficiently due to exchange or cash controls that could make it challenging. As a result, our cash balance may not represent our ability to quickly and efficiently use this cash.

Guarantor Information

Baker Hughes has senior unsecured notes and senior unsecured debentures (collectively the "Debt Securities") outstanding with an aggregate principal amount of $5.8 billion as of June 30, 2024, with maturities ranging from 2024 to 2047. The Debt Securities constitute debt obligations of Baker Hughes Holdings LLC ("BHH LLC"), an indirect, 100% owned subsidiary and the primary operating company of Baker Hughes, and Baker Hughes Co-Obligor, Inc, a 100%-owned finance subsidiary of BHH LLC (the "Issuers") that was incorporated for the sole purpose of serving as a corporate co-obligor of debt securities. The Debt Securities are fully and unconditionally guaranteed on a senior unsecured basis by Baker Hughes and rank equally in right of payment with all of the Company's other senior and unsecured debt obligations.

As permitted under Rule 13-01(a)(4)(vi) of Regulation S-X, we have excluded summarized financial information for the Issuers because the combined assets, liabilities, and results of operations of the Issuers are not materially different than the corresponding amounts in Baker Hughes Company's condensed consolidated financial statements and management believes such summarized financial information would be repetitive and would not provide incremental value to investors.

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CRITICAL ACCOUNTING ESTIMATES

Our critical accounting estimation processes are consistent with those described in Item 7 of Part II, "Management's discussion and analysis of financial condition and results of operations" of our 2023 Annual Report.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934, as amended, (each a "forward-looking statement"). All statements, other than historical facts, including statements regarding the presentation of the Company's operations in future reports and any assumptions underlying any of the foregoing, are forward-looking statements. Forward-looking statements concern future circumstances and results and other statements that are not historical facts and are sometimes identified by the words "may," "will," "should," "potential," "intend," "expect," "would," "seek," "anticipate," "estimate," "overestimate," "underestimate," "believe," "could," "project," "predict," "continue," "target," "goal" or other similar words or expressions. Forward-looking statements are based upon current plans, estimates and expectations that are subject to risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. The inclusion of such statements should not be regarded as a representation that such plans, estimates or expectations will be achieved. Important factors that could cause actual results to differ materially from such plans, estimates or expectations include, among others, the risk factors identified in the "Risk Factors" section of Part II of Item 1A of this report and Part 1 of Item 1A of our 2023 Annual Report and those set forth from time-to-time in other filings by the Company with the SEC. These documents are available through our website or through the SEC's Electronic Data Gathering and Analysis Retrieval (EDGAR) system at http://www.sec.gov.

Any forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. The Company does not undertake any obligation to update any forward-looking statements, whether as a result of new information or developments, future events or otherwise, except as required by law. Readers are cautioned not to place undue reliance on any of these forward-looking statements.

For quantitative and qualitative disclosures about market risk affecting us, see Item 7A. "Quantitative and Qualitative Disclosures about Market Risk," in our 2023 Annual Report. Our exposure to market risk has not changed materially since December 31, 2023.

Evaluation of disclosure controls and procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures (as defined in Rule 15d-15(e) of the Exchange Act) were effective at a reasonable assurance level.

There has been no change in our internal controls over financial reporting during the quarter ended June 30, 2024 that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See discussion of legal proceedings in "Note 16. Commitments and Contingencies" of the Notes to Unaudited Condensed Consolidated Financial Statements in this Quarterly Report, Item 3 of Part I of our 2023 Annual Report and Note 19 of the Notes to Consolidated Financial Statements included in Item 8 of our 2023 Annual Report.

As of the date of this filing, the Company and its operations continue to be subject to the risk factors previously discussed in the "Risk Factors" sections contained in the 2023 Annual Report.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table contains information about our purchases of our Class A common stock equity securities during the three months ended June 30, 2024.

(1)Represents Class A common stock purchased from employees to satisfy the tax withholding obligations primarily in connection with the vesting of restricted stock units.

(2)Average price paid for Class A common stock purchased from employees to satisfy the tax withholding obligations in connection with the vesting of restricted stock units and shares purchased in the open market under our publicly announced purchase program.

(3)On July 30, 2021, our Board of Directors authorized the Company to repurchase up to $2 billion of its Class A common stock. On October 27, 2022, our Board of Directors authorized an increase to our repurchase program of $2 billion of additional Class A common stock, increasing its existing repurchase authorization of $2 billion to $4 billion. The repurchase program may be suspended or discontinued at any time and does not have a specified expiration date.

(4)During the three months ended June 30, 2024, we repurchased 5.1 million shares of Class A common stock at an average price of $32.19 per share for a total of $166 million.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Our barite mining operations, in support of our OFSE segment, are subject to regulation by the Federal Mine Safety and Health Administration under the Federal Mine Safety and Health Act of 1977. Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95 to this Quarterly Report.

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Rule 10b5-1 and Non-Rule 10b5-1 Trading Arrangements

During the three months ended June 30, 2024, certain of our officers or directors listed below adopted or terminated trading arrangements for the sale of shares of our Class A common stock in amounts and prices determined in accordance with a formula set forth in each such plan:

(1)Intended to satisfy the affirmative defense conditions of Rule 10b5-1(c)

(2)Not intended to satisfy the affirmative defense conditions of Rule 10b5-1(c)

Each exhibit identified below is filed as a part of this report. Exhibits designated with an "*" are filed as an exhibit to this Quarterly Report on Form 10-Q and Exhibits designated with an "**" are furnished as an exhibit to this Quarterly Report on Form 10-Q. Exhibits designated with a "+" are identified as management contracts or compensatory plans or arrangements. Exhibits previously filed are incorporated by reference.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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