Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: It's head down to Houston, Texas right now to our
Speaker 2: very own Alex Steele. She's going to be speaking with
Speaker 2: Baker Hughes CEO Lorenzo Seminelli. Alex, what do you have
Speaker 2: for us?
Speaker 1: All right?
Speaker 3: Thank you so much. Polit's right. Lorenzo Simonelli is chairman
Speaker 3: and also president and CEO of Baker Hughes. Lorenzo, it's
Speaker 3: good to see you.
Speaker 1: Thanks for joining, Alex. Great to see as well.
Speaker 3: You are the premiere oil services providers in the entire world.
Speaker 3: Everyone is worried about a recession today. Are you seeing
Speaker 3: any signs of slowdown?
Speaker 4: There's clearly a lot of volatility happening in the marketplace,
Speaker 4: and we've seen that last week and also today. At
Speaker 4: this moment in time, if you look at the macro trends,
Speaker 4: there are still tailwinds that point to no recession. The
Speaker 4: consumer's resilient and from an activity level, as we said
Speaker 4: at the beginning of the year, we continued to see
Speaker 4: a positive outlook for Baker Hughes as an energy technology
Speaker 4: company and that.
Speaker 3: Has not changed in the last two months.
Speaker 4: It has not changed, and again we monitor the situation
Speaker 4: on a daily basis. I think again, you've got the
Speaker 4: macro aspects from an energy perspective that are clear.
Speaker 1: Energy demand is increasing.
Speaker 4: Also here in the United States, natural gas is a
Speaker 4: huge opportunity, and we've got a huge opportunity from an
Speaker 4: export perspective of LERG. So when you look at a
Speaker 4: company like Baker Hughes, we see a lot of positive
Speaker 4: trends that go beyond just twenty twenty five and you'll
Speaker 4: always have volatility, but again, nothing that we're worried about
Speaker 4: at this stage.
Speaker 3: And there are lots of sections. As you mentioned right,
Speaker 3: there's the oil services demand side. You also make energy
Speaker 3: export facilities, so there you have a lot of different
Speaker 3: hands and a lot of different things. So there's that
Speaker 3: part of it.
Speaker 1: Too, correct well, less cyclical for sure.
Speaker 3: The issue though, is the tariff situation, which it would
Speaker 3: seem like you're very exposed to. If we get aluminum,
Speaker 3: steel and copper tariffs, if we get them on Wednesday
Speaker 3: twenty five percent, does that affect the pipe you're.
Speaker 1: Going to put in the ground.
Speaker 4: It really varies, and the tariffs are complicated and you
Speaker 4: need to go into the full supply chain and also
Speaker 4: end use perspective. We have Baker Hughes have a very
Speaker 4: diversified supply chain. We're not the original maker of the
Speaker 4: aluminium or the steel. What we're providing is equipment and services,
Speaker 4: and we're also providing modules, and we have a versatile
Speaker 4: supply chain that enables us to both from the US
Speaker 4: as well as from internationally and from an export an
Speaker 4: import perspective, be able to be diversified and move things around.
Speaker 4: So as we look at it today, we anticipate that
Speaker 4: the tariffs will have a negligible impact on Baker Hughes
Speaker 4: and we're continuing to assess it on a daily basis.
Speaker 3: So basically, the supplier might increase prices if they need to,
Speaker 3: but you can manage it or pass it on.
Speaker 4: We can manage it because also we can change supplier.
Speaker 4: Also we can work with the end customer with regards
Speaker 4: to efficiencies and changes, and so through a number of
Speaker 4: different scenarios, we look to manage that and work collaboratively
Speaker 4: with the end customer.
Speaker 3: The other big macro tailwind actually is drill baby drill
Speaker 3: that has been a quarter zone of the Trump administration.
Speaker 3: Where you sit our producer's drill baby drilling.
Speaker 4: What you're seeing from this administration is clearly an energy
Speaker 4: renaissance in the United States, and when you look at
Speaker 4: the opportunity ahead, it is for increased production, both on
Speaker 4: the oil side the natural gas side.
Speaker 1: When you look at the aspect of the.
Speaker 4: Operators, they're going to continue to be that capital discipline.
Speaker 4: They're going to look at the financial returns, and we
Speaker 4: haven't seen any changes today in the outlook of that.
Speaker 4: We do think US production will go up, driven predominantly
Speaker 4: by efficiencies and technology enhancements that we're providing to the sector.
Speaker 4: And then we see a big opportunity with natural gas,
Speaker 4: and also as you look at natural gas pricing remaining
Speaker 4: to be resilient with the opportunity of the LNG exports
Speaker 4: coming online.
Speaker 3: But you don't see the world where we have one
Speaker 3: million barrels of growth year like we saw in twenty
Speaker 3: twenty three. Do you see a more muted a growth
Speaker 3: profile for oil in the US.
Speaker 4: It's going to go down to the fundamentals of the
Speaker 4: demand and supply and also the returns from a shareholder perspective,
Speaker 4: and I think companies have worked on their capital discipline,
Speaker 4: so they're going to make sure that that is all
Speaker 4: in balance as well as meeting the needs from.
Speaker 1: A societal perspective.
Speaker 4: So I think it's going to be more muted than
Speaker 4: a million barrels. You are going to those see continued
Speaker 4: production enhancements and efficiencies and people will look at the
Speaker 4: price of oil on a regular basis and then decide
Speaker 4: accordingly what's best for their shareholder.
Speaker 3: Yeah, and a tough tape for oil price today, to
Speaker 3: be sure. So let's get to the other potential tailman,
Speaker 3: and that is AI and data center build out. How
Speaker 3: can Baker Hughes play in that space.
Speaker 4: Well, it's a great opportunity for Baker Hues And when
Speaker 4: we think about the grid instability and also the huge
Speaker 4: increase in demand for power generation, it really fits into
Speaker 4: off grid application where we can provide our industrial gas turbans,
Speaker 4: we can provide our geofermal technology, we can provide a
Speaker 4: number of factors to enable the hyperscalers to go and
Speaker 4: produce the data centers immediately. We've already seen an increase
Speaker 4: in activity. You have seen an announcement we made last
Speaker 4: week with Fronterra with regards to data centers exclusive of ccs.
Speaker 4: And it's not just a phenomena within the United States
Speaker 4: clearly here it's spoken about every day, but also globally,
Speaker 4: we're seeing increased activity within other areas such as Middle East,
Speaker 4: such as Asia relative to data center demand and generative AI.
Speaker 4: We know has a huge energy consumption and that's what
Speaker 4: we're servicing, and.
Speaker 3: That also comes from your industrial and energy technology business.
Speaker 3: Hence the diversified part we were talking about earlier, making
Speaker 3: a little less cyclical in terms of that, can you
Speaker 3: also become a services helper for power demand, like not
Speaker 3: just here's my gas turbine, but I'm also going to
Speaker 3: be a services provider for this data center In terms
Speaker 3: of power.
Speaker 4: We're looking at different commercial models and actually working in consortiums,
Speaker 4: and I think there's going to be different models that
Speaker 4: different end users require.
Speaker 1: In some cases we will be with.
Speaker 4: A developer, we will be with a financier and it
Speaker 4: will be a tan key solution that's provided to a
Speaker 4: data center operator. In other cases, they'll just want the
Speaker 4: equipment and they'll want to have the power turned on.
Speaker 4: So we are, like in LNG, able to have the
Speaker 4: different model that's required for the end user, and that's
Speaker 4: something at Baker Hughes we think is very important we've
Speaker 4: got to be able to meet the different requirements with
Speaker 4: the capabilities we have, So we're looking at a variety
Speaker 4: of options right now.
Speaker 3: I'm glad you brought up ELL and G again. Do
Speaker 3: you expect if there is an end of the war
Speaker 3: in Ukraine, are you guys at the table thinking about
Speaker 3: a lot more Russian gas coming into Europe and then
Speaker 3: displacing flows that we see elsewhere.
Speaker 4: I think we're confident that flows have redirected themselves already.
Speaker 1: And count for Russian gas well.
Speaker 4: Yes, because the Russian gas has been flowing elsewhere as well.
Speaker 4: So there's an aspect of a demand. It's increasing, and
Speaker 4: there's going to be a requirement for incremental natural gas
Speaker 4: and LNG as we look out to twenty thirty. We've
Speaker 4: always said there needs to be an installed base capacity
Speaker 4: of eight hundred million tons per annum.
Speaker 1: That is very much taking place, and we see the.
Speaker 4: Incremental build now happening in twenty five, twenty six, and
Speaker 4: twenty seven with the pores being lifted in the United States.
Speaker 4: So we don't see the aspect of Russian gas coming
Speaker 4: back as differing the outlook that we had previously, because
Speaker 4: it's been there. It's just been elsewhere and the flows
Speaker 4: will always change according to what's available.
Speaker 3: Would Russia, they'll become an opportunity, a business opportunity for you.
Speaker 1: Let's wait and see.
Speaker 4: You know, we'll monitor the situation relative to global sanctions
Speaker 4: or so the rule of law, and also from a
Speaker 4: society perspective and values within Baker Hughes, so we'll monitor
Speaker 4: the situation.
Speaker 3: One last question oil price weakness.
Speaker 1: Does it persist?
Speaker 3: And what do you think is actually behind that?
Speaker 1: Right now?
Speaker 4: We live in a world where on a daily basis
Speaker 4: there's a lot of different news and so there is
Speaker 4: volatility in the marketplace.
Speaker 1: I think give it some time. We've got to look
Speaker 1: at the next.
Speaker 4: Sixty eight weeks and I think that's when you start
Speaker 4: to really assess are.
Speaker 1: There going to be changes going forward?
Speaker 4: Right now, demand is strong, we know that the outlook
Speaker 4: for demand is strong, and I think we're just going
Speaker 4: through some volatile times. And at Baker Hugh's I can
Speaker 4: tell you I don't look at the oil price daily.
Speaker 4: It's really not a consideration relative to the investments we
Speaker 4: make longer term and also the way in which we
Speaker 4: run the business so that we can safeguard to supply
Speaker 4: and the end product for our customers.
Speaker 3: They always say that I never look at the oil price.
Speaker 3: All right, Lorenza, thanks a lot. I really appreciate Lorenzo Seminelli.
Speaker 3: I'm chairman, president and CEO of Baker Hughes Paul.
Speaker 2: Back to you, all right, Alex, thank you so much.
Speaker 2: We appreciate that. That's Alex Steel speaking with Baker Hugh
Speaker 2: CEO Lorenzo Simonelli at Sarah Week. That is where all
Speaker 2: the energy hanchos globally get together in Houston. It's their
Speaker 2: big conference every year.