WEBVTT - Baker Hughes CEO Lorenzo Simonelli Talks Oil Production, Market

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio News.

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<v Speaker 2>It's head down to Houston, Texas right now to our

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<v Speaker 2>very own Alex Steele. She's going to be speaking with

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<v Speaker 2>Baker Hughes CEO Lorenzo Seminelli. Alex, what do you have

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<v Speaker 2>for us?

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<v Speaker 1>All right?

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<v Speaker 3>Thank you so much. Polit's right. Lorenzo Simonelli is chairman

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<v Speaker 3>and also president and CEO of Baker Hughes. Lorenzo, it's

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<v Speaker 3>good to see you.

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<v Speaker 1>Thanks for joining, Alex. Great to see as well.

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<v Speaker 3>You are the premiere oil services providers in the entire world.

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<v Speaker 3>Everyone is worried about a recession today. Are you seeing

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<v Speaker 3>any signs of slowdown?

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<v Speaker 4>There's clearly a lot of volatility happening in the marketplace,

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<v Speaker 4>and we've seen that last week and also today. At

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<v Speaker 4>this moment in time, if you look at the macro trends,

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<v Speaker 4>there are still tailwinds that point to no recession. The

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<v Speaker 4>consumer's resilient and from an activity level, as we said

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<v Speaker 4>at the beginning of the year, we continued to see

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<v Speaker 4>a positive outlook for Baker Hughes as an energy technology

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<v Speaker 4>company and that.

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<v Speaker 3>Has not changed in the last two months.

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<v Speaker 4>It has not changed, and again we monitor the situation

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<v Speaker 4>on a daily basis. I think again, you've got the

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<v Speaker 4>macro aspects from an energy perspective that are clear.

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<v Speaker 1>Energy demand is increasing.

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<v Speaker 4>Also here in the United States, natural gas is a

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<v Speaker 4>huge opportunity, and we've got a huge opportunity from an

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<v Speaker 4>export perspective of LERG. So when you look at a

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<v Speaker 4>company like Baker Hughes, we see a lot of positive

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<v Speaker 4>trends that go beyond just twenty twenty five and you'll

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<v Speaker 4>always have volatility, but again, nothing that we're worried about

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<v Speaker 4>at this stage.

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<v Speaker 3>And there are lots of sections. As you mentioned right,

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<v Speaker 3>there's the oil services demand side. You also make energy

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<v Speaker 3>export facilities, so there you have a lot of different

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<v Speaker 3>hands and a lot of different things. So there's that

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<v Speaker 3>part of it.

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<v Speaker 1>Too, correct well, less cyclical for sure.

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<v Speaker 3>The issue though, is the tariff situation, which it would

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<v Speaker 3>seem like you're very exposed to. If we get aluminum,

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<v Speaker 3>steel and copper tariffs, if we get them on Wednesday

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<v Speaker 3>twenty five percent, does that affect the pipe you're.

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<v Speaker 1>Going to put in the ground.

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<v Speaker 4>It really varies, and the tariffs are complicated and you

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<v Speaker 4>need to go into the full supply chain and also

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<v Speaker 4>end use perspective. We have Baker Hughes have a very

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<v Speaker 4>diversified supply chain. We're not the original maker of the

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<v Speaker 4>aluminium or the steel. What we're providing is equipment and services,

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<v Speaker 4>and we're also providing modules, and we have a versatile

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<v Speaker 4>supply chain that enables us to both from the US

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<v Speaker 4>as well as from internationally and from an export an

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<v Speaker 4>import perspective, be able to be diversified and move things around.

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<v Speaker 4>So as we look at it today, we anticipate that

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<v Speaker 4>the tariffs will have a negligible impact on Baker Hughes

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<v Speaker 4>and we're continuing to assess it on a daily basis.

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<v Speaker 3>So basically, the supplier might increase prices if they need to,

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<v Speaker 3>but you can manage it or pass it on.

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<v Speaker 4>We can manage it because also we can change supplier.

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<v Speaker 4>Also we can work with the end customer with regards

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<v Speaker 4>to efficiencies and changes, and so through a number of

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<v Speaker 4>different scenarios, we look to manage that and work collaboratively

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<v Speaker 4>with the end customer.

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<v Speaker 3>The other big macro tailwind actually is drill baby drill

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<v Speaker 3>that has been a quarter zone of the Trump administration.

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<v Speaker 3>Where you sit our producer's drill baby drilling.

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<v Speaker 4>What you're seeing from this administration is clearly an energy

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<v Speaker 4>renaissance in the United States, and when you look at

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<v Speaker 4>the opportunity ahead, it is for increased production, both on

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<v Speaker 4>the oil side the natural gas side.

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<v Speaker 1>When you look at the aspect of the.

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<v Speaker 4>Operators, they're going to continue to be that capital discipline.

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<v Speaker 4>They're going to look at the financial returns, and we

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<v Speaker 4>haven't seen any changes today in the outlook of that.

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<v Speaker 4>We do think US production will go up, driven predominantly

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<v Speaker 4>by efficiencies and technology enhancements that we're providing to the sector.

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<v Speaker 4>And then we see a big opportunity with natural gas,

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<v Speaker 4>and also as you look at natural gas pricing remaining

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<v Speaker 4>to be resilient with the opportunity of the LNG exports

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<v Speaker 4>coming online.

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<v Speaker 3>But you don't see the world where we have one

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<v Speaker 3>million barrels of growth year like we saw in twenty

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<v Speaker 3>twenty three. Do you see a more muted a growth

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<v Speaker 3>profile for oil in the US.

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<v Speaker 4>It's going to go down to the fundamentals of the

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<v Speaker 4>demand and supply and also the returns from a shareholder perspective,

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<v Speaker 4>and I think companies have worked on their capital discipline,

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<v Speaker 4>so they're going to make sure that that is all

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<v Speaker 4>in balance as well as meeting the needs from.

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<v Speaker 1>A societal perspective.

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<v Speaker 4>So I think it's going to be more muted than

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<v Speaker 4>a million barrels. You are going to those see continued

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<v Speaker 4>production enhancements and efficiencies and people will look at the

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<v Speaker 4>price of oil on a regular basis and then decide

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<v Speaker 4>accordingly what's best for their shareholder.

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<v Speaker 3>Yeah, and a tough tape for oil price today, to

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<v Speaker 3>be sure. So let's get to the other potential tailman,

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<v Speaker 3>and that is AI and data center build out. How

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<v Speaker 3>can Baker Hughes play in that space.

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<v Speaker 4>Well, it's a great opportunity for Baker Hues And when

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<v Speaker 4>we think about the grid instability and also the huge

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<v Speaker 4>increase in demand for power generation, it really fits into

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<v Speaker 4>off grid application where we can provide our industrial gas turbans,

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<v Speaker 4>we can provide our geofermal technology, we can provide a

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<v Speaker 4>number of factors to enable the hyperscalers to go and

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<v Speaker 4>produce the data centers immediately. We've already seen an increase

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<v Speaker 4>in activity. You have seen an announcement we made last

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<v Speaker 4>week with Fronterra with regards to data centers exclusive of ccs.

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<v Speaker 4>And it's not just a phenomena within the United States

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<v Speaker 4>clearly here it's spoken about every day, but also globally,

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<v Speaker 4>we're seeing increased activity within other areas such as Middle East,

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<v Speaker 4>such as Asia relative to data center demand and generative AI.

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<v Speaker 4>We know has a huge energy consumption and that's what

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<v Speaker 4>we're servicing, and.

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<v Speaker 3>That also comes from your industrial and energy technology business.

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<v Speaker 3>Hence the diversified part we were talking about earlier, making

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<v Speaker 3>a little less cyclical in terms of that, can you

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<v Speaker 3>also become a services helper for power demand, like not

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<v Speaker 3>just here's my gas turbine, but I'm also going to

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<v Speaker 3>be a services provider for this data center In terms

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<v Speaker 3>of power.

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<v Speaker 4>We're looking at different commercial models and actually working in consortiums,

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<v Speaker 4>and I think there's going to be different models that

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<v Speaker 4>different end users require.

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<v Speaker 1>In some cases we will be with.

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<v Speaker 4>A developer, we will be with a financier and it

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<v Speaker 4>will be a tan key solution that's provided to a

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<v Speaker 4>data center operator. In other cases, they'll just want the

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<v Speaker 4>equipment and they'll want to have the power turned on.

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<v Speaker 4>So we are, like in LNG, able to have the

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<v Speaker 4>different model that's required for the end user, and that's

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<v Speaker 4>something at Baker Hughes we think is very important we've

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<v Speaker 4>got to be able to meet the different requirements with

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<v Speaker 4>the capabilities we have, So we're looking at a variety

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<v Speaker 4>of options right now.

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<v Speaker 3>I'm glad you brought up ELL and G again. Do

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<v Speaker 3>you expect if there is an end of the war

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<v Speaker 3>in Ukraine, are you guys at the table thinking about

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<v Speaker 3>a lot more Russian gas coming into Europe and then

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<v Speaker 3>displacing flows that we see elsewhere.

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<v Speaker 4>I think we're confident that flows have redirected themselves already.

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<v Speaker 1>And count for Russian gas well.

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<v Speaker 4>Yes, because the Russian gas has been flowing elsewhere as well.

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<v Speaker 4>So there's an aspect of a demand. It's increasing, and

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<v Speaker 4>there's going to be a requirement for incremental natural gas

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<v Speaker 4>and LNG as we look out to twenty thirty. We've

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<v Speaker 4>always said there needs to be an installed base capacity

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<v Speaker 4>of eight hundred million tons per annum.

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<v Speaker 1>That is very much taking place, and we see the.

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<v Speaker 4>Incremental build now happening in twenty five, twenty six, and

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<v Speaker 4>twenty seven with the pores being lifted in the United States.

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<v Speaker 4>So we don't see the aspect of Russian gas coming

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<v Speaker 4>back as differing the outlook that we had previously, because

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<v Speaker 4>it's been there. It's just been elsewhere and the flows

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<v Speaker 4>will always change according to what's available.

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<v Speaker 3>Would Russia, they'll become an opportunity, a business opportunity for you.

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<v Speaker 1>Let's wait and see.

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<v Speaker 4>You know, we'll monitor the situation relative to global sanctions

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<v Speaker 4>or so the rule of law, and also from a

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<v Speaker 4>society perspective and values within Baker Hughes, so we'll monitor

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<v Speaker 4>the situation.

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<v Speaker 3>One last question oil price weakness.

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<v Speaker 1>Does it persist?

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<v Speaker 3>And what do you think is actually behind that?

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<v Speaker 1>Right now?

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<v Speaker 4>We live in a world where on a daily basis

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<v Speaker 4>there's a lot of different news and so there is

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<v Speaker 4>volatility in the marketplace.

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<v Speaker 1>I think give it some time. We've got to look

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<v Speaker 1>at the next.

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<v Speaker 4>Sixty eight weeks and I think that's when you start

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<v Speaker 4>to really assess are.

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<v Speaker 1>There going to be changes going forward?

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<v Speaker 4>Right now, demand is strong, we know that the outlook

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<v Speaker 4>for demand is strong, and I think we're just going

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<v Speaker 4>through some volatile times. And at Baker Hugh's I can

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<v Speaker 4>tell you I don't look at the oil price daily.

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<v Speaker 4>It's really not a consideration relative to the investments we

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<v Speaker 4>make longer term and also the way in which we

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<v Speaker 4>run the business so that we can safeguard to supply

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<v Speaker 4>and the end product for our customers.

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<v Speaker 3>They always say that I never look at the oil price.

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<v Speaker 3>All right, Lorenza, thanks a lot. I really appreciate Lorenzo Seminelli.

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<v Speaker 3>I'm chairman, president and CEO of Baker Hughes Paul.

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<v Speaker 2>Back to you, all right, Alex, thank you so much.

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<v Speaker 2>We appreciate that. That's Alex Steel speaking with Baker Hugh

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<v Speaker 2>CEO Lorenzo Simonelli at Sarah Week. That is where all

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<v Speaker 2>the energy hanchos globally get together in Houston. It's their

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<v Speaker 2>big conference every year.