20
23
ar
2023 Annual Report
2023 highlights
Performance
Technology
and innovation
ESG
Leadership
About
Baker Hughes
$30.5B
in orders
26%
increase in
adjusted EBITDA*
$658M
in research and
development
>2,000
patents granted
$2.0B
in free cash flow*
$750M
in new energy orders
AA
ESG rating
by MSCI
28%
reduction in
Scope 1 & 2 GHG
emissions**
199
HSE Perfect
Days
~58,000
employees
$25.5B
in revenue
120+
countries where we
conduct business
Awards &
recognition
Baker Hughes continues to be recognized by our industry and leading sustainability
organizations. Aligned to our strategy and commitment to strong financial returns,
these achievements are a further reflection of our progress as a differentiated
energy technology company and as a top employer in many of the communities
where we conduct business:
#1
top ranked company
by Institutional Investor
magazine
* Adjusted EBITDA, free cash flow, and EBITDA margin rate are non-GAAP measures. Please refer to the Baker Hughes Reconciliation of GAAP
to non-GAAP Financial Measures section at the end of this Annual Report.
** 2022 actual compared to 2019 base year
Dear fellow
shareholders,
In 2023, Baker Hughes delivered a record-breaking year
across the Company. Our order backlog has reached
historic levels, led by over 80 million tons per annum
(MTPA) of liquified natural gas (LNG) awards. At the same
time, we are making significant progress in transforming
our organization. We continue to see the growing
benefits of our strategic positioning as a differentiated
energy and industrial technology company.
During the year, our transformation activities continued
to lay the foundation for a more durable earnings
and free cash flow growth profile, and structurally
increasing shareholder returns. Through optimizing our
organization’s structure, improving internal processes
and upgrading our financial and operating systems,
we are becoming more agile and responsive to a
dynamic market.
Our unique portfolio of assets, technologies,
and long-term strategy has allowed us
to maintain a strong balance sheet and
invest in differentiated solutions while we
transform our operations to better deliver
for energy and industrial customers and
enhance shareholder value.
Today, we are uniquely placed to support our
customers in their endeavors to make the energy they
produce and consume more sustainable. While there
is growing consensus that the energy transition will
take longer and be more complex than expected, we
are fully committed to supporting our customers as
they take on this challenge. Irrespective of the pace of
the energy transition, our portfolio is set to benefit as
we drive progress across the energy ecosystem in 2024
and beyond.
Our strategy – first launched in 2020 – is built on three
key pillars: transform the core, invest for growth, and
position for new energy frontiers. This strategy is driving
our execution over three time horizons that look out
to 2030 and beyond, culminating in a Baker Hughes
which has an elevated margin and returns profile,
differentiated shareholder returns and strong exposure
across the industrial and energy growth vectors.
As our strategy continues to evolve, we are seeing
that more efficient energy solutions and emissions
abatement are becoming non-negotiables for all
projects regardless of the end market. We believe our
transformation over these three horizons will deliver
significant long-term value to our shareholders and
achieve our purpose of taking energy forward.
Lorenzo Simonelli
Chairman, President, and
Chief Executive Officer
Executing our strategy
across three time horizons
Delivering on near-term targets while laying the foundations for long-term
success across our two business segments, Oilfield Services & Equipment (OFSE)
and Industrial & Energy Technology (IET)
Market
Landscape
HORIZON ONE
THROUGH 2025
Multi-year growth
cycles underway in LNG
and upstream
HORIZON TWO
MID TO LATE 2020’S
Growth moderates in
upstream - new energy
starts to scale
HORIZON THREE
TO 2030 and BEYOND
Decarbonization becomes
the prerequisite for all
energy projects
Transform
our core
Transforming our business
and simplifying the way
we work
Strong aftermarket services
growth driven by increasing LNG
installed base
Leveraging current
capabilities in new ways as
traditional markets mature
Invest for
growth
Optimizing the portfolio
and integrating recent
acquisitions
Scaling digital offerings as
customers focus on efficiencies
and emissions reductions
Significant recurring
revenue from digital
and services franchises
Position
for new
frontiers
Leveraging world class
capabilities to progress
digital and new energy
technology
Successful commercialization
of digital and new energy
technology
New energy inflects,
driving significant
order growth across
decarbonization offerings
Baker
Hughes
targets
20%
OFSE/IET EBITDA
margins
15%/20%
ROIC OFSE/IET
20+%
OFSE/IET EBITDA
margins
>15%/>20%
ROIC OFSE/IET
$6-7B
new energy
orders
2023 Annual Report
2023 Annual Report The macro environment
Amidst global economic uncertainty and geopolitical
risk at levels not seen in decades, the need to push
ahead in a balanced energy transition became more
apparent with another year of extreme climate impacts
worldwide. These events have sharpened policymakers’
focus on better balancing the energy trilemma across
energy security, sustainability and affordability.
To resolve the energy trilemma over the longer term,
all forms of energy will be required with heightened
focus on lowering and/or eliminating emissions.
Technologies for sustainable energy development
will continue to require public incentives to scale up,
whether in the form of grants, tax credits, loans, or
other forms of assistance.
We believe that natural gas – and within it, LNG – will
remain critical to meet global energy demand and
further reduce use of other more carbon-intensive
sources of energy, including coal. In the near term,
we remain constructive on the outlook for oil and
gas, and we believe underlying macroeconomic
fundamentals remain supportive of a multi-year
upturn in upstream spending led by international
markets. While resilient oil demand and production
cuts tightened the market, the pace of oil demand
growth in the face of economic uncertainty,
and geopolitical risk will be important factors
to monitor as we navigate 2024.
Additionally, our customers are focused on
remaining disciplined in their capital and
operating expenditures. They expect new
partnerships, commercial models and new
technology solutions to deliver sustainable
productivity improvements with a lower carbon
footprint. In turn, we see opportunities to create
strategic customer relationships where we are
recognized and rewarded financially for the risk
that we take in building and delivering these new
technology solutions.
Our 2023 performance
Baker Hughes achieved strong results during another
year of volatility thanks to a strong commitment to
our strategy and generally favorable market forces.
In 2023, our operations continued to benefit from the
transformation efforts initiated in 2022, growing orders,
revenues and margins. We booked $30.5 billion in orders,
increased adjusted EBITDA* by 26%, and generated
strong free cash flow* of $2.0 billion.
Our Oilfield Services and Equipment (OFSE) segment
enjoyed another strong year of market growth
internationally, solidifying its presence in the Middle
East, and expanding its presence in the North Sea and
sub-Saharan Africa. Offshore continued to be a strong
market, with Baker Hughes capturing just over 25% of
the subsea tree market. We are encouraged by the level
of activity in our focus markets, and also pleased with
the progress we have made on our cost-out initiatives
in Subsea & Surface Pressure Systems. We are very
pleased with our 2023 acquisition of Altus Intervention,
providing key differentiation in OFSE for well intervention.
As operators look to increase efficiency, decarbonize
operations and prolong the life of their assets, well
intervention and production enhancement will be
critical and long-term growth drivers for the industry.
In OFSE, we are pleased with the margin performance
improvement in 2023. As the supply chain stabilized for
our chemicals business, we worked hard to manage
commodity price increases and production cuts
to continue margin improvements that we expect
to normalize in 2024. OFSE’s EBITDA* margin rate
reached 17.9% in the fourth quarter, reflecting a strong
track record of execution and growth for the Well
Construction and Production Solutions product lines,
including our drilling portfolio.
Our Industrial & Energy Technology (IET) segment
booked a record number of LNG awards in 2023 of $5.6
billion, further emphasizing Baker Hughes’ role as the
energy technology provider of choice for this critical
resource. Since 2017, there have been 210 MTPA of LNG
Final Investment Decisions (FIDs), and Baker Hughes
has been selected for 207 MTPA of this new capacity.
These projects are scheduled to come online over the
coming years, representing an almost 50% increase
in our global liquefaction installed base between now
and 2028.
New energy orders of $750 million exceeded our original
full year guidance, and all orders will utilize existing Baker
Hughes technology – a confirmation of the flexibility of
our technology portfolio and ability to capitalize on new
opportunities rapidly developing to address climate
change. With expected total company new energy
orders of $800 million to $1 billion in 2024, the customer
synergies between IET and OFSE are becoming more
visible across the landscape. Additionally, the 2022
acquisition of BRUSH Power Generation saw continued
traction, with IET securing several orders for our
electric machinery portfolio – supporting our strategic
commitment to provide lower carbon solutions.
Electrification across all energy projects is becoming
more prevalent, and BRUSH Power Generation orders
were up over 50% in 2023.
With a record backlog of $30 billion, the pipeline of
opportunities for IET remains robust. We are well-
positioned to execute on this backlog to help drive
significant revenue growth in 2024 and 2025. To ensure
continued profitable growth, we will maintain our focus
on driving operational and cost improvements across
all IET product lines, as well as managing aeroderivative
gas turbine supply chain tightness.
Baker Hughes remained committed to delivering
increased shareholder value. We returned $1.3 billion to
shareholders through dividends and share buybacks,
and we increased our dividend to $0.20 in the third
quarter. Our strong balance sheet and free cash flow
continue to allow us to deliver strong shareholder
returns while we continue to reinvest in the business and
focus on strategic technology investments in the future.
* Adjusted EBITDA, free cash flow, and EBITDA margin rate are non-GAAP measures. Please refer to the Baker
Hughes Reconciliation of GAAP to non-GAAP Financial Measures section at the end of this Annual Report.
2023 Annual Report Executing our strategy
O u r stra te g i c fram ewo rk co nti nu es to a l l ow
Baker Hughes to deliver sustainable value for our
shareholders and stakeholders. In 2023, our three
strategic pillars each had strong examples of
differentiated value creation:
• Transform our core: The Altus Intervention acquisition
strengthened OFSE’s existing portfolio of intervention
solutions and enhanced the business’ life-of-well
capabilities. As operators look for ways to increase
efficiency, decarbonize operations and prolong
the life of their assets, intervention and production
enhancement are seen as critical long-term growth
drivers for the industry. In IET, Gas Technology Services
saw parallel growth alongside record-breaking Gas
Tech Equipment orders and will continue to enjoy
productive returns. IET’s structural growth has become
a key differentiator for Baker Hughes with continuing
visibility through the latter part of the decade.
• Invest for growth: We unveiled new digital solutions
for more intelligent operations and cleaner energy
– OFSE’s Leucipa™ and Cordant™ in IET. Leucipa™
is an automated field production sof t ware
solution designed to help oil and gas operators
proactively manage production and reduce carbon
emissions, and Cordant™ is an integrated suite of
solutions supporting industrial asset performance
management and process optimization.
• Position for new energy frontiers: We continued to
make progress in strategic investments in emerging
energy technologies and expanded the reach of our
solutions with an agreement to develop a lower-
carbon energy solution for the airline industry. Our
momentum in new energy orders is growing, and
2023 marked our largest volume booked to date ($750
million). This confirms not only that Baker Hughes is
a leader in the energy transition but that the desire
to transform the industry and solve for emissions
remains strong.
* Adjusted EBITDA, free cash flow, and EBITDA margin rate are non-
GAAP measures. Please refer to the Baker Hughes Reconciliation
of GAAP to non-GAAP Financial Measures section at the end of
this Annual Report.
Our performance remains focused
on the execution of our strategy
across three time horizons,
designed to capitalize on market
trends and growth opportunities
into the early 2030s.
$1.3B
shareholder returns in 2023
26%
increase in adjusted
EBITDA* vs. 2022
45%
increase in new energy
orders vs. 2022
Continued leadership
in sustainability
We continue to view environmental, social, and
governance (ESG) performance as a key lever
to transform our Company and our industr y.
Our commitments set out in previous years remain
firm, and our ESG strategy remains guided by our
three pillars: People, Planet and Principles.
In the second quarter of 2023, we published our 2022
Corporate Responsibility Report, which highlighted
our progress in several key areas, including
environmental sustainability, our people-first culture,
and governance. We also continued to show strong
community leadership, contributing nearly $3 million
in charitable donations through our Baker Hughes
Foundation and achieving record levels of volunteer
engagement by our employees. We expect to publish
our next corporate responsibility report in the second
quarter of 2024.
We also deliver value by enabling our customers to
measure, manage and reduce their environmental
impact. We believe the focus on energy transition,
coupled with the market forces of the energy
tril emma , are p aving a new p ath towards
sustainable energy development in the energy
and industrial ecosystems. Baker Hughes remains
a partner of choice to our customers as they work
towards their long-term sustainability goals.
Scan to read our Corporate
Responsibility Report
2023 Annual Report
Delivering differentiated value
In 2023, our focus was on execution. We implemented
new ways of working to change how we operate with
heightened levels of operational rigor and efficiency.
This is driving more effective management of the
business, reducing revenue volatility and improving
structural margin improvement. We believe there is still
additional optimization we can do across the business to
further reduce redundancy and enable faster
decision making. At the same time it is vital that
we foster a culture of collaboration and innovation,
intently focused on driving increased productivity
and commercial success. I remain proud of our team’s
accomplishments, and we believe our cultural and
organizational evolution will allow us to unlock further
value in 2024 and beyond.
Technology, differentiated commercial models, digital
enablement, and sustainability are driving value
across our businesses, as well as enhancing our
competitive positioning. These four capabilities will truly
differentiate the companies who are delivering on the
energy trilemma, inclusive of driving a net-zero future.
Baker Hughes is committed to playing a leading role in
solving the energy trilemma and enabling sustainable
energy development.
Alongside the significant new energy opportunities
enabled by our unique portfolio available to energy
and industrial customers, we see several growth
areas in which we are set for success: the upward
investment cycle in upstream and LNG; innovative
ways of maintaining if not growing production; new
growth vectors in industrial solutions; and continued
adoption of technologies required for the lower-
carbon economy of the future.
2024 will be a pivotal year to set up our success for 2030
goals. Internally, we remain focused on operational
execution to drive higher EBITDA and structural free
cash flow growth over the next several years, and
further operational enhancements to drive increasing
margins and returns. For our customers, we will focus
on the flawless execution and partnerships required
to deliver a net-zero future.
Our results demonstrate that our strategy is helping
to deliver a sustainable future for people and the
planet, and we are doing so in a fiscally and socially
responsible manner. Throughout our strategic
horizons, we remain heavily committed to creating
shareholder value and helping usher the planet
through sustainable energy development.
I look ahead with confidence to another year of taking
energy forward.
Sincerely,
Lorenzo Simonelli
Chairman, President, and Chief Executive Officer
Our
leadership
Lorenzo Simonelli
Chairman, President,
and Chief Executive Officer
B
o
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r
d
o
f
d
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e
c
t
o
r
s
M
a
n
a
g
e
m
e
n
t
t
e
a
m
W. Geoffrey
Beattie
Lead Director
Abdulaziz M.
Al Gudaimi
Gregory D.
Brenneman
Cynthia B.
Carroll
Nelda J.
Connors
Michael
Dumais
Lynn L.
Elsenhans
John G.
Rice
Mohsen
M. Sohi
Nancy
Buese
Chief Financial
Officer
Maria Claudia
Borras
Executive Vice
President, Oilfield
Services & Equipment
Ganesh
Ramaswamy
Executive Vice
President, Industrial
& Energy Technology
Georgia
Magno
Chief Legal
Officer
Deanna
Jones
Executive Vice
President, People,
Communications &
Transformation
Jeff
Fleece
Chief Information
Officer
Jim
Apostolides
Senior Vice
President, Enterprise
Operational
Excellence
2023 Annual Report
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2023
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
Commission file number 1-38143
Baker Hughes Company
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
81-4403168
(I.R.S. Employer Identification No.)
575 N. Dairy Ashford Rd., Suite 100
Houston, Texas
(Address of principal executive offices)
77079-1121
(Zip Code)
Registrant's telephone number, including area code: (713) 439-8600
Title of each class
Securities registered pursuant to Section 12(b) of the Act:
Trading Symbol
Name of each exchange on which registered
Class A Common Stock, $0.0001 Par Value per Share
BKR
The Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☑
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):
Large accelerated filer
☑
Accelerated filer ☐
Non-accelerated filer ☐
Smaller reporting company ☐
Emerging growth company ☐
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 has filed a report on and attestation to its management's assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting
firm that prepared or issued its audit report. ☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included
in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based
compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D- 1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑
The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant as of the last business day of the
registrant’s most recently completed second fiscal quarter (based on the closing price on June 30, 2023 reported by the Nasdaq Stock Market
LLC) was $31,860,362,416.
As of January 26, 2024, the registrant had outstanding 1,000,881,406 shares of Class A Common Stock, $0.0001 par value per share.
Portions of Registrant's Definitive Proxy Statement for the 2024 Annual Meeting of Stockholders are incorporated by reference into Part III of this
Form 10-K.
DOCUMENTS INCORPORATED BY REFERENCE
Baker Hughes Company
Table of Contents
Part I
Page No.
Item 1.
Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 1C. Cybersecurity
Item 2.
Item 3.
Item 4.
Properties
Legal Proceedings
Mine Safety Disclosures
Part II
Item 5.
Item 6.
Item 7.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
[Reserved]
Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Financial Statements and Supplementary Data
Management's Report on Internal Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Income (Loss)
Consolidated Statements of Comprehensive Income (Loss)
Consolidated Statements of Financial Position
Consolidated Statements of Changes in Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Part III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accounting Fees and Services
Part IV
Item 15. Exhibits and Financial Statement Schedules
Item 16. Form 10-K Summary
Signatures
Baker Hughes Company 2023 Form 10-K | i
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ITEM 1. BUSINESS
PART I
Baker Hughes Company ("Baker Hughes," "the Company," "we," "us," or "our") is an energy technology
company with a diversified portfolio of technologies and services that span the energy and industrial value chain.
Built on a century of experience and conducting business in over 120 countries, our innovative technologies and
services are taking energy forward.
OUR VISION & STRATEGY
With the breadth of our portfolio, leading technology, and unique partnership models, we are positioned to
deliver outcome-based solutions across the energy and industrial markets. By integrating health, safety &
environment ("HSE") into everything we do, we protect our people, our customers, and the environment.
The oil and gas macroeconomic environment continues to be complex. While we believe that the world's
reliance on hydrocarbons will not disappear, and oil and gas will continue to remain relevant in meeting global
energy demand, we also acknowledge the need to transition to new energy sources. Over the last several years,
this transition has been progressing, with governments and society focused on a long-term goal of net-zero
emissions while trying to balance the "energy trilemma" - energy security, sustainability, and affordability. There is a
growing consensus that the energy transition will likely take longer than many expected due to the energy trilemma.
We believe the industry is going through a transformation that requires a change in how we work with our
existing and new customers expecting new partnerships and commercial models and new technology solutions to
deliver sustainable productivity improvements and leverage economies of scale, with a lower carbon footprint. That
is why our strategy is focused on improving our core competitiveness and delivering higher-productivity solutions
today, while positioning to lead the energy transition and solving the energy trilemma. Our unique portfolio is
expected to benefit regardless of how quickly the energy transition develops.
Our strategy is based on three key pillars:
•
•
•
Transform the core: We are transforming our current business to improve margins and cash flow, which
we are achieving through portfolio rationalization, cost improvement, and new business models.
Invest for growth: We are driving organic and inorganic growth in high potential markets where we have a
strong position, including industrial power and processes, industrial asset management, non-metallics, and
chemicals.
Position for new energy frontiers: We are making strategic investments to drive lower carbon emissions
in the energy and industrial sectors, including hydrogen; geothermal; carbon capture, utilization and storage
("CCUS"); and clean power solutions.
We expect to benefit from our strategy in the following ways:
•
•
Scope and scale: We have a global presence and a broad, diversified portfolio. Our products, services,
and expertise serve the upstream, midstream/liquefied natural gas ("LNG") and downstream sectors of the
oil and gas industry, as well as broader chemical and industrial segments. We deliver through our two
operating segments: Oilfield Services & Equipment ("OFSE") and Industrial & Energy Technology ("IET") as
discussed below under "Products and Services," and each are among the top providers for the majority of
the product lines in the markets they serve.
Technology: Our culture is built on a heritage of innovation and invention through research and
development, with complementary capabilities. Technology remains a differentiator for us, and a key
enabler to drive the efficiency and productivity gains our customers need. We also have a range of
technologies that support our customers' efforts to reduce their carbon footprint. We remain committed to
investing in our products and services to maintain our leadership position across our offerings, including
$658 million research and development ("R&D") spend and being granted more than 2,000 patents
worldwide in 2023. We have also made strategic acquisitions to strengthen our core technology portfolio,
including Altus Intervention which adds significant well intervention capabilities to our OFSE segment.
Baker Hughes Company 2023 Form 10-K | 1
•
•
Energy transition solutions: We are positioned to support our customers' efforts to reduce their carbon
footprint with a range of emissions-abatement products and services, which we refer to as "new energy."
This includes more efficient power generation and compression technology, as well as sensor technology
that reduces flaring and overall carbon emissions, technology for CCUS, hydrogen production,
transportation, storage and distribution, and geothermal solutions. Over the past several years, we have
made progress in strategic investments and acquisitions in emerging energy technologies to advance
CCUS, hydrogen, clean power and e-fuels with companies such as Mosaic, Nemesys, HIF Global, and NET
Power, among others. We also continue to expand our low to zero-carbon solutions capabilities, helping
customers to detect, quantify, and reduce emissions more efficiently and accurately, and complementing our
existing solutions available today.
Digital capabilities: We expect to benefit from the emerging demand for intelligent operations and artificial
intelligence ("AI") based solutions as part of our customers' digital transformation initiatives. In 2023, we
launched several key digital solutions across our portfolio for existing customers, including Cordant™ for
industrial and energy customers and the Leucipa™ automated field production solution for oilfield
customers. We also continued our investments in digital partners, including Corva. In addition to enhancing
our technology portfolio with new AI applications, we are embedding digital elements in our core OFSE
product lines, helping them to deliver efficiency, predictability, and a better experience for our customers
and ourselves.
PRODUCTS AND SERVICES
Our two operating segments are organized based on the nature of our markets and customers and consist of
similar products and services and growth profiles. We sell to our customers through direct and indirect channels.
Our primary sales channel is through our direct sales force, which has a strong regional focus with local teams close
to the customer, who are able to draw support from centers of excellence in each of our major product lines. Our
products and services are sold in highly competitive markets and the competitive environment varies by product
line. See discussion below by segment.
Oilfield Services & Equipment
The OFSE segment designs and manufactures products and provides related services for onshore and offshore
oilfield operations across the lifecycle of an asset, ranging from exploration, appraisal, and development to
production, rejuvenation, and decommissioning.
Beyond its traditional oilfield concentration, OFSE is also expanding its capabilities and technology portfolio to
meet the challenges of the energy transition, including focusing on new energy areas, such as geothermal and
CCUS, strengthening its digital architecture, and addressing key energy market themes.
The OFSE segment is organized into four product lines.
• Well Construction focuses on drilling and includes drilling services (directional drilling, logging-while-
drilling, surface logging, and remote operations), drill bits (polycrystalline, roller cone, hybrid, and in-bit
sensing), and drilling & completion fluids (emulsion-based, water-based, specialty, drill-in, and completion
fluids; and waste management).
•
•
•
Completions, Intervention, & Measurements encompasses completions (wellbore construction, upper
and lower completions, unconventional multistage completions, intelligent production systems, workover
systems, and fishing and through-tubing services), pressure pumping (cementing, production enhancement,
coiled tubing, and tubular running services), and wireline services (openhole logging services, cased-hole
logging services, and perforating and drill stem-testing services).
Production Solutions spans artificial lift systems (electrical submersible pumping systems, surface
pumping systems, rigless deployment systems, and sensors and gauges) and oilfield & industrial chemicals
(upstream, downstream, and AquanessTM wholesale chemicals).
Subsea & Surface Pressure Systems includes subsea projects and services (subsea trees, controls,
manifolds, wellheads, premium casing connectors, installation and commissioning, repairs and
Baker Hughes Company 2023 Form 10-K | 2
maintenance, well intervention, life-of-field solutions, and plug and abandonment), flexible pipe systems
(subsea risers, subsea flowlines and jumpers, onshore reinforced thermoplastic pipe, and rehabilitation),
and surface pressure control systems (surface trees and wellheads).
These product lines are supported by an OFSE digital group, which combines the segment's domain expertise
with a deep understanding of digital technology to improve operational safety, performance, and sustainability.
Reservoir analysis proficiencies are rooted in evaluation technologies, a team of reservoir experts, and software.
Together, these capabilities provide customers with a greater understanding of the subsurface, enabling smoother,
faster drilling and precise wellbore placement that can lead to improved recovery and project economics. OFSE also
provides integrated well services and solutions to plan and execute projects ranging from well construction and
production through well abandonment, in addition to integrated services and solutions for the subsea environment.
OFSE customers include large integrated major and super-major oil and natural gas companies; U.S. and
international independent oil and natural gas companies; national or state-owned oil and natural gas companies;
engineering, procurement, and construction contractors; geothermal companies; and other oilfield services
companies. OFSE believes that its principal competitive differentiators in the industries and markets it serves are
the quality, efficiency, reliability, and availability of its products and services. A continued commitment to service
delivery, HSE standards, technical proficiency, and competitive pricing is also a key factor in its success.
OFSE products and services are sold in highly competitive markets. While OFSE may have contracts that
include multiple well projects and that may extend over a period ranging from two to four years, its services and
products are generally provided on a well-by-well basis. Most contracts cover pricing of the products and services,
along with various limitations on liability, but do not necessarily establish an obligation to use OFSE products and
services. OFSE competitors include SLB and Halliburton (Well Construction; Completions, Intervention, &
Measurements; Production Solutions; Subsea & Surface Pressure Systems); ChampionX (Production Solutions);
and TechnipFMC, Aker Solutions, and NOV (Subsea & Surface Pressure Systems).
Industrial & Energy Technology
The IET segment combines a broad array of domain expertise, technologies, software, and services for energy
customers including on-and offshore, LNG, pipeline and gas storage, refining, petrochemical, distributed gas,
nuclear, hydrogen, carbon capture, utilization and storage, clean power and renewables. It also provides cutting
edge technology for consumers of energy and/or organizations who are reliant on infrastructure integrity. IET
solutions unlock the ability to transform, transfer, and transport energy efficiently, while capturing and cutting
emissions, addressing a fundamental challenge behind the energy trilemma: reducing environmental impact, while
maximizing efficiency, safety, productivity, reliability and availability.
Effective October 1, 2023, IET re-aligned its product lines and began operating through five product lines - Gas
Technology Equipment, Gas Technology Services, Industrial Products, Industrial Solutions, and Climate
Technology Solutions.
• Gas Technology Equipment delivers highly efficient mechanical and electric drive compression and power
generation technology for projects across the natural gas value chain. The product line's portfolio includes
drivers, driven equipment, flow control, and turnkey solutions:
•
•
•
Drivers include aero-derivative gas turbines, heavy-duty gas turbines, small- to medium-sized
industrial gas turbines, steam turbines, and hot gas and turboexpanders.
Driven equipment includes generators and reciprocating, centrifugal, integrated zero emission
compressors, and centrifugal pumps.
Turnkey solutions includes power generation and gas compression modules, waste heat/energy/
pressure recovery, energy storage, modularized small and large liquefaction plants, CO2
compression, and storage/use solutions.
• Gas Technology Services provides advanced aftermarket support and uptime availability in critical
environments and through every stage of our customers' equipment and plant lifecycle. The product line's
portfolio includes:
Baker Hughes Company 2023 Form 10-K | 3
•
•
Designing, manufacturing, maintaining, upgrading rotating equipment combining sophisticated
hardware technologies with enterprise-class software products.
Analytics to connect customers' assets, providing them with the data, safety and security needed to
improve operations reliably and efficiently.
• Genuine spare parts, system upgrades, conversion solutions, digital advanced services, and
turnkey solutions to refurbish and improve the output from a single machine up to an entire plant.
•
Industrial Products includes a broad portfolio of component products and service offerings that enable
industrial safety and productivity across diverse industry verticals. The product line's portfolio includes:
• Waygate Technologies, which comprises non-destructive testing technology, software, and services,
including industrial radiography, ultrasonic sensors, testing machines and gauges, non-destructive
testing film, and remote visual inspection.
•
•
Process & Pipeline Services, which comprises pre-commissioning and maintenance services to
improve throughput and asset integrity for process facilities and pipelines as well as inline
inspection solutions to support pipeline integrity.
Valves and Gears, which comprises flow technology including industrial valves, regulators, control
systems, gears and other flow and process control technologies.
•
•
Industrial Solutions offers a unique suite of hardware, software, and edge device solutions that enable
asset performance and process optimization. Industrial Solutions combines several product lines to
leverage our critical equipment hardware capability to migrate to full plant offerings and through Cordant, a
full-stack, edge-to-enterprise solution that encompasses our hardware, software and services offerings. The
product line's portfolio includes:
•
•
Precision Sensors & Instrumentation device technology including the Panametrics®, Druck®, and
Reuter-Stokes® product brands, provides instrumentation and sensor-based technologies to better
detect and analyze pressure, flow, gas, moisture, radiation, and related conditions.
Condition Monitoring includes the Bently Nevada® and System 1® product brands, providing rack-
based vibrating monitoring equipment and sensors for both power generation and oil and gas
operations, as well as industrial applications. The product line also provides integrated asset
performance management.
Climate Technology Solutions ("CTS") includes CCUS, hydrogen, clean power, and emissions
abatement capabilities to enable energy operators as well as users of energy in the broader industry, in
particular the hard-to-abate sectors, to achieve their emission reduction goals. This product line is the
primary driver of the Company's new energy orders and is designed to accelerate the decarbonization of
both energy and hard-to-abate industries.
IET customers for Gas Technology Equipment and Gas Technology Services product lines are upstream,
midstream, and downstream, onshore, and offshore, and small to large scale. Midstream and downstream
customers include LNG plants, pipelines, storage facilities, refineries, and a wide range of industrial and
engineering, procurement, and construction companies. Products and services for the remaining IET product lines
are primarily sold in a diversified arena to a broad range of customers and across multiple verticals including
aerospace, automotive, nuclear, oil and gas, mining, cement, metals, refinery and petrochemical, food and
beverage, pulp & paper, and textile.
IET believes that its principal competitive factors in the industries and markets it serves are product range
coverage, product technology, efficiency, product reliability and quality, availability, project execution and service
capabilities, emissions, and price. IET differentiates itself from competitors with its expertise in technology and
project management, local presence, and partnerships, to provide fully integrated equipment and services solutions
with state-of-art technology from design and manufacture through to operations.
IET competes across a wide range of industries, including oil and gas, power generation, aerospace, and light
and heavy industrials. IET competitors for Gas Technology Equipment product line includes Siemens Energy, Solar
(a Caterpillar company), and MAN Energy Solutions. Our Gas Technology Services product line competes with
Baker Hughes Company 2023 Form 10-K | 4
independent service providers such as Masaood John Brown, EthosEnergy, and Sulzer. IET competitors for the
Industrial Products product line include Emerson, Flowserve, and Metso Outotec. Competitors for the Industrial
Solutions product line include Emerson, Honeywell Process Solutions, and ABB. CTS competitors are varied across
application. For CCUS, competitors include Aker Carbon Capture, Svante, and SLB. For hydrogen, competitors
include Siemens Energy, Howden (a Chart Industries company), and Burckhardt.
CONTRACTS
We conduct our business under various types of contracts in the upstream, midstream, and downstream sectors
of the oil and gas industry, including fixed-fee or turnkey contracts, transactional agreements for products and
services, and long-term aftermarket service agreements. We also conduct business in a number of industrial
markets and provide critical equipment hardware capability for full plant offerings, asset performance management
and process optimization.
We benefit from stable relationships with many of our customers based on long-term project contracts and
master service agreements. Several of those contracts require us to commit to a fixed price based on the
customer's technical specifications with little or no relief available due to changes in circumstances. In some cases,
failure to deliver products or perform services within contractual commitments may lead to liquidated damages
claims. We seek to mitigate these exposures through close collaboration with our customers.
We strive to negotiate the terms of our customer contracts consistent with what we consider to be industry best
practices. In connection with oil & gas operations, our customers typically indemnify us for certain claims arising
from: the injury or death of their employees and often their contractors; the loss of or damage to their facility and
equipment, and often that of their contractors; pollution originating from their equipment or facility; and all liabilities
related to the well and subsurface operations, including loss or damage to the well or reservoir, loss of well control,
fire, explosion, or any uncontrolled flow of oil or gas. Conversely, we typically indemnify our customers for certain
claims arising from: the injury or death of our employees and often that of our subcontractors; the loss of or damage
to our equipment; and surface pollution originating from our equipment while under our control. Where the above
indemnities do not apply or are not consistent with industry best practices (e.g., in connection with industrial and/or
digital sectors), we typically provide a capped indemnity for damages caused to the customer by our negligence and
include an overall limitation of liability clause. It is also our general practice to include a limitation of liability for
consequential loss, including loss of profits and loss of revenue, in all customer contracts.
Our indemnity structure may not protect us in every case. Certain U.S. states have enacted oil and natural gas
specific anti-indemnity statutes that can void the allocation of liability agreed to in a contract. Applicable law or the
negotiated terms of a customer contract may also limit indemnity obligations in the event of gross negligence or
willful misconduct, or in the event of breaches of applicable laws or breach of confidentiality and/or intellectual
property rights. We sometimes contract with customers that are not the end user of our products. It is our practice to
seek to obtain an indemnity from our customer for any end-user claims, but this is not always possible. Similarly,
government agencies and other third parties may make claims in respect of which we are not indemnified and for
which responsibility is assessed proportionate to fault. We have an established process to review any risk
deviations from our standard contracting practices.
The Company maintains a commercial general liability insurance policy program that covers against certain
operating hazards, including product liability claims and personal injury claims, as well as certain limited
environmental pollution claims for damage to a third party or its property arising out of contact with pollution for
which the Company is liable; however, clean up and well control costs are not covered by such program. All of the
insurance policies purchased by the Company are subject to deductible and/or self-insured retention amounts for
which we are responsible for payment, specific terms, conditions, limitations, and exclusions. There can be no
assurance that the nature and amount of Company insurance will be sufficient to fully indemnify us against liabilities
related to our business.
Baker Hughes Company 2023 Form 10-K | 5
ORDERS AND REMAINING PERFORMANCE OBLIGATIONS
Remaining performance obligations, a defined term under U.S. generally accepted accounting principles ("U.S.
GAAP"), are unfilled customer orders for products and product services excluding any purchase order that provides
the customer with the ability to cancel or terminate without incurring a substantive penalty, even if the likelihood of
cancellation is remote based on historical experience. For product services, an amount is included for the expected
life of the contract.
We recognized orders of $30.5 billion and $26.8 billion in 2023 and 2022, respectively. We recognized OFSE
orders of $16.3 billion and $14.1 billion, and IET orders of $14.2 billion and $12.7 billion in 2023 and 2022,
respectively. As of December 31, 2023, the remaining performance obligations totaled $33.5 billion. As of December
31, 2023, OFSE remaining performance obligations totaled $3.5 billion, and IET remaining performance obligations
totaled $29.9 billion.
RESEARCH AND DEVELOPMENT
We engage in R&D activities across both operating segments directed toward the development of new
products, services, technology, and other solutions, as well as bringing about a significant improvement to existing
products and services, and the design of specialized products to meet specific customer needs. We also continue to
invest and develop a range of technologies that support our customers' efforts to reduce their carbon footprint. For
the year ended December 31, 2023, we incurred $658 million of R&D expense.
In OFSE, we continue to fund a range of formation evaluation, drilling, completions, and production capabilities
and products. In parallel, and in strong collaboration with the IET technology organization, we are investing in
strategic themes that fuel our future product and service portfolios. These include themes such as digital,
automation, electrification, chemistry and materials, electronics, CCUS, and geothermal.
Specifically for OFSE, in our Well Construction product line, we are improving reliability in high-temperature and
high shock and vibration environments (harsh-drilling conditions), through a combination of optimized design,
automated operations, and integrated solutions that leverage our drilling tools, drill bits, and drilling fluids
technologies. In our Completions, Intervention, and Measurements product line, we are investing in intelligent
solutions and advanced measurements while creating a leadership position in the well-intervention domain through
the integration of our wireline measurement capabilities with the conveyance and intervention capabilities. In our
Production Solutions product line, we are leveraging our artificial lift technologies with our chemical solutions to
provide an optimized and automated portfolio of production-enhancing solutions. In our Subsea and Surface
Pressure Solutions product line, we continue to develop subsea production systems that improve performance and
reduce emissions through lighter design, automated operations, and electrification. Our offshore flexible pipe
systems optimized for higher pressure temperature and CO2 content continue to deliver greater sustainability and
performance.
In IET, we continue to invest in and develop foundational technologies which will enable our journey for the
energy transition. Such technologies include advanced materials, advanced manufacturing technologies, novel
process technologies, and digital technologies such as advanced sensing & diagnostics, data sciences, and artificial
intelligence. Within Gas Technology Equipment and Gas Technology Services product lines, we are focusing on our
latest generation of gas turbines for energy efficiency and reduced carbon footprint such as our LM9000TM and
Nova LTTM products, as well as Allam Cycle turboexpander, CCUS, and hydrogen and geothermal technologies.
Within Industrial Technology, we are investing in advanced digital solutions designed to improve the efficiency,
reliability, and safety of oil and gas, aerospace, energy, and broader industrial production and operations. This
includes our Orbit 60 Bently Nevada product for critical asset monitoring in turbine systems, including wind, hydro,
and gas turbines. The IET segment is also enhancing its process and safety valve business bringing new digital
applications including analytics to our customers. Investments in Industrial Technology also include technologies to
measure, monitor, and minimize carbon emissions, new inspection technologies for nondestructive evaluation of
materials and structures as well as solutions for industrial asset management.
INTELLECTUAL PROPERTY
Our technology, brands and other intellectual property ("IP") rights are important elements of our business. We
rely on patent, trademark, copyright, and trade secret laws, as well as non-disclosure and employee invention
Baker Hughes Company 2023 Form 10-K | 6
assignment agreements to protect our IP rights. Many patents and patent applications comprise the Baker Hughes
portfolio and are owned by us. Other patents and patent applications applicable to our products and services are
licensed to us by General Electric ("GE") and, in some cases, third parties. In particular, we have an IP cross-license
agreement with GE that allows both parties to have continued and permanent rights to commercially utilize certain
IP of the other pursuant to the terms of the agreement. The IP cross-licenses remain in place following GE exiting its
ownership position in us. We do not consider any individual patent to be material to our business operations.
We follow a policy of seeking patent and trademark protection in numerous countries and regions throughout
the world for products and methods that appear to have commercial significance. We believe that maintenance,
protection and enforcement of our patents, trademarks, and related IP rights is central to the conduct of our
business, and aggressively pursue protection of our IP rights against infringement, misappropriation, or other
violation worldwide as may be necessary to protect our business. Additionally, we consider the quality and timely
delivery of our products, the service we provide to our customers, and the technical knowledge and skills of our
personnel to be other important components of the portfolio of capabilities and assets supporting our ability to
compete.
SEASONALITY
Our operations can be affected by seasonal events, which can temporarily affect the delivery and performance
of our products and services, and our customers' budgetary cycles. Examples of seasonal events that can impact
our business are set forth below:
•
•
In OFSE, adverse weather conditions, such as hurricanes in the Gulf of Mexico or extreme heat in the
Middle East during the summer months, may impact our operations or our customers' operations, cause
supply disruptions and result in a loss of revenue and/or damage to our equipment and facilities, which may
or may not be insured. For more information on seasonal and weather conditions, see the "Operational
Risks" section of Part 1 of Item 1A herein.
Severe weather during the winter months normally results in reduced activity levels in the North Sea in
OFSE generally in the first quarter and may interrupt or curtail our operations, or our customers' operations,
in those areas and result in a loss of revenue.
• Many of our international OFSE customers may increase activity for certain products and services in the
fourth quarter as they seek to fully utilize their annual budgets.
• Our broader IET businesses typically experience higher customer activity as a result of spending patterns in
the second half of the year.
RAW MATERIALS
We purchase various raw materials and component parts for use in manufacturing our products and delivering
our services. The principal raw materials we use include steel alloys, chromium, nickel, titanium, barite, beryllium,
copper, lead, tungsten carbide, synthetic and natural diamonds, gels, sand and other proppants, printed circuit
boards and other electronic components, and hydrocarbon-based chemical feed stocks. Raw materials that are
essential to our business are normally readily available from multiple sources but may be subject to price volatility.
We have also seen prices remain elevated for ferrous and non-ferrous metals and other raw materials. Our
procurement teams utilize advanced planning and may enter into strategic agreements with our global suppliers to
minimize price impacts and other availability challenges. We anticipate some pricing and fulfillment volatility for
certain raw materials, components, and certain logistics lanes to continue through 2024.
In addition to raw materials and component parts, we also use the products and services of metal fabricators,
machine shops, foundries, forge shops, assembly operations, contract manufacturers, logistics providers,
packagers, indirect material providers, and others in order to produce and deliver products to customers. These
materials and services are generally available from multiple sources.
Baker Hughes Company 2023 Form 10-K | 7
ENVIRONMENTAL, SOCIAL AND GOVERNANCE ("ESG")
Environmental
We believe we have an important role to play in society as an industry leader and partner. We view ESG as a
lever to transform the performance of our Company. In 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.
This goal encompasses emissions from our operations ("Scope 1 and 2 carbon emissions") in alignment with the
Paris Agreement and the specific recommendations of the United Nations ("UN") Intergovernmental Panel on
Climate Change’s Special Report on Global Warming of 1.5oC.
We continue to make progress on emissions reductions. We reported in our 2022 Corporate Sustainability
Report a 28% reduction in our Scope 1 and 2 carbon dioxide equivalent emissions compared to our 2019 base year.
This reduction was primarily due to implementing energy efficiency initiatives, facility consolidation, increasing
electric power consumption from renewable energy sources, and improvements in our vehicle fleet, among other
reasons. We plan to continue to employ a broad range of emissions reduction initiatives across manufacturing,
supply chain, logistics, energy sourcing, and generation. Our latest Corporate Sustainability report is available on
the Company section of our website at www.bakerhughes.com. Information contained on or connected to our
website is not incorporated by reference into this annual report on Form 10-K for the year ended December 31,
2023 ("Annual Report") and should not be considered part of this Annual Report or any other filing we make with the
Securities and Exchange Commission ("SEC").
Our sustainability commitments include our formal participation in the UN Global Compact ("UNGC") and our
commitment to the UNGC's Ten Principles including human rights, labor, environment, and anti-corruption, as well
as the UNGC's Sustainable Development Goals. We have annually renewed our commitment to the UNGC since
joining in 2019.
Social & Human Capital
At Baker Hughes, our people are central contributors to our purpose of taking energy forward. As an energy
technology company with operations around the world, we believe that a diverse workforce is critical to our success,
and we aim to attract the best and most diverse talent to support the energy transition. We strive to be an inclusive
and safe workplace, with opportunities for our employees to grow and develop in their careers, supported by
learning and development opportunities, competitive compensation, benefits, health and wellness programs, and by
programs that build connections between our employees and their communities.
As of December 31, 2023, we had approximately 58,000 employees. More than 45,000 of our employees work
outside the U.S. in over 85 different countries with more than 155 nationalities represented. This diversity of global
perspectives makes our Company stronger, more resilient, and more responsive to our global customers.
Diversity, Equity, and Inclusion ("DEI")
We believe unique ideas and perspectives fuel innovation and our differences make us stronger. We value
difference in gender, race, ethnicity, age, gender identity, sexual orientation, ability, cultural background, religion,
veteran status, experience, thought, and more across the globe. We recognize the importance of diverse teams, an
equitable workplace and an inclusive culture in driving innovation and competitiveness as both are critical to our
business success and our mission of taking energy forward for our customers and the industry. We believe that our
DEI strategic framework and our commitment to DEI will enable us to continue to recruit and retain a diverse
workforce, promote an inclusive culture, expand our supplier diversity, and be a stronger partner to our customers
and our community.
As we continue to prioritize DEI, we are focused on progressing on diversity, equity and inclusion across our
organization, with a particular emphasis on supporting gender representation. In 2023, the percentage of people
who identify as women in our workforce, senior leadership positions, and on the Board of Directors ("the Board"),
was 19%, 18%, and 33%, respectively. Specific to the U.S., 38% of our employees identify as people of color.
We work to ensure we have access to and support diverse pipelines of talent across the globe while prioritizing
development and retention. We hold leadership accountable for integrating DEI principles into their respective parts
Baker Hughes Company 2023 Form 10-K | 8
of the business. Our enterprise-wide strategy allows us to measure the outcomes and progress of our DEI efforts,
assign goals, develop accountability, and ensure transparency. And our corporate memberships with respected
nonprofits, such as Ally Energy, Catalyst, Disability:IN, and the Women's Energy Network, provide partnership and
guidance to support our goals. Our talent acquisition efforts as well as our eight global employee resource groups
support the engagement, development and retention of diverse talent.
Talent Acquisition: We have enacted a number of initiatives to support our global goals related to DEI. We
have conducted training on unconscious bias and have launched pilot projects on blind resumes and debiasing job
descriptions, interview templates, and assessments as well as expanded our talent acquisition focus to include
executive search services and initiatives with universities to expand our new talent pipeline.
Employee Resource Groups ("ERGs"): ERGs consist of employees who have joined together based on
shared interests, characteristics, or life experiences. These groups can have a powerful influence on driving change
by elevating the conversation and awareness around key issues and engaging with the communities where we
operate while also providing opportunities for employee development, education, and professional growth. In 2023,
we continued our support of the ERGs in several ways, including the opportunity for ERGs to nominate charitable
organizations to receive grants from the Baker Hughes Foundation. We also formalized and enhanced support and
impact for our five communities of interest groups, which bring together employees based on shared interests and
enable employees to share information and ideas, find opportunities to participate in philanthropy and volunteerism,
and learn best practices by engaging with colleagues on a specific topic or area of interest. These efforts have
helped our DEI focus and have fostered closer connections between employees in communities around the world.
Inclusive Culture: We have several programs and initiatives that cultivate an inclusive culture. The Baker
Hughes Culture & Inclusion Council, comprised of executives across the organization, supports the success of our
DEI mission and workplace culture ambitions and meets regularly to review progress and discuss ways in which to
continue to advance our efforts. The DEI Community of Practice facilitates sharing best practices across the
enterprise. Our DEI Knowledge Center, located on the Baker Hughes intranet, enables us to provide our workforce
with tools, resources, and learning opportunities that raise awareness, foster inclusive behaviors, and build cross-
cultural competences.
Compensation and Benefits
We are committed to paying for performance and supporting our employees' wellbeing, as well as the wellbeing
of their families, by offering flexible and competitive benefits tailored by location to meet the specific needs of our
employees. We regularly assess our total compensation and benefits programs through benchmarking with industry
peers and local markets. We strive to ensure that our compensation programs are fair and equitable for all
employees. Healthcare plans and life insurance are a core benefit of the Company and are provided in most
locations. Baker Hughes offers various leaves of absence options for certain quality-of-life needs, including family
care. We also continue to assess and provide programs that support our employees' work arrangements such as
flexible schedules, compressed work weeks, hybrid work, remote work, and other options.
Learning and Development
Learning and Development is a personal journey at Baker Hughes. We empower our employees to follow their
passion for personal knowledge, job related skills, development, and the domain expertise needed for professional
and personal growth. In alignment with this, in 2023, we built upon the progress in our social learning communities,
by transitioning to an improved learning delivery platform. This change in the learning ecosystem simplified the user
experience for our learners and enabled rich analytics for the team to continuously make the learning experience
more engaging, impactful, and easy.
Our learning communities CORE Values, CORE Strengths and JOURNEY continue to provide opportunities for
all employees to learn, share and practice their learning with their peers no matter where they are in their career.
CORE Values, is a curated learning space centered around our Baker Hughes Values: Grow, Care, Collaborate,
and Lead, and the behaviors associated with each. CORE Strengths adds focus to the critical skills (for example
Data Analytics, Project Management, Change Management) that will help transform our organization, and
JOURNEY is targeted for people leaders to help them transition into their leadership roles. We continue to offer in-
person learning opportunities to complement the robust virtual learning catalog with workshops and team
development.
Baker Hughes Company 2023 Form 10-K | 9
Our formal leadership development programs play a pivotal role in attracting, retaining, and developing talent
and increasing the pipeline of diverse talent into and within the organization. As an example, Aspire is a two-year
rotational leadership program for recent graduates and early-career employees to grow functional and leadership
skills through challenging assignments, learning plans, and global cross-functional projects.
Health, Safety, Environment, and Wellness
HSE is at the core of our culture as we are committed to doing the right thing to protect our employees,
customers, the communities where we live and work, and the environment. We take a risk-based approach with
proactive and preventive programs to deliver safe, secure, and sustainable operations. We have established a
stringent set of standards which meet or exceed global HSE regulatory requirements.
Our commitment to HSE starts at the highest levels of our Company and is embedded throughout all layers of
the organization. We encourage and empower all employees to take an active role in "owning" HSE by stopping
work when conditions and/or behaviors are unsafe and reporting observations, near misses, and stop-work events
through open reporting channels. Our employees are required to complete recurring HSE training. We offer over
200 unique HSE courses including foundational training required for all employees, workplace and job-specific
training, and human-performance leadership training for managers. Our ambition is to make every day a "Perfect
HSE Day"—one without serious injuries, accidents, or harm to the environment. In 2023, we achieved 199 Perfect
HSE Days, down 8% versus 2022.
Our commitment to HSE goes beyond safety alone. Occupational health and wellness is a key competency
jointly managed within our HSE and Human Resources ("HR") teams. The importance of physical health,
ergonomics, preventative health care, and mental wellness cannot be overstated in promoting a healthy, engaged,
and productive workplace. We work with our health benefit providers and internal teams to offer employees health
and wellness programs, telemedicine access, health screenings, immunizations, fitness reimbursements, and virtual
wellness tools.
In 2023, the mental health and emotional well-being of our employees continued to be a critical priority. We
hosted numerous events with Baker Hughes leaders and external experts, further embedded mental well-being into
leadership engagements, and provided resources and tools to employees. Our Employee Assistance Program
("EAP") provides employees and their family members direct access to professional coaches for in-the-moment
counseling or referrals to community experts and extended care providers to navigate daily life and cope with major
life events.
Community Involvement
Baker Hughes seeks to make a positive impact in the communities where we conduct business around the
world. Consistent with our purpose and values, we work to advance environmental quality, educational
opportunities, health, and wellness. We benefit our communities through financial contributions, in-kind donations of
goods and services, and volunteer projects. The Baker Hughes Foundation makes strategic philanthropic
contributions, matches Baker Hughes employee charitable contributions, and awards volunteer recognition grants
for outstanding employee community service.
Governance
The Board believes the purpose of corporate governance is to maximize shareholder value in a manner
consistent with legal requirements and the highest standards of integrity. The Board has adopted and adheres to
corporate governance practices, which the Board and management believe promote this purpose, are sound, and
represent best practices. The Board periodically reviews these governance practices, Delaware law (the state in
which the Company is incorporated), the rules and listing standards of Nasdaq and the SEC regulations, as well as
best practices suggested by recognized governance authorities.
The Board monitors and provides oversight over our ESG policies, programs, and practices regarding corporate
responsibility and sustainability and plays an active role in overseeing our human capital management efforts. Our
Human Capital and Compensation Committee provides oversight of our social strategy, policies, programs, and
initiatives focusing on DEI as well as pay equity, culture, talent development, succession planning, and executive
compensation and benefits. Our Governance and Corporate Responsibility Committee provides oversight of the
Baker Hughes Company 2023 Form 10-K | 10
Company's environmental matters, including monitoring its sustainability strategy and initiatives, the management of
employee health, safety, and wellness matters, and oversight of our positions on corporate social responsibilities
and public issues of significance which affect investors and other key stakeholders. The Audit Committee provides
oversight over the Company's risk assessment and risk management policies and processes, including data privacy,
and compliance reporting.
GOVERNMENTAL REGULATION
Environmental Matters
We are committed to the health and safety of people, protection of the environment and compliance with
environmental laws, regulations and our policies. Our past and present operations include activities that are subject
to extensive domestic (including U.S. federal, state and local) and international regulations concerning, among other
things, air and water quality, waste management, occupational health and safety, and land protection.
Environmental regulations continue to evolve, and changes in standards of enforcement of existing regulations, as
well as the enactment of new legislation, may require us and our customers to modify, supplement or replace
equipment or facilities, obtain new or updated permits to conduct regulated activities, initiate investigatory and/or
remedial measures, apply specific HSE criteria addressing employee protection and/or to change or discontinue
present methods of operation. Our environmental compliance expenditures and our capital costs for environmental
control equipment may change accordingly.
Ongoing environmental compliance costs, such as obtaining environmental permits, installation and
maintenance of pollution control equipment and waste disposal, are expensed as incurred. Based upon current
information, we believe that our overall environmental regulatory compliance obligations, including investigatory
and/or remediation obligations, environmental compliance costs and capital expenditures for environmental control
equipment, will not have a material adverse effect on our capital expenditures, earnings or competitive position
because we have either established adequate reserves or our compliance cost, based on available information, is
not expected to be material to our consolidated financial statements.
While we seek to embed and verify sound environmental practices throughout our business, we are, and may in
the future be, involved in investigation and/or remediation projects at current and former properties, typically related
to historical operations and operations of our predecessor companies. In some cases, our remediation activities are
conducted as specified by a government agency-issued consent decree or agreed order. Remediation costs at
these properties are accrued using currently available facts, existing environmental permits, technology and
presently enacted laws and regulations. For sites where we have primary responsibility for the remediation, our cost
estimates are developed based on internal evaluations and are not discounted. We record accruals when it is
probable that we will be obligated to pay amounts for environmental site evaluation, investigation and/or remediation
or related activities, and such amounts can be reasonably estimated. Accruals are recorded even if significant
uncertainties exist over the ultimate cost of the remediation. Our total accrual for environmental remediation was
$58 million and $63 million at December 31, 2023 and 2022, respectively.
Other Regulatory Matters
We are subject to regulation by various U.S. federal regulatory agencies and by the applicable regulatory
authorities in countries in which our products are manufactured or sold. Such regulations principally relate to the
ingredients, classification, labeling, safety, manufacturing, packaging, transportation, advertising, and marketing of
our products. Additionally, as a U.S. entity operating through subsidiaries in non-U.S. jurisdictions, we are subject to
foreign exchange control, transfer pricing and customs laws that regulate the import and export of goods as well as
the flow of funds between us and our subsidiaries. In particular, the shipment of goods, services and technology
across international borders subjects us to extensive trade laws and regulations. Our import activities are governed
by the unique customs laws and regulations in each of the countries where we operate. Pursuant to their laws and
regulations, governments may impose economic sanctions against certain countries, persons and entities that may
restrict or prohibit transactions involving such countries, persons and entities, which may limit or prevent our
conduct of business in certain jurisdictions. We are also required to be in compliance with transfer pricing, securities
laws, and other statutes and regulations, such as the U.S. Foreign Corrupt Practices Act and other countries’ anti-
corruption and anti-bribery regimes.
Baker Hughes Company 2023 Form 10-K | 11
As a result of the conflict between Russia and Ukraine that began in February of 2022, governments in the U.S.,
United Kingdom ("U.K."), European Union ("EU"), and other countries enacted sanctions against Russia and certain
Russian interests. As previously announced on March 19, 2022, we suspended any new investments in our Russia
operations, but continued to comply with applicable laws and regulations as we fulfilled existing contractual
obligations. Over the course of the second quarter of 2022, we closely monitored the developments in Ukraine and
Russia and changes to sanctions all of which continued to make ongoing operations increasingly complex and
significantly more challenging. As a result, we completed a number of actions during the course of 2022 including
the sale of part of our OFSE Russia business and suspended substantially all of our remaining operational activities
in Russia. In 2023, our focus in Russia has been to continue to close local entities within the scope of western
sanctions and local regulation. For further information see "Note 20. Restructuring, Impairment and Other" and
"Note 21. Business Dispositions and Acquisitions" of the Notes to Consolidated Financial Statements in Item 8
herein.
We are also subject to laws relating to data privacy and security and consumer credit, protection and fraud. An
increasing number of governments worldwide have established laws and regulations, and industry groups also have
promoted various standards, regarding data privacy and security, including with respect to the protection and
processing of personal data. The legal and regulatory environment related to data privacy and security is
increasingly rigorous, with new and constantly changing requirements applicable to our business, and enforcement
practices are likely to remain uncertain for the foreseeable future. We are also subject to labor and employment
laws, including regulations established by the U.S. Department of Labor and other local regulatory agencies, which
sets laws governing working conditions, paid leave, workplace safety, wage and hour standards, and hiring and
employment practices.
While there are no current environmental or regulatory matters that we expect to be material to our results of
operations, financial position or cash flows or have a material adverse effect on our capital expenditures, earnings
or competitive position, there can be no assurances that existing or future environmental laws and other laws,
regulations and standards applicable to our operations or products will not lead to such a material adverse impact.
AVAILABILITY OF INFORMATION FOR STOCKHOLDERS
Our Annual Reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and
amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended ("Exchange Act"), are made available free of charge on our internet website at
www.bakerhughes.com as soon as reasonably practicable after these reports have been electronically filed with, or
furnished to, the SEC, and can be found at their internet website www.sec.gov. In addition, our Corporate
Sustainability reports are available on the Company section of our website at www.bakerhughes.com. Information
contained on or connected to our website is not incorporated by reference into this Annual Report on Form 10-K and
should not be considered part of this Annual Report or any other filing we make with the SEC.
We have a Code of Conduct to provide guidance to our directors, officers, and employees on matters of
business conduct and ethics, including compliance standards and procedures. We also require our principal
executive officer, principal financial officer, and principal accounting officer to sign a Code of Ethical Conduct
Certification annually.
The Code of Conduct, referred to as Our Way: The Baker Hughes Code of Conduct, and the Code of Ethical
Conduct Certifications are available on the Investor section of our website at www.bakerhughes.com. We will
disclose on a current report on Form 8-K or on our website information about any amendment or waiver of these
codes for our executive officers and directors. Waiver information disclosed on our website will remain on the
website for at least 12 months after the initial disclosure of a waiver. Our Governance Principles and the charters of
our Audit Committee, Finance Committee, Human Capital and Compensation Committee, and Governance and
Corporate Responsibility Committee of the Board are also available on the Investor section of our website at
www.bakerhughes.com. In addition, a copy of the Code of Conduct, Code of Ethical Conduct Certifications,
Governance Principles, and the charters of the committees referenced above are available in print at no cost to any
shareholder who requests them.
Baker Hughes Company 2023 Form 10-K | 12
EXECUTIVE OFFICERS OF BAKER HUGHES COMPANY
The following table shows, as of February 5, 2024, the name of each of our executive officers, together with his
or her age and office presently or previously held. There are no family relationships among our executive officers.
Name
Lorenzo Simonelli
Age
50
Nancy Buese
54
James E.
Apostolides
Maria Claudia
Borras
46
55
Ganesh
Ramaswamy
55
Georgia Magno
45
Position and Background
Chairman, President and Chief Executive Officer
Lorenzo Simonelli has been the Chairman of the Board of Directors of the Company
since October 2017, and a Director, President and Chief Executive Officer of the
Company since July 2017. Prior to joining the Company in July 2017, Mr. Simonelli
was Senior Vice President, GE and President and Chief Executive Officer, GE Oil &
Gas from October 2013 to July 2017. Before joining GE Oil & Gas, he was the
President and Chief Executive Officer of GE Transportation from July 2008 to
October 2013. Mr. Simonelli joined GE in 1994 and held various finance and
leadership roles from 1994 to 2008.
Chief Financial Officer
Nancy Buese is the Chief Financial Officer of the Company. Prior to joining the
Company in November 2022, she served as Executive Vice President ("EVP") and
Chief Financial Officer ("CFO") of Newmont Corporation, a gold mining company,
since October 2016. Prior to her role at Newmont, Ms. Buese spent more than a
decade as EVP & CFO of MarkWest Energy Partners, a leader in gathering,
processing, and transportation of hydrocarbons, as well as EVP & CFO of MPLX (a
subsidiary of Marathon Petroleum) following MPLX’s acquisition of MarkWest. She
began her career in public accounting, starting as an accountant for Arthur Andersen
and rising to be a partner at Ernst & Young until 2003.
Senior Vice President, Enterprise Operational Excellence
James E. Apostolides is the Senior Vice President of Enterprise Operational
Excellence of the Company. He previously served as Senior Vice President of
Enterprise Excellence from February 2020 to September 2022. In July 2017, he was
appointed VP of Materials Management, Logistics, and Cash Operations. He began
his career in 1999 with GE and held roles of increasing responsibility, including
managerial positions in Shop Operations, Materials, Sourcing, and Fulfillment across
multiple continents.
Executive Vice President, Oilfield Services and Equipment
Maria Claudia Borras is the Executive Vice President, Oilfield Services and
Equipment of the Company. She previously served as Executive Vice President, of
Oilfield Services from July 2017 to September 2022. Prior to joining the Company in
July 2017, she served as the Chief Commercial Officer of GE Oil & Gas from January
2015 to July 2017. Prior to joining GE Oil & Gas, she held various leadership
positions at Baker Hughes Incorporated including President, Latin America from
October 2013 to December 2014, President, Europe Region from August 2011 to
October 2013, Vice President, Global Marketing from May 2009 to July 2011 and
other leadership roles at Baker Hughes Incorporated from 1994 to April 2009.
Executive Vice President, Industrial & Energy Technology
Ganesh Ramaswamy is the Executive Vice President, Industrial & Energy
Technology. Prior to joining the Company in January 2023, he served as President of
Global Services for Johnson Controls from December 2019 to December 2022. Prior
to joining Johnson Controls, he served at Danaher Corporation from April 2015 to
December 2019 in various executive roles including Group Executive for Marking &
Coding; President of Videojet Technologies; and Senior Vice President of High
Growth Markets at Beckman Coulter Diagnostics. Prior to his career with Danaher, he
held executive roles at Hoya Corporation, including as President of Pentax Medical,
from June 2011 to April 2015. He began his career in product development and
general management at GE Global Research and GE Healthcare.
Chief Legal Officer
Georgia Magno is the Chief Legal Officer of the Company. She previously served as
Vice President and General Counsel for the IET segment. Georgia joined the
Company in 2010, first as General Counsel for the global supply chain and holding
subsequent legal roles across commercial, operational, and product line
organizations in multiple countries including Italy and the U.S. Prior to joining the
Company, she was an international litigator with the law firms of Cleary Gottlieb and
Weil, Gotshal & Manges LLP.
Baker Hughes Company 2023 Form 10-K | 13
ITEM 1A. RISK FACTORS
An investment in our common stock involves various risks. When considering an investment in the Company,
one should carefully consider all of the risk factors described below, as well as other information included and
incorporated by reference in this Annual Report. There may be additional risks, uncertainties and matters not listed
below, that we are unaware of, or that we currently consider immaterial. Any of these may adversely affect our
business, financial condition, results of operations and cash flows and, thus, the value of an investment in the
Company.
OPERATIONAL RISKS
We operate in a highly competitive environment, which may adversely affect our ability to succeed. Our
investments in new technologies, equipment, and facilities may not provide competitive returns.
We operate in a highly competitive environment for marketing our products and services and securing
equipment across our portfolio. Our ability to continually provide competitive products and services can impact our
ability to defend, maintain or increase prices for our products and services, maintain market share, and negotiate
acceptable contract terms with our customers. In order to be competitive, we must provide new and differentiating
technologies, reliable products and services that perform as expected and that create value for our customers.
We continue to invest in new technologies, equipment, and facilities and to expand our capabilities and
technology portfolio to meet the challenges of a net-zero future. These efforts include expanding into new energy
areas such as geothermal and carbon capture, utilization and storage, strengthening our digital architecture and
addressing key energy market themes. Our ability to defend, maintain or increase prices for our products and
services is in part dependent on the industry's capacity relative to customer demand, on our ability to differentiate
the value delivered by our products and services from our competitors' products and services and to provide
innovative and competitive products and services to meet our client's evolving needs with respect to new energy
areas. Managing development of competitive technology and new product introductions on a forecasted schedule
and at a forecasted cost can impact our financial results. If we are unable to continue to develop and produce
competitive and innovative technology or deliver it to our clients in a timely and cost-competitive manner in
response to changes in the market, customer requirements, competitive pressures, or as a result of the energy
transition to lower carbon emitting technology, or if competing technology accelerates the obsolescence of any of
our products or services, any competitive advantage that we may hold, and in turn, our business, financial condition,
results of operations and cash flows could be materially and adversely affected.
We have, and may in the future enter into, agreements with third parties to jointly develop certain technologies
which may include financial or other commitments. Under the terms of these agreements, we may agree to share in
the associated development and marketing costs for the developed technologies. There can be no assurances that
we will be able to successfully develop these technologies in collaboration with these third parties that will
adequately meet our customers' needs. Also, there can be no assurances that these joint development agreements
will be commercially viable, successful or profitable. As a result, these joint development agreements could have a
material adverse effect on our financial condition, results of operations and cash flows.
The potential transition risks posed by moving to a lower carbon economy could have an adverse effect on
the demand for our technologies and services.
There is increased focus by governments and our customers, investors and other stakeholders on a climate
change, sustainability, and energy transition matters. Transitioning to a low-carbon economy will likely require
extensive policy, legal, technology, and market changes.
These changes may result in the enactment of climate change-related regulations, policies and initiatives (at the
government, regulator, corporate and/or investor community levels); technological advances with respect to the
generation, transmission, storage and consumption of energy; increased availability of, and increased demand from
consumers and industry for, energy sources other than oil and natural gas and development of, and increased
demand from consumers and industry for, lower-emission products and services as well as more efficient products
and services.
Baker Hughes Company 2023 Form 10-K | 14
Our future success may depend on our ability to effectively execute on our energy transition strategy and the
pace at which the energy transition unfolds. Our strategy depends on our ability to develop additional innovative
technologies and work with our customers and partners to advance new energy solutions such as geothermal,
CCUS, hydrogen energy, and other integrated solutions. If the energy transition occurs faster than anticipated or
faster than we can transition, or if we are unable to execute our energy transition strategy as planned, demand for
our technologies and services or access to capital could be adversely affected. If the energy transition occurs
slower than anticipated, we could be developing technologies and services that are not responsive to the
commercial needs of our customers.
In addition, negative attitudes toward or perceptions of our industry or fossil fuel products and their relationship
to the environment have led governments, non-governmental organizations, and companies to implement initiatives
to conserve energy and promote the use of alternative energy sources, which may reduce the demand for and
production of oil and gas in areas of the world where our customers operate, and thus reduce future demand for our
products and services. In addition, initiatives by investors and financial institutions to limit funding to companies in
fossil fuel-related industries may adversely affect our liquidity or access to capital.
Disruptions in our supply chain, the high cost or unavailability of raw materials, equipment, and supplies
essential to our business could adversely affect our ability to execute our operations on a timely basis.
Our manufacturing operations are dependent on having sufficient raw materials, component parts and
manufacturing capacity, including labor, available to meet our manufacturing plans on a timely basis, at a
reasonable cost while minimizing inventories. Additional disruptions within our supply chain resulting from factors
including, but not limited to, pandemic, inflation, rising interest rates, and shortages in labor supply, have had and
may continue to have an impact on our business and reputation. Many of the raw materials essential to our
business require the use of rail, storage, and trucking services to transport the materials to our job sites. These
services, particularly during times of high demand, may cause delays in the arrival of or otherwise constrain our
supply of raw materials. These constraints could have a material adverse effect on our business and consolidated
results of operations. In addition, price increases imposed by our vendors for raw materials and transportation
providers used in our business, and the inability to pass these increases through to our customers, could have a
material adverse effect on our business and consolidated results of operations. As a result of these or any other
factors, our ability to execute our operations on a timely basis, including our ability to meet our manufacturing plans
and revenue goals, control costs, and avoid shortages or over-supply of raw materials and component parts, could
be adversely affected.
The partial or complete loss of GE as a supplier, as well as contracts with our aeroderivative joint venture
(the "Aero JV") with GE may adversely affect our business, financial condition, results of operations and
cash flows.
We currently have an extensive commercial relationship with GE. Although we have a long-term contractual
framework in place with GE, if GE were to discontinue or reduce its business with the Company, fail to perform its
obligations under existing contracts, such as our long-term supply agreement for heavy-duty gas turbines, or
experience significant disruptions, including under the intellectual property related agreements with GE, our
business, financial condition, results of operations and cash flows may be adversely affected.
In addition to our contracts and arrangements with GE as a direct supplier, we and GE formed the Aero JV in
2019. The Aero JV is jointly controlled by GE and us, and as a result, realizing the benefits of this joint venture
depends on the continued cooperation between the parties. In addition, the business and financial performance of
the Aero JV may be adversely affected if GE were to fail to perform its obligations under its contracts with the Aero
JV. We in turn use certain products purchased through the Aero JV for the manufacture of various end products,
and therefore, failure of the Aero JV to perform for any reason could prevent us from fulfilling our contractual
obligations, which may adversely affect our business, financial condition, results of operations and cash flows.
If we are unable to attract and retain key personnel, we may not be able to execute our business strategy
effectively and our operations could be adversely affected.
Our operations and future success depend on our ability to recruit, train, and retain key personnel. People are a
key resource to developing, manufacturing, and delivering our products and providing technical services and
Baker Hughes Company 2023 Form 10-K | 15
solutions to our customers around the world. A competent, well-trained, highly skilled, motivated, and diverse
workforce has a positive impact on our ability to attract and retain business. Difficulties in hiring or retaining key
employees, or the unexpected loss of experienced employees resulting in the depletion of our institutional
knowledge base, could have an adverse impact on our business performance, reputation, financial condition, or
results of operations. Additionally, successfully executing organizational change as we restructure the Company,
management transitions at leadership levels of the Company, and motivation and retention of key employees is
critical to our business success. Factors that may affect our ability to attract and retain sufficient numbers of
qualified employees include: employee morale, our brand reputation as an employer of choice, competition from
other employers, our location strategy for key roles, investments in technology and systems, and availability of
qualified individuals with the desired skills and experiences needed to grow our business. Other factors that have,
and could continue to impact our workforce, are: changes to our office environments and the impact this could have
on our Company culture, the adoption of new work models, and our requirements and/or expectations about when
or how often certain employees work on-site or remotely, which may not meet the expectations of our employees.
The implementation of our plan to restructure our corporate organization and operating segments may not
achieve the results we anticipate, which could adversely affect our business.
In the second half of 2022, we announced a plan to undertake certain corporate realignments and restructure
our four operating segments to focus on two operating segments, OFSE and IET, in order to simplify and streamline
our organizational structure, and create better flexibility and economies of scale across the two operating segments.
Restructuring activities may be more costly than anticipated, and could lead to the diversion of management's
attention from other business priorities. As a result of these or any other factors, we may not realize the anticipated
benefits associated with the restructuring plan. There can be no assurance that the restructuring plan will result in
cost savings or will materially increase our profitability. Even if the restructuring plan generates the benefits that we
have anticipated, there may be other unforeseeable and unintended factors or consequences that occur as a result
of the restructuring, which could adversely affect our business.
Our business could be impacted by both geopolitical and terrorism threats, including armed conflict, in
countries where we or our customers do business and our business operations may be impacted by civil
unrest and/or government expropriations.
Geopolitical and terrorism threats continue to grow in a number of key countries where we currently or may in
the future do business. Geopolitical and terrorism threats, including armed conflict among countries, has had and
could in the future lead to, among other things, a loss of our investment in the country, adverse impact to our
employees, and impairment of our or our customers' ability to conduct operations.
Further, the broader consequences of geopolitical and terrorism threats, which may include further sanctions
that prohibit our ability to do business in specific countries, embargoes, supply chain disruptions, the potential
inability to service our remaining performance obligations and potential contractual breaches and litigation, regional
instability and geopolitical shifts, and the extent of any such threats effect on our business and results of operations
as well as the global economy, cannot be predicted.
Certain geopolitical conflicts, such as between Russia and Ukraine and between Israel and Hamas, have had
and may continue to have the effect of heightening many other risks disclosed in our public filings, any of which
could materially and adversely affect our business and results of operations. Such risks include, but are not limited
to, adverse effects on regional and global macroeconomic conditions; increased volatility in the price and demand of
oil and natural gas, increased exposure to cyber attacks; limitations in our ability to implement and execute our
business strategy; risks to employees and contractors that we have in the region; disruptions in global supply
chains; exposure to foreign currency fluctuations; potential nationalizations and assets seizures; constraints or
disruption in the capital markets and our sources of liquidity; our potential inability to service our remaining
performance obligations and potential contractual breaches and litigation. Any such risks may require us to record
asset impairments and experience adverse operating impacts which could have a material adverse effect on our
financial condition, results of operations and cash flows.
Baker Hughes Company 2023 Form 10-K | 16
Control of oil and natural gas reserves by national oil companies may impact the demand for our services
and products and create additional risks in our operations.
Much of the world's oil and natural gas reserves are controlled by national oil companies. National oil
companies may require their contractors to meet local content requirements or other local standards, such as
conducting our operations through joint ventures with local partners that could be difficult or undesirable for us to
meet. The failure to meet the local content requirements and other local standards may adversely impact our
operations in those countries. In addition, our ability to work with national oil companies is subject to our ability to
negotiate and agree upon acceptable contract terms.
Our operations involve a variety of operating hazards and risks that could cause losses.
The products that we manufacture and the services that we provide are complex, and the failure of our
equipment to operate properly or to meet specifications may greatly increase our customers' costs. In addition,
many of these products are used in inherently hazardous industries, such as the offshore oilfield business. These
hazards include blowouts, explosions, unplanned or uncontrolled releases, nuclear-related events, fires, collisions,
capsizings, and severe weather conditions. We may incur substantial liabilities or losses as a result of these
hazards. Our insurance and contractual indemnity protection may not be sufficient or effective to protect us under all
circumstances or against all risks. The occurrence of a significant event, against which we were not fully insured or
indemnified or the failure of a customer to meet its indemnification obligations to us, could materially and adversely
affect our results of operations and financial condition.
The potential physical risks posed by climate change could adversely affect our operations and those of
our customers.
The physical risks of climate change can include extreme variability in weather patterns such as increased
frequency and severity of significant weather events (e.g. flooding, hurricanes and tropical storms), natural hazards
(e.g., increased wildfire risk), rising mean temperature and sea levels, and long-term changes in precipitation
patterns (e.g. drought, desertification, or poor water quality). Such effects have the potential to affect business
continuity and operating results, particularly at facilities in coastal areas or areas prone to chronic water scarcity,
and could disrupt our operations or those of our customers or suppliers, including through direct damage to physical
assets and indirect impacts from supply chain disruption and market volatility. While we evaluate and incorporate
potential ranges of physical risks, it is difficult to predict with certainty the timing, frequency or severity of such
events, any of which could have a material adverse effect on our financial condition, results of operations and cash
flows. See also "Seasonal and weather conditions, including severe weather associated with climate change, could
adversely affect demand for our services and operations."
Seasonal and weather conditions, including severe weather associated with climate change, could
adversely affect demand for our services and operations.
Variation from normal weather patterns, such as cooler or warmer summers and winters, can have a significant
impact on demand for our services and operations. Adverse weather conditions, such as hurricanes in the Gulf of
Mexico or extreme winter conditions in Canada or the North Sea, may interrupt or curtail our operations, or our
customers' operations, cause supply disruptions and result in a loss of revenue and damage to our equipment and
facilities, which may or may not be insured. Repercussions of severe or unseasonable weather conditions, including
as a result of climate change, may include evacuation of personnel and curtailment of services, weather-related
damage to offshore drilling rigs resulting in suspension of operations, weather-related damage to our facilities and
project work sites, inability to deliver materials to job sites in accordance with contract schedules, decreases in
demand for oil and natural gas during unseasonably warm winters, and loss of productivity. As a result of the above
repercussions or any others, demand for our services and operations may be adversely affected.
Our business has and may continue to be adversely affected by a public health emergency or outbreak of a
contagious disease or virus.
In the past, the markets have experienced volatility in oil demand due to the economic impacts of public health
emergencies. If demand for our products and services decline as a result of a public health emergency, the
utilization of our assets and the prices we are able to charge our customers for our products and services could
Baker Hughes Company 2023 Form 10-K | 17
decline. The spread of a pandemic could result in instability in the markets and decreases in commodity prices
resulting in adverse impacts on our financial condition, results of operations and cash flows.
In addition, the outbreak and spread of contagious diseases and measures to contain the disease may
adversely impact our workforce and operations, operations of our customers, and those of our vendors and
suppliers. The extent to which these public health emergencies adversely impact our business would depend on
future developments, which are highly uncertain and unpredictable, depending on the severity and duration of the
emergency and effectiveness of actions taken globally to contain or mitigate its effects. There is considerable
uncertainty regarding such containment or mitigation measures and potential future measures which may result in
labor disruptions, employee attrition, and could negatively impact our ability to attract and retain qualified
employees, all of which could have a material adverse effect on our financial condition, results of operations and
cash flows.
CREDIT AND CUSTOMER CONTRACTING RISKS
Providing services on an integrated, turnkey, or fixed price basis could require us to assume additional
risks.
We may choose to enter into integrated or turnkey contracts with our customers that require us to provide
services and equipment outside of our core business. Providing services on an integrated or turnkey basis may also
subject us to additional risks, such as costs associated with unexpected delays or difficulties in drilling operations,
project management interface risk, and risks associated with subcontracting and consortium arrangements. These
integrated or turnkey contracts may be fixed price contracts that do not allow us to recover for cost over-runs unless
they are directly caused by the customer.
We may not be able to satisfy technical requirements, testing requirements or other specifications required
under our service contracts and equipment purchase agreements.
Our products are used in deepwater, and other harsh environments, and severe service applications. Our
contracts with customers and customer requests for bids typically set forth detailed specifications or technical
requirements for our products and services, which may also include extensive testing requirements. In addition,
scrutiny of the offshore drilling industry and LNG industry has resulted in more stringent technical specifications for
our products and more comprehensive testing requirements for our products to ensure compliance with such
specifications. We cannot provide assurance that our products, including products supplied through joint ventures,
will be able to satisfy the specifications or that we will be able to perform the full-scale testing necessary to prove
that the product specifications are satisfied in future contract bids or under existing contracts, or that the costs of
modifications to our products to satisfy the specifications and testing will not adversely affect our results of
operations.
We sometimes enter into consortium or similar arrangements for certain projects, which could impose
additional costs and obligations on us.
We sometimes enter into consortium or similar arrangements for certain projects. Under such arrangements,
each party is responsible for performing a certain scope of work within the total scope of the contracted work, and
the obligations expire when all contractual obligations are completed. The failure or inability, financially or otherwise,
of any of the parties to perform their obligations could impose additional costs and obligations on us. These factors
could result in unanticipated costs to complete the project, liquidated damages or contract disputes.
Our contracts may be terminated early in certain circumstances.
Our contracts with customers generally may be terminated by the customer for convenience, default, or
extended force majeure (which could include inability to perform due to a pandemic or as a result of civil unrest or
armed conflicts). Termination for convenience may require the payment of an early termination fee by the customer,
but the early termination fee may not fully compensate us for the loss of the contract. Termination by the customer
for default or extended force majeure due to events outside of our control generally will not require the customer to
pay an early termination fee.
Baker Hughes Company 2023 Form 10-K | 18
Our financial condition, results of operations and cash flows could be materially adversely affected if our
customers terminate some of our contracts, and we are unable to secure new contracts on a timely basis and on
substantially similar terms, if payments due under our contracts are suspended for an extended period of time, or if
a number of our contracts are renegotiated. Our remaining performance obligation ("RPO") is comprised of unfilled
customer orders for products and product services (expected life of contract sales for product services). The actual
amount and timing of revenues earned may be substantially different than the reported RPO. The total dollar
amount of the Company's RPO as of December 31, 2023 was $33.5 billion.
The credit risks of having a concentrated customer base in the energy industry could result in losses.
Having a concentration of customers in the energy industry may impact our overall exposure to credit risk as our
customers may be similarly affected by prolonged changes in economic and industry conditions. Some of our
customers may experience extreme financial distress as a result of falling commodity prices and may be forced to
seek protection under applicable bankruptcy laws, which may affect our ability to recover any amounts due from
such customers. Furthermore, countries that rely heavily upon income from hydrocarbon exports have been and
may in the future be negatively and significantly affected by a drop in oil prices, which could affect our ability to
collect, timely or at all, from our customers in these countries, particularly national oil companies. Laws in some
jurisdictions in which we will operate could make collection difficult or time consuming. We perform ongoing credit
evaluations of our customers and do not expect to require collateral in support of our trade receivables. While we
maintain reserves for potential credit losses, we cannot assure such reserves will be sufficient to meet write-offs of
uncollectible receivables or that our losses from such receivables will be consistent with our expectations.
Additionally, in the event of a bankruptcy of any of our customers, we may be treated as an unsecured creditor and
may collect substantially less, or none, of the amounts owed to us by such customer.
Our customers' activity levels and spending for our products and services and ability to pay amounts owed
us could be impacted by the reduction of their cash flow and the ability of our customers to access equity
or credit markets.
Our customers' access to capital is dependent on their ability to access the funds necessary to develop
economically attractive projects based upon their expectations of future energy prices, required investments, and
resulting returns. Limited access to external sources of funding has caused and may continue to cause customers
to reduce their capital spending plans to levels supported by internally generated cash flow. In addition, a reduction
of cash flow resulting from declines in commodity prices, a reduction in borrowing bases under reserve-based credit
facilities or the lack of available debt or equity financing may impact the ability of our customers to pay amounts
owed to us and could cause us to increase our reserve for credit losses.
LEGAL AND REGULATORY RISKS
Compliance with and changes in laws could be costly and could affect operating results. In addition,
government disruptions could negatively impact our ability to conduct our business.
We conduct business in more than 120 countries that can be impacted by expected and unexpected changes in
the legal and business environments in which we operate. In particular, goods, services, data, finances, and
technology that cross international borders subjects us to extensive trade laws and regulations. Our import activities
are governed by the unique customs laws and regulations in each of the countries where we operate. Pursuant to
their laws and regulations, governments may impose economic sanctions against certain countries, persons and
entities that may restrict or prohibit transactions involving such countries, persons and entities, which may limit or
prevent our conduct of business in certain jurisdictions.
Compliance-related issues could limit our ability to do business in certain countries, impact our earnings, bring
reputational harm, or result in governmental investigations leading to fines, penalties or other remedial measures.
Changes that could impact the legal environment include new legislation, new regulations, new policies,
investigations, and legal proceedings and new interpretations of existing legal rules and regulations, in particular,
changes in export control laws or exchange control laws, additional restrictions on doing business in countries
subject to sanctions, and changes in laws in countries where we operate. In addition, changes and uncertainty in
the political environments in which our businesses operate can have a material effect on the laws, rules, and
regulations that affect our operations. Government disruptions may also delay or halt the granting and renewal of
permits, licenses and other items required by us and our customers to conduct our business. The continued
Baker Hughes Company 2023 Form 10-K | 19
success of our global business and operations depends, in part, on our ability to continue to anticipate and
effectively manage these and other political, legal and regulatory risks. Given the highly dynamic nature of these
restrictions and the unprecedented nature of these changes in the last two years, and the uncertainty in the political
landscape and unrest in certain areas of the world, our future success depends on the ability of our organization to
react to such changes rapidly and appropriately to assure compliance as we continue to conduct business globally.
Our failure to comply with the Foreign Corrupt Practices Act ("FCPA") and other similar laws could have a
negative impact on our ongoing operations.
Our ability to comply with the FCPA, the U.K. Bribery Act, and various other anti-bribery and anti-corruption laws
depends on the success of our ongoing compliance program, including our ability to successfully manage our
agents, distributors and other business partners, and supervise, train, and retain competent employees. We could
be subject to sanctions and civil and criminal prosecution, fines and penalties, as well as legal expenses and
reputational harm in the event of a finding of a violation of any of these laws by us or any of our employees.
Anti-money laundering and anti-terrorism financing laws could have adverse consequences for us.
Non-compliance with anti-money laundering, anti-terrorism financing and various other financial laws may
subject us to sanctions, civil and criminal prosecution, fines and penalties, as well as legal expenses and potential
reputational harm. While we strive to continuously improve our programs and pursue effective compliance, we
cannot be sure our programs and controls are or will remain effective to ensure our compliance with all applicable
anti-money laundering and anti-terrorism financing laws and regulations.
Changes in tax laws, tax rates, tariffs, adverse positions taken by taxing authorities, and tax audits in the
countries where we operate could have a material adverse impact on our results of operations.
We are subject to changes in tax laws, rates, treaties, regulations, and tariffs in the various jurisdictions where
we operate, any of which, including in the interpretation there of, could have a material adverse impact on our tax
expense and results of operations. Further, the examinations and subsequent tax assessments by various tax
authorities could increase the Company's tax liabilities. Any changes to tax laws or rates or unfavorable positions
taken by tax authorities have and could preclude our ability to fully utilize tax loss carryforwards and tax credits
which could increase the amount of valuation allowances required against deferred tax assets and could adversely
affect our financial condition, results of operations and cash flows.
We could be subject to litigation and environmental claims arising out of our products and services which
could adversely affect our reputation, financial condition, results of operations and cash flows.
The technical complexities of our operations expose us to a wide range of significant health, safety and
environmental risks and we are from time to time subject to litigation in the U.S. and in foreign countries, for
example claims involving services or equipment such as personal injury or loss of life, product failure (including as a
result of a cyber attack) or damage to or destruction of property, employment and labor, customer privacy, or
regulatory risks. While we have insurance coverage against operating hazards to the extent deemed prudent by our
management and to the extent insurance is available, our insurance may not cover all expenses related to litigation
claims arising from our business. Moreover, we may not be able to maintain insurance at levels of risk coverage or
policy limits that we deem adequate. We may therefore incur significant expenses defending any such suit or
government charge and may be required to pay amounts or otherwise change our operations in ways that could
adversely affect our financial condition, results of operations and cash flows.
We may be subject to litigation if another party claims that we have infringed upon, misappropriated or
otherwise violated its intellectual property rights.
The tools, techniques, methodologies, programs and components we use to provide our products and services
may infringe upon, misappropriate or otherwise violate the intellectual property rights of others or be challenged on
that basis. Regardless of the merits, any such claims may result in significant legal and other costs and may distract
management from running our core business. Resolving such claims could increase our costs, including through
royalty payments to acquire licenses, if available, from third parties and through the development of replacement
technologies. If a license to resolve a claim were not available, we might not be able to continue providing a
Baker Hughes Company 2023 Form 10-K | 20
particular service or product, which could adversely affect our financial condition, results of operations and cash
flows.
Compliance with, and rulings and litigation in connection with, environmental regulations and the
environmental impacts of our operations may adversely affect our business and operating results.
We and our business are subject to extensive domestic and international environmental, health and safety
regulations. In addition to environmental, health and safety regulatory compliance obligations, we may face liability
arising out of the normal course of business, including alleged personal injury, property damage, and human health
risks due to exposure to hazardous substances or processes at our current or former facilities. Additionally, we may
be impacted by material changes in environmental, health and safety regulations or subject to substantial liability for
environmental impacts caused by our (or our predecessors') operations. Compliance with environmental laws and
regulations and associated expenditures, including but not limited to our capital expenditures for environmental
control equipment, are forecasted and may be inconsistent based on multiple variables. Our compliance cost
forecasts may be substantially different from actual results, which may be affected by factors such as: changes in
law that impose new or increased restrictions on air or other emissions, wastewater management, waste disposal,
hydraulic fracturing, or wetland and land use practices; changes in standards of enforcement of existing
environmental laws and regulations; a change in our share of any remediation costs or other unexpected, adverse
outcomes with respect to sites where we have been named as a potentially responsible party ("PRP"), (including
Superfund sites, the allocation of PRP liability at other sites, or discovery of additional issues at existing sites) where
additional expenditures may be required to comply with environmental legal obligations; and the accidental,
unauthorized discharge of hazardous materials.
Investor and public perception related to the Company's ESG performance as well as current and future
ESG reporting requirements may affect our business and our operating results.
In recent years, companies across all industries are facing increasing scrutiny from a variety of stakeholders,
including investor advocacy groups, proxy advisory firms, certain institutional investors and lenders, investment
funds and other influential investors and rating agencies, related to their ESG and sustainability practices. If we do
not adapt to or comply with investor or other stakeholder expectations and standards on ESG matters (or meet
sustainability goals and targets that we have set), as they continue to evolve, or if we are perceived to have not
responded appropriately or quickly enough to growing concern for ESG and sustainability issues, regardless of
whether there is a regulatory or legal requirement to do so, we may face increased litigation risk, reputational
damage and our business, financial condition and/or stock price could be materially and adversely affected.
In addition, our continuing efforts to research, establish, accomplish and accurately report on the
implementation of our ESG strategy, including our emissions reduction commitments, may also create additional
operational risks and expenses and expose us to reputational, legal and other risks. While we create and publish
voluntary disclosures regarding ESG matters from time to time, some of the statements in those voluntary
disclosures may be based on hypothetical expectations and assumptions that may or may not be representative of
current or actual risks or events or forecasts of expected risks or events, including the costs associated therewith.
Such expectations and assumptions are necessarily uncertain and may be prone to error or subject to
misinterpretation given the long timelines involved and the lack of an established single approach to identifying,
measuring and reporting on many ESG matters.
Our voluntary disclosures of ESG data are evaluated and rated by various organizations that assess corporate
ESG performance. These organizations provide information to investors on corporate governance and related
matters and have developed ratings processes for evaluating companies on their approach to ESG matters.
Unfavorable ESG ratings, or our inability to meet the ESG standards set by specific investors, may lead to negative
investor sentiment and reputational damage, which could have an adverse impact, among other things, on our stock
price and cost of capital.
Regulatory requirements related to ESG or sustainability reporting have been adopted and may continue to be
introduced in various jurisdictions. For example, the EU Corporate Sustainability Reporting Directive became
effective in 2023 and applies to both EU and certain non-EU entities. In October 2023, California enacted the
Climate Corporate Data Accountability Act and the Climate Related Financial Risk Act that will require large public
and private companies that do business within the state to disclose their Scopes 1, 2 and 3 greenhouse gas
("GHG") emissions, with third party assurance of GHG emissions information for certain entities, and issue public
Baker Hughes Company 2023 Form 10-K | 21
reports on their climate-related financial risk and related mitigation measures. In 2023, California also enacted the
Voluntary Carbon Market Disclosures Act, which requires companies that operate within the state and make certain
climate-related claims to provide enhanced disclosures around the achievement of such claims. We expect
regulatory disclosure requirements related to ESG matters to continue to expand globally, which has and may
continue to increase our cost and burden of compliance and subject us to increased legal and reputational risk.
To achieve our stated emission reduction goals, we have implemented internal decarbonization projects and
may also need to rely on external factors, such as the greater deployment of carbon reduction and removal
technologies and adoption of government policies that we expect would accelerate the adoption of energy transition
technologies. There have been policy responses to support the energy transition in the U.S. with the passage of the
Inflation Reduction Act. In addition, geopolitical instability has increased energy prices compared to the prior year
and raised energy security concerns, which may result in many governments reassessing energy transition
strategies, extending the timeline to ensure adequate and reasonably priced energy supplies. It is difficult to predict
with certainty how these policy, economic, and energy security issues will impact the energy transition. Our failure or
perceived failure to pursue or fulfill our reductions and elimination of carbon equivalent emissions commitments
within the timelines we announce, or changes to these commitments or related timelines could have a negative
impact on investor sentiment, ratings outcomes for evaluating our approach to ESG matters, our stock price and
cost of capital and expose us to government enforcement actions and private litigation, among other material
adverse impacts.
International, national, and state governments and agencies continue to evaluate and promulgate
legislation and regulations that are focused on reducing GHG emissions. Compliance with GHG emission
regulations applicable to our or our customers' operations may have significant implications that could
adversely affect our business and operating results in the fossil-fuel sectors.
In the United States, the U.S. Environmental Protection Agency ("EPA") has taken steps to regulate GHG
emissions as air pollutants under the U.S. Clean Air Act of 1970, as amended. The EPA's Greenhouse Gas
Reporting Rule requires monitoring and reporting of GHG emissions from, among others, certain mobile and
stationary GHG emission sources in the oil and natural gas industry and the EPA has recently proposed to expand
the scope of the rule, which in turn may impact (and include) data from our equipment or operations. In addition, the
U.S. government has proposed rules in the past setting GHG emission standards for, or otherwise aimed at
reducing GHG emissions from, the oil and natural gas and power industries. International developments focused on
restricting GHG emissions include the United Nations Framework Convention on Climate Change, which includes
implementation of the Paris Agreement and the Kyoto Protocol by the signatories; the Glasgow Climate Pact; the
EU Emission Trading System; Article 8 of the EU Energy Efficiency Directive and the United Kingdom's Streamlined
Energy and Carbon Reporting framework; and the EU's carbon border adjustment mechanism. Caps or fees on
carbon emissions, including in the U.S. (such as proposed methane fees under the Inflation Reduction Act), have
been and may continue to be established and the cost of such caps or fees could disproportionately affect the fossil-
fuel sectors. The implementation of these agreements and other existing or future regulatory mandates, may
adversely affect the demand for our products and services, require us or our customers to reduce GHG emissions
or impose taxes on us or our customers, all of which could have a material adverse effect on our results of
operations.
Voluntary initiatives to reduce GHG emissions, as well as increased climate change awareness, may result
in increased costs for the oil and gas industry to curb greenhouse gas emissions and could have an
adverse impact on demand for oil and natural gas.
There are various corporate and non-governmental initiatives that are focused on voluntary reductions of GHG
emissions. These developments, and public perception relating to climate change, may shift demand from oil and
natural gas towards an investment in relatively lower carbon emitting energy sources and alternative energy
solutions, which could have a material adverse effect on our results of operations.
Changes in laws or regulations relating to data privacy and security, or any actual or perceived failure by us
to comply with such laws or regulations, or contractual or other obligations relating to data privacy or
security, may adversely affect our business and operating results.
We have access to sensitive, confidential, proprietary or personal data or information in certain of our
businesses that is or may become subject to various data privacy and security laws, regulations, standards,
Baker Hughes Company 2023 Form 10-K | 22
contractual obligations or customer-imposed controls in the jurisdictions in which we operate. The legal and
regulatory environment related to data privacy and security is increasingly rigorous, with new and constantly
changing requirements applicable to our business, and enforcement practices are likely to remain uncertain for the
foreseeable future. These laws and regulations are and may be interpreted and applied differently over time and
from jurisdiction to jurisdiction, and it is possible that they will be interpreted and applied in ways that may adversely
affect our business and operating results.
In the U.S., various federal and state regulators, including governmental agencies like the Federal Trade
Commission, have adopted, or are considering adopting, laws, regulations and standards concerning personal
information, privacy and data security. Certain state laws may be more stringent or broader in scope, or offer greater
individual rights, with respect to personal information than federal, international or other state laws, and such laws
may differ from each other, all of which may complicate compliance efforts. Internationally, laws, regulations and
standards in many jurisdictions apply broadly to the collection, use, retention, security, disclosure, transfer and other
processing of personal information or other data. For example, the collection, use, storage, disclosure, transfer, or
other processing of personal data regarding individuals located in the European Economic Area and the U.K. is
subject to strict regulations, and compliance may require adhering to stringent legal and operational obligations and
the dedication of substantial time and financial resources.
The various and evolving federal, state and international laws, regulations and standards can differ significantly
from one another and, given our global footprint, this may significantly complicate our compliance efforts and
impose considerable costs, such as costs related to organizational changes and implementing additional protection
technologies, which are likely to increase over time. In addition, compliance with applicable requirements may
require us to modify our data processing practices and policies, distract management or divert resources from other
initiatives and projects, all of which could adversely affect our business and operating results. Any failure or
perceived failure by us to comply with any applicable federal, state or international laws, regulations, standards, or
contractual or other obligations, relating to data privacy and security could result in damage to our reputation and
our relationship with our customers, as well as proceedings or litigation by governmental agencies, customers or
individuals, which could subject us to significant fines, sanctions, awards, penalties or judgments, all of which could
adversely affect our business and operating results.
TECHNOLOGY RISKS
An inability to obtain, maintain, protect, defend or enforce our intellectual property rights could adversely
affect our business.
There can be no assurance that the steps we take to obtain, maintain, protect, defend and enforce our
intellectual property rights will be completely adequate. Our intellectual property rights may fail to provide us with
significant competitive advantages, particularly in foreign jurisdictions where we have not invested in an intellectual
property portfolio or that do not have, or do not enforce, strong intellectual property rights. The weakening of
protection of our trademarks, patents, trade secrets and other intellectual property rights could also adversely affect
our business.
We are a party to a number of licenses that give us rights to intellectual property that is necessary or useful to
our business. Our success depends in part on the ability of our licensors to obtain, maintain, protect, defend and
sufficiently enforce the licensed intellectual property rights we have commercialized. Without protection for the
intellectual property rights we own or license, other companies might be able to offer substantially identical products
for sale, which could adversely affect our competitive business position and harm our business products. Also, there
can be no assurances that we will be able to obtain or renew from third parties the licenses to use intellectual
property rights we need in the future, and there is no assurance that such licenses can be obtained on reasonable
terms. We would be adversely affected in the event that any such license agreement was terminated without the
right for us to continue using the licensed intellectual property.
Increased cybersecurity vulnerabilities and threats, and more sophisticated and targeted cyber attacks and
other security incidents, pose risks to our systems, data and business, and our relationships with
customers and other third parties.
In the course of conducting our business, we may hold or have access to sensitive, confidential, proprietary or
personal data or information belonging to us, our employees or third parties, including customers, partners or
Baker Hughes Company 2023 Form 10-K | 23
suppliers. Increased cybersecurity vulnerabilities and threats, and more sophisticated and targeted cyber attacks
and other security incidents, pose risks to our and our customers', partners', suppliers' and third-party service
providers' systems, data, and business, and the confidentiality, availability and integrity of our and our employees'
and customers' data. We utilize various procedures and controls to monitor and mitigate our exposure including
maintaining a dedicated Cyber Fusion Center and engaging third party experts. For more information see the "Risk
Management & Strategy" section of Part 1 of Item 1C herein. While we attempt to mitigate these risks, we remain
vulnerable to cyber attacks and other security incidents, including ransomware incidents. Given our global footprint,
the large number of customers, partners, suppliers and service providers with which we do business, and the
increasing sophistication and complexity of cyber attacks, an incident could occur and persist for an extended
period without detection. Any investigation of a cyber attack or other security incident would be inherently
unpredictable and it would take time before the completion of any investigation and before there is availability of full
and reliable information. During such time we would not necessarily know the extent of the harm or how best to
remediate it, and certain errors or actions could be repeated or compounded before they are discovered and
remediated, all or any of which would further increase the costs and consequences of such an incident. We may be
required to expend significant resources to protect against, respond to, and recover from any cyber attacks and
other security incidents. As cyber attacks continue to evolve, we may be required to expend significant additional
resources to continue to modify or enhance our protective measures or to investigate and remediate any information
security vulnerabilities. In addition, our remediation efforts may not be successful. The inability to implement,
maintain and upgrade adequate safeguards could materially and adversely affect our financial condition, results of
operations and cash flows.
In addition to our own systems, we use third-party service providers, who in turn may also use third-party
providers, to process certain data or information on our behalf. Due to applicable laws and regulations or contractual
obligations, we may be held responsible for cybersecurity incidents attributed to our service providers to the extent
affecting information we share with them. Although we contractually require these service providers to implement
and maintain reasonable security measures, we cannot control third parties and cannot guarantee that a security
breach will not occur in their systems.
Despite our and our service providers' efforts to protect our data and information, we and our service providers
have been and may in the future be vulnerable to security breaches, ransomware attacks, theft, misplaced or lost
data, programming errors, phishing attacks, denial of service attacks, acts of vandalism, computer viruses, malware,
employee errors and/or malfeasance or similar events, including those perpetrated by criminals or nation-state
actors, that could potentially lead to the compromise, unauthorized access, use, disclosure, modification or
destruction of data or information, improper use of our systems, defective products, loss of access to our data,
production downtimes and operational disruptions. In addition, a cyber attack or any other significant compromise or
breach of our data security, media reports about such an incident, whether accurate or not, or, under certain
circumstances, our failure to make adequate or timely disclosures to the public, law enforcement agencies or
affected individuals following any such event, whether due to delayed discovery or a failure to follow existing
protocols, could adversely impact our operating results and result in other negative consequences, including
damage to our reputation or competitiveness, harm to our relationships with customers, partners, suppliers and
other third parties, distraction to our management, remediation or increased protection costs, significant litigation or
regulatory action, fines and penalties. Given the increased prevalence of customer-imposed cybersecurity controls
and other related contractual obligations towards customers or other third parties, a cyber attack or other security
incident also could result in breach of contract or indemnity claims against us by customers or other counterparties.
While we currently maintain cybersecurity insurance, such insurance may not be sufficient in type or amount to
cover us against claims related to cybersecurity breaches or attacks, failures or other data security-related
incidents, and we cannot be certain that cyber insurance will continue to be available to us on economically
reasonable terms, or at all, or that an insurer will not deny coverage as to any future claim. The successful assertion
of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in
our insurance policies, including premium increases or the imposition of large deductible or co-insurance
requirements, could materially and adversely affect our financial condition, results of operations and cash flows.
Baker Hughes Company 2023 Form 10-K | 24
INDUSTRY AND MARKET RISKS
Volatility of oil and natural gas prices can adversely affect demand for our products and services.
Prices of oil and gas products are set on a commodity basis. As a result, the volatility in oil and natural gas
prices can impact our customers' activity levels and spending for our products and services. Current energy prices
are important contributors to cash flow for our customers and their ability to fund exploration and development
activities. Expectations about future prices and price volatility are important for determining future spending levels.
Demand for our products and services is subject to factors beyond our control and depends substantially
on expenditures by our customers. Changes in the global economy could impact our customers' spending
levels and our financial condition, results of operations and cash flows.
Demand for our services and products is highly correlated with global economic growth and substantially
dependent on the levels of expenditures by our customers. Across our products and services, customer demand
may be reduced due to global economic factors beyond our control, including but not limited to inflation, rising
interest rates, fluctuations in foreign exchange rates, and declining availability of credit. Specifically, for example,
past oil and natural gas industry downturns have resulted in reduced demand for oilfield products and services and
lower expenditures by our customers, which in the past has resulted, and may in the future result, in a prolonged
reduction in oil and natural gas prices that may require us to record asset impairments, and we could experience
decreased revenue, decreased profitability and reduction in cash flows. Such potential impairment charges and
adverse operating metrics could have a material adverse effect on our financial condition, results of operations and
cash flows.
Supply of oil and natural gas is subject to factors beyond our control, which may adversely affect our
operating results.
Productive capacity for oil and natural gas is dependent on our customers' decisions to develop and produce oil
and natural gas reserves and on the regulatory environment in which our customers and we operate. The ability to
produce oil and natural gas can be affected by the number and productivity of new wells drilled and completed, as
well as the rate of production and resulting depletion of existing wells.
Currency fluctuations or devaluations may impact our operating results.
Fluctuations or devaluations in foreign currencies relative to the U.S. dollar can impact our revenue and our
costs of doing business and create volatility, as well as the costs of doing business of our customers.
Changes in economic and/or market conditions may impact our ability to borrow and/or cost of borrowing.
The condition of the capital markets and equity markets in general may affect the price of our common stock
and our ability to obtain financing, if necessary. Actions by the Federal Reserve in the last year to increase interest
rates, and the potential for further increases or an extended period of elevated interest rates, has resulted, and
could continue to result, in increased borrowing costs or make the cost of borrowing funds commercially
unattractive. Furthermore, if our credit rating is downgraded, it could increase borrowing costs under credit facilities
and issuances of commercial paper, as well as increase the cost of renewing or obtaining, or make it more difficult
to renew, obtain, or issue new debt financing.
RISKS RELATED TO OUR STOCK
The market price and trading volume of our Class A common stock may be volatile, which could result in
rapid and substantial losses for our shareholders.
The market price of our Class A common stock may be highly volatile and could be subject to wide fluctuations.
In addition, the trading volume in our Class A common stock may fluctuate and cause significant price variations to
occur. If the market price of our Class A common stock declines significantly, our shareholders may be unable to sell
their shares of our Class A common stock at or above their purchase price, if at all. We cannot assure our
shareholders that the market price of our Class A common stock will not fluctuate or decline significantly in the
future. Some of the factors that could negatively affect the price of our Class A common stock or result in
Baker Hughes Company 2023 Form 10-K | 25
fluctuations in the price or trading volume of our Class A common stock include: variations in our quarterly operating
results; failure to meet our earnings estimates; publication of research reports about us or our industry; additions or
departures of our executive officers and other key management personnel; adverse market reaction to any
indebtedness we may incur or securities we may issue in the future; actions by shareholders; changes in market
valuations of similar companies; speculation in the press or investment community; changes or proposed changes
in laws or regulations or differing interpretations thereof affecting our business or enforcement of these laws and
regulations, or announcements relating to these matters; adverse publicity about our industry generally or individual
scandals, specifically; and general market and economic conditions.
Anti-takeover provisions in our organizational documents and Delaware law might discourage or delay
acquisition attempts for us that might be considered favorable.
Our amended and restated certificate of incorporation and amended and restated bylaws may delay or prevent
a merger or acquisition that a shareholder may consider favorable by permitting the Board to issue one or more
series of preferred stock, requiring advance notice for shareholder proposals and nominations, and placing
limitations on convening shareholder meetings. These provisions may also discourage acquisition proposals, delay,
or prevent a change in control, which could harm our stock price.
Our second amended and restated certificate of incorporation designates the Court of Chancery of the
State of Delaware as the exclusive forum for certain litigation that may be initiated by our shareholders,
which could limit our shareholders' ability to obtain a favorable judicial forum for disputes with us.
Pursuant to our second amended and restated certificate of incorporation, unless we consent in writing to the
selection of an alternative forum, the Court of Chancery of the State of Delaware is the sole and exclusive forum for
(1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of breach of a
fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (3) any action
asserting a claim arising pursuant to any provision of the Delaware General Corporation Law or (4) any action
asserting a claim governed by the internal affairs doctrine. Our second amended and restated certificate of
incorporation further provides that any person or entity purchasing or otherwise acquiring any interest in shares of
our common stock is deemed to have notice of and consented to the foregoing provision. The forum selection
clause in our second amended and restated certificate of incorporation may limit our shareholders' ability to obtain a
favorable judicial forum for disputes with us.
This exclusive forum provision applies to certain state law claims and will not apply to claims under the
Securities Act or the Exchange Act. In addition, our shareholders will not be deemed to have waived our compliance
with the federal securities laws and the rules and regulations thereunder. This choice of forum provision may limit a
shareholder's ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors,
officers, or other employees, which may discourage such lawsuits against us and our directors, officers and
employees.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
RISK MANAGEMENT & STRATEGY
Overall Process
We protect our digital systems and data through a comprehensive cybersecurity management program, which
includes a dedicated cybersecurity function, risk assessments, policies and procedures, and technical measures
and related services from third party service providers. We have a dedicated Chief Information Security Officer
("CISO") with overall responsibility for the cybersecurity program, including threat detection and response,
vulnerability management, governance, risk and compliance, security strategy and architecture, security
engineering and operations, product and operational technology security. As part of our cybersecurity management
program, we operate a Cyber Fusion Center ("CFC") to monitor both internal and external cybersecurity threats,
conduct initial assessment of severity, coordinate incident response resources, reduce incident response time, and
Baker Hughes Company 2023 Form 10-K | 26
shift toward a proactive cyber-defense model, which includes a dedicated threat intelligence program that leverages
custom intelligence platforms as well as industry specific professional associations and ongoing threat hunting.
Through our cybersecurity risk management program, we monitor cybersecurity vulnerabilities and potential attack
vectors and evaluate the potential operational and financial effects of any threat and countermeasures made to
defend against such threats.
We have established policies and procedures, including our Incident Response Plan ("IRP"), for assessing,
identifying, managing, and responding to cybersecurity and privacy threats and incidents, including protocols for
assessing potential material impact from cybersecurity threats and incidents, escalating to executive leadership and
the Board, engaging external stakeholders, and reporting incidents based on applicable legal requirements. Our IRP
provides guidance in the event of a cybersecurity incident, including processes with assigned roles and
responsibilities to triage, assess severity, escalate, contain, investigate, and remediate incidents, as well as to
comply with potentially applicable legal obligations and mitigate brand and reputational damage. We conduct
regular cybersecurity tabletop exercises to test established policies and procedures for responding to cybersecurity
threats and incidents. In addition, employees and stakeholders can report cybersecurity threats, cybersecurity and
data privacy incidents, or other concerns through external and internal reporting channels.
Enterprise Risk Management Process Integration
Cybersecurity risk management processes are an integral part of our enterprise risk management, which is
overseen by the Audit Committee of the Board. Our processes include periodic program maturity assessments,
ongoing information technology risk assessments, and third-party security risks assessments.
Our cybersecurity risk management efforts have also been integrated into the overall Enterprise Risk
Management ("ERM") process, which includes assessment of cybersecurity risks that could result in significant
operational disruption to the Company, such as production disruption, business downtime, loss of containment or
other operation interruptions, as well as risks that could have significant reputational and compliance/regulatory
impact. Cybersecurity risks identified and tracked through our ERM risk register have assigned risk owners at the
executive leadership level and risk delegates who are responsible to identify and manage risk mitigation actions.
Key risk indicators are updated quarterly by risk delegates and communicated to our executive leadership and the
Audit Committee.
We leverage recognized cybersecurity frameworks to drive strategic direction and maturity improvement and
engage third party security experts for risk assessments, risk mitigation actions, and program enhancements. We
also include cybersecurity training as part of our required annual employee training program. In addition,
cybersecurity and privacy training and awareness is integrated and continues throughout the year, utilizing various
delivery methods such as phishing campaigns, training sessions, and informational articles.
Third Party Security Experts
We engage third party security experts to supplement our internal CFC team as well as for assessments,
penetration tests and program enhancements, including vulnerability assessments, security framework maturity
assessments and identification of areas for continued focus and improvement. In addition, our third-party experts
work with us to conduct cybersecurity tabletop exercises and internal phishing awareness campaigns. We use the
findings of these exercises to improve our practices, procedures, and technologies. We also engage third party
security experts to support our cybersecurity threat and incident response management and maintain information
security risk insurance coverage.
Identification of Threats Associated with Third Parties
Baker Hughes utilizes a third-party risk management ("TPRM") program to identify, assess, monitor, and
mitigate risks associated with third-party relationships, including cybersecurity risks. We conduct initial risk
assessments of third-party suppliers and service providers based on various factors to classify each into a risk
category. Our TPRM program is designed to apply our most rigorous processes to those suppliers and service
providers that are classified into the highest risk category. These processes include due diligence assessments of
third-party suppliers and service providers that have access to Baker Hughes networks, confidential information,
and information systems in order to assess the risks from cybersecurity threats that could impact our suppliers and
third-party service providers. We leverage external partners to assist with the regular assessment of our top priority
Baker Hughes Company 2023 Form 10-K | 27
suppliers and third-party service providers to identify, review and address risks, including deeper reviews of their
cybersecurity controls. We track the identified deficiencies and include with other cybersecurity metrics based on
their severity. We also require that our suppliers and third-party service providers have in place appropriate
technical and organizational security measures and security-control principles based on recognized cybersecurity
standards.
Incidents & Risks
We have not experienced a material cybersecurity incident and although we are subject to ongoing and evolving
cybersecurity threats, we are not aware of any material risks from cybersecurity threats that have materially affected
or are reasonably likely to materially affect the Company, including our business strategy, results of operations or
financial condition. For more information on our cybersecurity risks, see "Technology Risks" identified in the "Risk
Factors" section of Part 1 of Item 1A herein.
GOVERNANCE
Board of Directors
Oversight responsibilities for our cybersecurity and digital trust compliance programs and risks lie with the Audit
Committee of the Board. The Board is actively engaged in the oversight of our cybersecurity program and oversees
all operational, financial, strategic, and reputational risks with oversight of specific risks undertaken with the
committee structure including risks related to cybersecurity, privacy, and technology.
The Audit Committee receives reports on the Company's cybersecurity program and developments from our
Chief Information Officer ("CIO"), who reports to the Chief Executive Officer, and our CISO, who reports to the CIO,
at each of our regular meetings, which occur five times a year. These reports typically include analyses of recent
cybersecurity threats and incidents at the Company and across the industry, as well as a review of our own security
controls, assessments and program maturity, and risk mitigation status, as well as a review of our third-party service
providers. Our digital technology, legal, and the corporate audit functions also routinely present to the Audit
Committee on key cybersecurity topics and, on at least an annual basis, the Board receives reports on the
Company's cybersecurity program and developments from the CIO and CISO.
Management
Our programs are focused on building digital trust through sound oversight of cybersecurity and data privacy
protections and the responsible use of data and technology. We operate a CFC, and we have a cross-functional
approach to addressing cybersecurity-related risks through the functional compliance structures in our digital
technology and legal organizations with oversight from the corporate audit and controllership functions. The
cybersecurity and legal functions employ full time cybersecurity and privacy roles with expertise in managing
cybersecurity and privacy compliance and risks and responding to incidents.
Our senior executive leadership is actively engaged in the oversight and strategic direction of our cybersecurity
and digital trust compliance programs. The senior executive leadership-level Cybersecurity Steering Committee
("CSC") is responsible for assessing cybersecurity risks, providing direction and oversight for risk mitigation action,
and assisting the Audit Committee in overseeing the Company’s cybersecurity risks. The CSC also receives monthly
reports on the Company's cybersecurity program and developments from our CISO and legal representatives. The
CSC is chaired by our CISO. The senior executive leadership members include the CIO, Chief Legal Officer, Chief
Financial Officer, Chief Compliance Officer, and Senior Vice President of Operations Excellence.
The CISO has over 25 years of business experience in information technology and cybersecurity and is a long-
standing certified information systems security professional ("CISSP") with the International Information System
Security Certification Consortium.
We have an Incident Response Team ("IRT") that consists primarily of representatives from the CFC, legal,
corporate communications, finance, and other relevant stakeholders. The IRT follows the guidance as outlined in
the IRP to respond to cybersecurity incidents and escalate as necessary to the CSC based on a defined severity
matrix. Internal legal and finance stakeholders are responsible for assessing materiality of risks in consultation with
the IRT, CSC, the CEO, and external advisors.
Baker Hughes Company 2023 Form 10-K | 28
ITEM 2. PROPERTIES
We own or lease numerous properties throughout the world. We consider our manufacturing plants, equipment
assembly, maintenance and overhaul facilities, grinding plants, drilling fluids and chemical processing centers, and
primary research and technology centers to be our principal properties. The following sets forth the location of our
principal owned or leased facilities for our business segments as of December 31, 2023:
Oilfield Services & Equipment:
Houston, Pasadena, and The Woodlands, Texas; Claremore, Oklahoma - all
located in the United States; Leduc, Canada; Celle, Germany; Tananger,
Norway; Aberdeen and Montrose, Scotland; Nailsea and Newcastle, England;
Macae and Niteroi, Brazil; Singapore, Singapore; Suzhou, China; Kakinada,
India; Abu Dhabi and Dubai, United Arab Emirates; Dammam and Dhahran,
Saudi Arabia; Luanda, Angola; Port Harcourt, Nigeria
Industrial & Energy Technology: Deer Park, Texas; Jacksonville, Florida; Billerica, Massachusetts; Minden,
Nevada; Twinsburg, Ohio - all located in the United States; Florence, Massa,
Avenza, Bari, and Talamona, Italy; Le Creusot, France; Leicester, England;
Shannon, Ireland; Hurth and Wunstorf, Germany; Pilsen, Czech Republic;
Shanghai, China; Doha, Qatar; Boufarik, Algeria; Coimbatore, India
We lease our corporate headquarters in Houston, Texas. We also own or lease numerous other facilities such
as service centers, blend plants, workshops and sales and administrative offices throughout the geographic regions
in which we operate. We also have a significant investment in service vehicles, tools and manufacturing and other
equipment. All of our owned properties are unencumbered. We believe that our facilities are well maintained and
suitable for their intended purposes and are operating at a level consistent with the requirements of the industry in
which we operate.
ITEM 3. LEGAL PROCEEDINGS
The information with respect to Item 3. Legal Proceedings is contained in "Note 19. Commitments and
Contingencies" of the Notes to Consolidated Financial Statements in Item 8 herein.
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 Annual Report.
Baker Hughes Company 2023 Form 10-K | 29
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Our Class A common stock, $0.0001 par value per share, is traded on the Nasdaq Global Select Market under
the ticker symbol 'BKR'. As of January 26, 2024, there were approximately 5,663 stockholders of record.
The following table contains information about our purchases of Class A common stock equity securities during
the fourth quarter of 2023.
Issuer Purchases of Equity Securities
Total Number
of Shares
Purchased (1)
Average
Price Paid
Per Share (2)
Total Number of Shares
Purchased as Part of a
Publicly Announced Plan
or Programs (3) (4)
Maximum Dollar Value
of Shares that May Yet Be
Purchased Under the Plan
or Programs (3) (4)
Period
October 1-31, 2023
1,504,251 $
November 1-30, 2023
6,396,260
December 1-31, 2023
Total
790,967
8,691,478 $
34.84
34.39
31.77
34.23
1,494,491 $
6,356,047 $
788,251 $
8,638,789
2,461,020,155
2,242,451,793
2,217,416,302
(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)
In July 2021, the Board authorized the Company to repurchase up to $2 billion of its Class A common stock. In October
2022, the Board 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. During the three months ended December 31,
2023, our agents repurchased a number of our Class A common stock that complied with Rule 10b-18 of the Exchange
Act.
(4) During the three months ended December 31, 2023, we repurchased and subsequently canceled 8.6 million shares of
Class A common stock at an average price of $34.23 per share for a total of $296 million.
Baker Hughes Company 2023 Form 10-K | 30
Corporate Performance Graph
The following graph compares the yearly change in our cumulative total shareholder return on our common
stock (assuming reinvestment of dividends into common stock at the date of payment) with the cumulative total
return on the published Standard & Poor's ("S&P") 500 Stock Index, the cumulative total return on the S&P 500 Oil
and Gas Equipment and Services Index, and the Philadelphia Oil Service Index ("OSX") over the preceding five
year period. Although the Company is not a component of the OSX, this index represents a large group of
companies with similar industry exposure, many of which provide the same or similar equipment and services as the
Company.
Comparison of Five-Year Cumulative Total Return
BKR, S&P 500 Stock Index, S&P 500 Oil and Gas Equipment and Services Index, and OSX
2018
2019
2020
2021
2022
2023
Baker Hughes Company ("BKR")
$ 100.00 $ 122.94 $ 104.35 $ 124.14 $ 156.30 $ 185.32
S&P 500 Stock Index
207.04
100.00
S&P 500 Oil and Gas Equipment and Services Index 100.00
152.38
Philadelphia Oil Service Index ("OSX")
114.47
100.00
131.47
110.54
99.45
155.65
70.49
57.60
200.29
89.93
69.55
163.98
148.98
112.31
The comparison of total return on investment (change in year-end stock price plus reinvested dividends)
assumes that $100 was invested on December 31, 2018 in Baker Hughes common stock, the S&P 500 Index, the
S&P 500 Oil and Gas Equipment and Services Index, and the OSX.
The corporate performance graph and related information shall not be deemed "soliciting material" or to be
"filed" with the SEC, nor shall such information be incorporated by reference into any future filing under the
Securities Act or the Exchange Act, except to the extent that Baker Hughes specifically incorporates it by reference
into such filing.
ITEM 6. [RESERVED]
Baker Hughes Company 2023 Form 10-K | 31
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") should be
read in conjunction with the consolidated financial statements included in Item 8. Financial Statements and
Supplementary Data contained herein.
For management's discussion and analysis of our financial condition and results of operations for fiscal year
2022 as compared to fiscal year 2021 please refer to Part II, Item 7. "Management's discussion and analysis of
financial condition and results of operations" on Form 10-K for our fiscal year ended December 31, 2022, filed with
the Securities and Exchange Commission ("SEC") on February 14, 2023.
EXECUTIVE SUMMARY
We are an energy technology company with a broad and diversified portfolio of technologies and services that
span the energy and industrial value chain. We operate through our two business segments: OFSE and 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.
During 2023, Baker Hughes built strong momentum across the Company with significant improvement in our
financial results over 2022. In OFSE, we saw key commercial successes and solid margin improvements, and in
IET, we benefited from robust growth in LNG orders, driving RPO to levels that provides meaningful revenue
visibility. Overall, we capitalized on market tailwinds to deliver strong revenue growth across both segments, began
realizing the full benefits of our cost-out initiatives, and continued to transform how we operate. We also achieved
significant growth in new energy orders compared to 2022 as we continue to experience growing demand for
decarbonization solutions across the Company's IET and OFSE portfolios.
As we look to 2024, we remain balanced on the oil and gas outlook but continue to see areas of strength across
our portfolio despite persisting economic uncertainty. We continue to believe in a multiyear upstream spending
cycle, which, we believe, will be more durable and less sensitive to commodity price swings relative to prior cycles
and led by international and offshore markets. Continued discipline from the world's largest producers and the pace
of oil demand growth in the face of economic uncertainty, will remain important factors to monitor as we look into
2024. Oil and gas prices have experienced volatility in the fourth quarter of 2023 and beginning of 2024, and this will
likely have some influence on upstream development plans, particularly for shorter-cycle spending budgets.
Additionally, the conflict in the Middle East has added another element of uncertainty across the oil and gas
markets. While this conflict has not had a material impact on our operations, a further escalation in geopolitical
tensions across the region could impact the Company. We will continue to monitor and assess the impact of the
conflict in the Middle East on our business. Furthermore, in IET, the aeroderivative supply chain continues to show
signs of tightness, which we will continue to manage operationally.
We also remain optimistic on the LNG outlook, seeing a continued shift towards the development of natural gas
and LNG. As a result, the LNG project pipeline remains strong, both in the U.S. and internationally. As the world
increasingly recognizes the crucial role natural gas is expected to play in the energy transition, serving as both a
transition and destination fuel, we believe it will be fundamental in satisfying the world's energy needs for many
decades to come.
Financial Results
In 2023, the Company generated revenue of $25.5 billion, compared to $21.2 billion in 2022, increasing $4.4
billion or 21%. The increase in revenue was primarily driven by higher volume in IET on Gas Technology Equipment
project backlog execution and stronger activity in OFSE. Income before tax was $2,655 million in 2023 compared to
$22 million in 2022, increasing $2,633 million. The increase in income before tax was driven by higher volume and
price in both segments and structural cost-out initiatives, positive effect from the change in fair value on certain
equity securities, and lower restructuring and impairment charges.
Baker Hughes Company 2023 Form 10-K | 32
Our journey of transformation continues. The business has undertaken significant structural changes, and we
see the cost-out performance coming through our operating results. We have made significant progress; however,
there is still more work to do to further identify areas to simplify and create efficiencies and modernize how the
business operates, including actions launched in OFSE to remove duplication and further streamline the business.
Baker Hughes remains committed to a flexible capital allocation policy that balances returning cash to
shareholders and investing in growth opportunities. We increased our quarterly dividend in the third quarter of 2023
by one cent to $0.20 per share. For the full year of 2023, we returned a total of $1.3 billion to shareholders in the
form of dividends and share repurchases. We continue to invest in the Baker Hughes portfolio through strategic
acquisitions. In 2023, we completed the acquisition of Altus Intervention, a leading international provider of well
intervention services and downhole technology, which significantly enhances OFSE's existing portfolio. We also
completed the sale of the Nexus Controls business in April 2023.
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: After trending lower most of 2023 due to lower activity from private exploration
& production operators and in gas basins, North American activity has recently stabilized. However, we see
a slow start to 2024 and anticipate only a modest recovery in activity during the second half of 2024.
• OFSE International activity: We expect spending outside of North America to experience moderate 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, CCUS, 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.
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 years ended December 31, 2023 and 2022, and should be
read in conjunction with the 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
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.
Baker Hughes Company 2023 Form 10-K | 33
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.
Brent oil prices ($/Bbl) (1)
WTI oil prices ($/Bbl) (2)
Natural gas prices ($/mmBtu) (3)
2023
2022
$
82.49 $
100.93
77.58
2.53
94.90
6.45
(1)
(2)
(3)
Energy Information Administration ("EIA") Europe Brent Spot Price per Barrel
EIA Cushing, OK West Texas Intermediate ("WTI") spot price
EIA Henry Hub Natural Gas Spot Price per million British Thermal Unit
Outside North America, customer spending is influenced by Brent oil prices. The average Brent oil prices
decreased to $82.49/Bbl in 2023 from $100.93/Bbl in 2022 and ranged from a low of $71.03/Bbl in March 2023, to a
high of $97.10/Bbl in September 2023.
In North America, customer spending is influenced by WTI oil prices, which similarly to Brent oil prices, on
average decreased to $77.58/Bbl in 2023 from $94.90/Bbl in 2022, and ranged from a low of $66.61/Bbl in March
2023, to a high of $93.67/Bbl in September 2023.
In North America, natural gas prices, as measured by the Henry Hub Natural Gas Spot Price, averaged $2.53/
mmBtu in 2023, representing a 61% decrease over the prior year. Throughout the year, Henry Hub Natural Gas
Spot Prices ranged from a high of $3.78/mmBtu in January 2023, to a low of $1.74/mmBtu in June 2023. According
to the U.S. Department of Energy, working natural gas in storage at the end of 2023 was 3,476 billion cubic feet
("Bcf"), which was 20%, or 585 Bcf, below the corresponding week in 2022.
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 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
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.
Baker Hughes Company 2023 Form 10-K | 34
The rig counts are summarized in the table below as averages for each of the periods indicated.
North America
International
Worldwide
2023 Compared to 2022
2023
2022
864
948
1,812
898
851
1,749
The worldwide rig count was 1,812 in 2023, an increase of 4% as compared to 2022 primarily due to an
increase in activity internationally partially offset by a decline in North America. The rig count in North America
decreased 4% and the international rig count increased 11% in 2023 compared to 2022.
Within North America, the decrease was primarily driven by the U.S. rig count, which was down 5% on average
when compared to the same period last year, partially offset by an increase in the Canada rig count, which was up
1% on average. Internationally, the increase in the rig count was driven by increases in the Africa, Europe, Asia-
Pacific, Middle East, and Latin America regions of 24%, 22%, 11%, 8%, and 6%, respectively.
RESULTS OF OPERATIONS
The discussions below relating to significant line items from our 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 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, restructuring, 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.
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.
Baker Hughes Company 2023 Form 10-K | 35
Orders and Remaining Performance Obligations
Our consolidated statements of income (loss) displays sales and costs of sales in accordance with SEC
regulations under which "goods" is required to include all sales of tangible products and "services" must include all
other sales, including other services activities. For the amounts shown below, we distinguish between "equipment"
and "product services," where product services refers 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 Management's Discussion and Analysis of Financial Condition and Results of Operations.
Orders: We recognized orders of $30.5 billion and $26.8 billion in 2023 and 2022, respectively. We recognized
OFSE orders of $16.3 billion and $14.1 billion, and IET orders of $14.2 billion and $12.7 billion in 2023 and 2022,
respectively. Within IET, Gas Technology orders were $10.4 billion and $9.2 billion, Industrial Technology orders
were $3.2 billion and $3.1 billion, and CTS orders were $0.6 billion and $0.4 billion in 2023 and 2022, respectively.
References to total new energy orders incorporates CTS in IET of $0.6 billion and OFSE of $0.2 billion.
Remaining Performance Obligations ("RPO"): As of December 31, 2023, the aggregate amount of the
transaction price allocated to the unsatisfied (or partially unsatisfied) performance obligations was $33.5 billion. As
of December 31, 2023, OFSE remaining performance obligations totaled $3.5 billion, and IET remaining
performance obligations totaled $29.9 billion.
Revenue and Operating Income
Summarized financial information for the Company's segments is shown in the following tables.
Revenue:
Well Construction
Completions, Intervention & Measurements
Production Solutions
Subsea & Surface Pressure Systems
Oilfield Services & Equipment
Gas Technology Equipment
Gas Technology Services
Total Gas Technology
Industrial Products
Industrial Solutions
Controls (1)
Total Industrial Technology
Climate Technology Solutions
Industrial & Energy Technology
Total
(1) The sale of our controls business was completed in April 2023.
Year Ended December 31,
2023
2022
$ Change
From 2022 to
2023
$
4,387 $
3,854 $
4,170
3,854
2,950
3,559
3,587
2,230
15,361
13,229
4,232
2,600
6,832
1,962
983
41
2,987
326
10,145
25,506 $
$
2,599
2,440
5,039
1,697
884
208
2,789
98
7,926
21,156 $
533
611
267
720
2,131
1,633
160
1,793
265
99
(167)
198
228
2,219
4,350
Baker Hughes Company 2023 Form 10-K | 36
The following table presents Oilfield Services & Equipment revenue by geographic region:
North America
Latin America
Europe/CIS/Sub-Saharan Africa (1)
Middle East/Asia
Oilfield Services & Equipment
North America
International
Year Ended December 31,
2023
2022
$ Change
From 2022 to
2023
$
4,116 $
3,764 $
2,761
2,655
5,829
2,099
2,483
4,883
$
$
15,361 $
13,229 $
4,116 $
11,245
3,764 $
9,465
352
662
172
946
2,131
352
1,779
(1)
Impacted by the discontinuation of our Russia operations that occurred in 2022.
The following table presents segment operating income through to net income (loss) for the Company.
Segment operating income:
Oilfield Services & Equipment
Industrial & Energy Technology
Total segment operating income
Corporate
Inventory impairment (1)
Restructuring, impairment and other
Operating income
Other non-operating income (loss), net
Interest expense, net
Income before income taxes
Provision for income taxes
Net income (loss)
Year Ended December 31,
2023
2022
$ Change
From 2022 to
2023
$
1,746 $
1,310
3,055
(380)
(35)
(323)
2,317
554
(216)
2,655
(685)
1,201 $
1,135
2,336
(416)
(31)
(705)
1,185
(911)
(252)
22
(600)
$
1,970 $
(578) $
546
175
719
36
(4)
382
1,133
1,464
36
2,633
(85)
2,547
(1) Charges for inventory impairments are reported in "Cost of goods sold" in the consolidated statements of income (loss).
Fiscal Year 2023 to Fiscal Year 2022
Revenue increased $4,350 million, or 21%, driven by increased activity across both segments. OFSE increased
$2,131 million and IET increased $2,219 million. Total segment operating income increased $719 million, primarily
driven by OFSE and to a lesser extent IET.
Oilfield Services & Equipment
OFSE revenue of $15,361 million increased $2,131 million, or 16%, in 2023 compared to 2022, as a result of
increased activity as evidenced by an increase in the global rig count. International revenue was $11,245 million in
2023, an increase of $1,779 million from 2022, primarily driven by the Middle East/Asia and Latin America regions,
partially offset by lower volume due to the discontinuation of our Russia operations that occurred in 2022. North
America revenue was $4,116 million in 2023, an increase of $352 million from 2022.
OFSE segment operating income was $1,746 million in 2023 compared to $1,201 million in 2022. The increase
in operating income was primarily driven by higher volume, price and cost-out initiatives, partially offset by
inflationary pressure and lower cost productivity.
Baker Hughes Company 2023 Form 10-K | 37
Industrial & Energy Technology
IET revenue of $10,145 million increased $2,219 million, or 28%, in 2023 compared to 2022. The increase was
primarily driven by higher volume in Gas Technology Equipment and, to a lesser extent, in CTS, Industrial
Technology and Gas Technology Services.
IET segment operating income was $1,310 million in 2023 compared to $1,135 million in 2022. The operating
income performance in 2023 was driven by higher volume, price and cost-out initiatives, partially offset by
unfavorable business mix and cost productivity, inflationary pressure, and higher research and development costs
related to new energy investments.
Corporate
In 2023, corporate expenses were $380 million compared to $416 million in 2022. The decrease of $36 million
was driven by savings related to our corporate optimization process.
Inventory Impairment
In 2023, we recorded inventory impairments of $35 million, predominately in the OFSE segment related to exit
activities at specific locations. In 2022, we recorded inventory impairments of $31 million, primarily in the IET
segment as part of suspending our Russia operations. Charges for inventory impairments are reported in "Cost of
goods sold" in the consolidated statements of income (loss).
Restructuring, Impairment and Other
In 2023, we recognized $323 million of restructuring, impairment, and other charges. We continued to incur
charges in 2023 related to our plan initiated in 2022 that consisted primarily of employee termination expenses
driven by actions taken to facilitate our reorganization into two segments and to optimize our corporate structure.
Restructuring charges for 2023 also include costs related to exit activities at specific locations in our segments to
align with the current market outlook and to rationalize our manufacturing supply chain footprint. In the fourth
quarter of 2023, we incurred additional costs related to a planned workforce reduction, primarily in OFSE.
In 2022, we recognized $705 million of restructuring, impairment, and other charges primarily related to the
suspension of substantially all of our operations in Russia, and the impairment of certain long-lived assets in the
OFSE segment for the subsea production systems business due to a decrease in the estimated future cash flows
driven by a decline in our long-term market outlook for this business.
Other Non-Operating Income (Loss), Net
In 2023, we incurred $554 million of other non-operating income. Included in this amount was a gain of $555
million from the change in fair value for certain equity investments.
In 2022, we incurred $911 million of other non-operating losses primarily due to the loss of $451 million from the
sale of part of the OFSE business in Russia and a loss of $265 million from the change in fair value for certain
equity investments. Additionally, in December 2022, the Company, Baker Hughes Holdings, LLC ("BHH LLC") and
GE entered into an agreement which resulted in the termination of the Tax Matters Agreement ("TMA"), and as a
result, we incurred a charge of $81 million, of which $21 million was a cash payment to GE as a net settlement of
claims asserted under the TMA. The TMA governed the administration and allocation between the parties of tax
liabilities and benefits arising prior to, as a result of, and subsequent to the merger in 2017, including the respective
rights, responsibilities, and obligations of the parties with respect to various other tax matters.
Interest Expense, Net
In 2023, we incurred net interest expense of $216 million, which includes interest income of $84 million. Net
interest expense decreased $36 million compared to 2022, primarily driven by higher interest income.
Baker Hughes Company 2023 Form 10-K | 38
Income Taxes
In 2023, the provision for income taxes was $685 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 2022, the provision for income taxes was $600 million. The difference between the U.S. statutory tax rate of
21% and the effective tax rate is primarily related to losses with no tax benefit due to valuation allowances,
restructuring charges for which a majority has no tax benefit, and earnings in jurisdictions with tax rates higher than
in the U.S.
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 is effective January 1, 2024. Baker Hughes
is continuing to evaluate the potential impact on future periods of Pillar Two, pending legislative adoption by
individual countries.
COMPLIANCE
In the conduct of all of our activities, we are committed to maintaining the core values of our Company, as well
as high safety, ethical, and quality standards as also reported in our Quality Management System. We believe such
a commitment is integral to running a sound, successful, and sustainable business. We devote significant resources
to maintain a comprehensive global ethics and compliance program ("Compliance Program") which is designed to
prevent, detect, and appropriately respond to any potential violations of the law, the Code of Conduct, and other
Company policies and procedures.
Highlights of our Compliance Program include the following:
•
Comprehensive internal policies over such areas as anti-bribery; travel, entertainment, gifts and charitable
donations to government officials and other parties; payments to commercial sales representatives; and, the
use of non-U.S. police or military organizations for security purposes. In addition, there are policies and
procedures to address customs requirements, visa processing risks, export and re-export controls,
economic sanctions, anti-money laundering and anti-boycott laws.
• Global and independent structure of Chief Compliance Officer and other compliance professionals providing
compliance advice, customized training and governance, as well as investigating allegations across all
regions and countries where we do business.
•
•
•
•
•
•
Comprehensive employee compliance training program that combines instructor-led and web-based
training modules tailored to the key risks that employees face on an ongoing basis.
Due diligence and monitoring procedures for third parties who conduct business on our behalf, including
channel partners (sales representatives, distributors, resellers), and administrative service providers.
Due diligence procedures for acquisition activities.
Specifically tailored compliance risk assessments and audits focused on country and third party risk.
Compliance Review Board comprised of senior officers of the Company that meets quarterly to monitor
effectiveness of the Compliance Program, as well as segment compliance review boards that meet
quarterly.
Technology to monitor and report on compliance matters, including an internal investigations management
system, a conflict of interest reporting and management system, a web-based anti-boycott reporting tool,
global trade management systems and comprehensive watch list screening.
Baker Hughes Company 2023 Form 10-K | 39
•
•
•
•
Data privacy compliance policies and procedures to ensure compliance with applicable data privacy
requirements.
A compliance program designed to create an "Open Reporting Environment" where employees are
encouraged to report any ethics or compliance matter without fear of retaliation, including a global network
of trained employee ombudspersons, and a worldwide, 24-hour business helpline operated by a third party
and available in approximately 200 languages.
Centralized finance organization with company-wide policies.
Anti-corruption audits of high-risk countries, as well as risk-based compliance audits of third parties.
• We have region-specific processes and procedures for management of HR related issues, including pre-
hire screening of employees; a process to screen existing employees prior to promotion into select roles
where they may be exposed to finance and/or corruption-related risks; and implementation of a global new
hire training module which includes compliance training for all employees.
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 December 31, 2023, we had cash and cash equivalents of $2.6 billion compared to $2.5 billion at
December 31, 2022.
In the U.S. we held cash and cash equivalents of approximately $0.6 billion as of December 31, 2023 and 2022,
and outside the U.S. of approximately $2.0 billion and $1.9 billion as of December 31, 2023 and 2022, respectively.
A substantial portion of the cash held outside the U.S. at December 31, 2023 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 December 31, 2023 and 2022, we had $637 million and $605 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.
In November 2023, BHH LLC entered into a $3 billion committed unsecured revolving credit facility ("the New
Credit Agreement") with commercial banks maturing in November 2028. The New Credit Agreement contains
certain representations and warranties, certain affirmative covenants and negative covenants, in each case we
consider customary. Upon the occurrence of certain events of default, our obligations under the New Credit
Agreement may be accelerated. Such events of default include payment defaults to lenders under the New Credit
Agreement and other customary defaults. No such events of default have occurred. The New Credit Agreement is
fully and unconditionally guaranteed on a senior unsecured basis by Baker Hughes. In addition, we have
authorization to issue up to $3 billion of commercial paper. At December 31, 2023 and 2022, there were no
borrowings under the New Credit Agreement and no outstanding commercial paper.
Certain Senior Notes contain covenants that restrict our ability to take certain actions. See "Note 9. Debt" of the
Notes to Consolidated Financial Statements in this Annual Report for further details. At December 31, 2023, we
were in compliance with all debt covenants. Our next debt maturity is June 2024.
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 and
could also limit or preclude our ability to issue commercial paper. Should this occur, we could seek alternative
sources of funding, including borrowing under the credit facility.
Baker Hughes Company 2023 Form 10-K | 40
During the year ended December 31, 2023, we dispersed cash to fund a variety of activities including certain
working capital needs, capital expenditures, business acquisitions, the payment of dividends, repayment of long-
term debt, and repurchases of our common stock.
Cash Flows
Cash flows provided by (used in) each type of activity were as follows for the years ended December 31:
(In millions)
Operating activities
Investing activities
Financing activities
Operating Activities
$
2023
2022
3,062 $
(817)
(2,028)
1,888
(1,564)
(1,592)
Cash flows from operating activities generated cash of $3,062 million and $1,888 million for the years ended
December 31, 2023 and 2022, 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.
In 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 benefit, and the impairment of certain assets). Net working capital cash generation was $42 million
mainly due to strong progress collections on equipment contracts, mostly offset by an increase in receivables and
inventory as we continue to build for growth. Included in our 2023 cash flows from operating activities are payments
of $142 million made primarily for employee severance as a result of our restructuring activities.
In 2022, cash generated from operating activities were primarily driven by net losses adjusted for certain
noncash items (including depreciation, amortization, loss on business dispositions, stock-based compensation cost,
deferred tax provision, loss on equity securities, and the impairment of certain assets). Working capital, which
includes contract and other deferred assets, generated cash of $122 million in 2022 mainly due to strong progress
collections on equipment contracts and an increase in accounts payable, partially offset by the increase in
receivables and inventory as we build for revenue growth.
Investing Activities
Cash flows from investing activities used cash of $817 million and $1,564 million for the years ended
December 31, 2023 and 2022, 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 $1,224 million and $989 million for 2023 and 2022, respectively, partially offset by cash flows from the
disposal of PP&E of $208 million and $217 million in 2023 and 2022, 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.
We had proceeds from the sale of certain equity securities of $372 million and $26 million in 2023 and 2022,
respectively. In addition, in 2023, we completed the acquisition of businesses for total cash consideration of $301
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.
The Central Bank of Argentina maintains currency controls that limit our ability to access U.S. dollars and remit
cash from our Argentine operations. There is an indirect foreign exchange mechanism known as a Blue Chip Swap
Baker Hughes Company 2023 Form 10-K | 41
that enables companies to transfer U.S. dollars out of and into Argentina, effectively at a parallel U.S. dollar
exchange rate. In 2023, we entered into transactions in order to remit cash from our Argentine operations resulting
in a net loss and a net cash outflow of $66 million, which is included in other investing activities.
In 2022, we completed the acquisition of businesses for total cash consideration of $767 million, net of cash
acquired, including BRUSH Power Generation, Quest Integrity, AccessESP, and Mosaic Materials.
Financing Activities
Cash flows from financing activities used cash of $2,028 million and $1,592 million for the years ended
December 31, 2023 and 2022, respectively.
In 2023, we repaid long-term debt of $651 million primarily related to certain senior notes that matured in
December. Additionally, we increased our quarterly dividend by one cent to $0.20 per share during the third quarter
of 2023. We paid dividends of $786 million and $726 million to our Class A stockholders, and we made distributions
of nil and $17 million to GE in 2023 and 2022, respectively.
In 2023, we repurchased and canceled 16.3 million shares of Class A common stock for a total of $538 million.
In 2022, we repurchased and canceled 29.7 million shares of Class A common stock for a total of $828 million.
Cash Requirements
We believe cash on hand, cash flows from operating activities, the available revolving credit facility, access to
both commercial paper and 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.
Based on current market conditions, capital expenditures in 2024 will be made at a rate that we estimate 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 also anticipate making income tax payments in the range of $800 million to
$850 million in 2024.
Contractual Obligations and Commitments
Our material cash commitments from known contractual and other obligations consist primarily of obligations for
long-term debt and related interest, leases for property and equipment, and purchase obligations as part of normal
operations. Certain amounts included in our contractual obligations as of December 31, 2023 are based on our
estimates and assumptions about these obligations, including their duration, anticipated actions by third parties and
other factors.
See "Note 9. Debt" of the Notes to Consolidated Financial Statements in Item 8 herein for information regarding
scheduled maturities of our long-term debt. See "Note 8. Leases" of the Notes to Consolidated Financial Statements
in Item 8 herein for information regarding scheduled maturities of our operating leases.
As of December 31, 2023, we had expected cash payments for estimated interest on our long-term debt and
finance lease obligations of $253 million payable within the next twelve months and $2,687 million payable
thereafter.
As of December 31, 2023, we had purchase obligations of $1,871 million payable within the next twelve months
and $875 million payable thereafter. Our purchase obligations include expenditures for capital assets for 2024 as
well as agreements to purchase goods or services or licenses that are enforceable and legally binding and that
specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price
provisions; and the approximate timing of the transaction.
Baker Hughes Company 2023 Form 10-K | 42
Due to the uncertainty with respect to the timing of potential future cash outflows associated with our uncertain
tax positions, we are unable to make reasonable estimates of the period of cash settlement, if any, to the respective
taxing authorities. Therefore, $629 million in uncertain tax positions, including interest and penalties, have been
excluded from the contractual obligations discussed above. See "Note 11. Income Taxes" of the Notes to
Consolidated Financial Statements in Item 8 herein for further information.
Other Factors Affecting Liquidity
Registration Statement: In December 2023, Baker Hughes, together with BHH LLC and Baker Hughes Co-
Obligor, Inc. filed a universal automatic shelf registration statement on Form S-3ASR with the SEC to have the
ability to sell various types of securities including debt securities, Class A common stock, preferred stock,
guarantees of debt securities, purchase contracts and units. The specific terms of any securities to be sold will be
described in supplemental filings with the SEC. The registration statement will expire in December 2026.
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. As of December 31, 2023, 19% of our
gross customer receivables were from customers in the U.S. and 11% were from customers in Mexico. As of
December 31, 2022, 15% of our gross customer receivables were from customers in the U.S. and 11% were from
customers in Mexico. 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
December 31, 2023. 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 $5,908 million as of December 31, 2023, with maturities ranging
from 2024 to 2047. The Debt Securities constitute debt obligations of 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 consolidated financial statements and
management believes such summarized financial information would be repetitive and would not provide incremental
value to investors.
CRITICAL ACCOUNTING ESTIMATES
An accounting policy is deemed to be critical if the nature of the estimate or assumption it incorporates is
subject to a material level of judgment related to matters that are highly uncertain and changes in those estimates
and assumptions are reasonably likely to materially impact our consolidated financial statements. These estimates
reflect our best judgment about current, and for some estimates, future, economic and market conditions and their
potential effects based on information available as of the date of these financial statements. If these conditions
change from those expected, it is reasonably possible that the judgments and estimates described below could
change, which may result in future impairments of goodwill, or the establishment of valuation allowances on
deferred tax assets and increased tax liabilities, among other effects. Also, see "Note 1. Summary of Significant
Baker Hughes Company 2023 Form 10-K | 43
Accounting Policies" of the Notes to Consolidated Financial Statements in Item 8 herein, which discusses our most
significant accounting policies.
The Audit Committee of the Board has reviewed our critical accounting estimates and the disclosure presented
below. During the past three fiscal years, we have not made any material changes in the methodology used to
establish the critical accounting estimates, and we believe that the following are the critical accounting estimates
used in the preparation of our consolidated financial statements for the year ended December 31, 2023. There are
other items within our consolidated financial statements that require estimation and judgment, but they are not
deemed critical as defined above.
Revenue Recognition on Long-Term Product Services Agreements
We have long-term service agreements with our customers within our IET segment. These agreements typically
require us to maintain assets sold to the customer over a defined contract term. These agreements have average
contract terms of greater than 10 years. From time to time, these contract terms may be extended through contract
modifications or amendments, which may result in revisions to future billing and cost estimates. Revenue
recognition on long-term product services agreements requires estimates of both customer payments and the costs
to perform required maintenance services over the contract term. We recognize revenue on an over time basis
using input method to measure our progress toward completion at the estimated margin rate of the contract.
To develop our billings estimates, we consider the number of billable events that will occur based on estimated
utilization of the asset under contract, over the life of the contract term. This estimated utilization will consider both
historical and market conditions, asset retirements and new product introductions, if applicable.
To develop our cost estimates, we consider the timing and extent of maintenance and overhaul events,
including the amount and cost of labor, spare parts and other resources required to perform the services. In
developing our cost estimates, we utilize a combination of our historical cost experience and expected cost
improvements. Cost improvements are only included in future cost estimates after savings have been observed in
actual results or proven effective through an extensive regulatory or engineering approval process.
We routinely review the estimates used in our product services agreements and regularly revise them to adjust
for changes. These revisions are based on objectively verifiable information that is available at the time of the
review. We gain insight into expected future utilization and cost trends, as well as credit risk, through our knowledge
of the equipment installed and the close interaction with our customers through supplying critical services and parts
over extended periods.
Revisions to cost or billing estimates may affect a product services agreement's total estimated profitability
resulting in an adjustment of earnings; such adjustments generated earnings of $15 million, $20 million and $14
million for the three years ended December 31, 2023, 2022 and 2021, respectively. We provide for probable losses
when they become evident. Cash billings collected on these contracts were approximately $0.6 billion and $0.7
billion during the years ended December 31, 2023 and 2022, respectively. Our contracts (on average) are
approximately 11% complete based on costs incurred to date and our estimate of future costs.
Revenue Recognition on Sale of Customized Equipment
We recognize revenue on agreements for sales of equipment manufactured to unique customer specifications
including long-term construction projects, on an over time basis utilizing cost inputs as the measurement criteria in
assessing the progress toward completion. Our estimation of the total costs required to fulfill our promise to a
customer is generally based on our history of manufacturing similar assets for customers. This estimation of cost is
critical to our revenue recognition process and is updated routinely to reflect changes in quantity or cost of the
inputs. In certain projects, the underlying technology or promise to the customer is unique to what we have
historically promised and reliably estimating the total cost to fulfill the promise to the customer requires a significant
level of judgment. We provide for potential losses on any of these agreements when it is probable that we will incur
the loss. The total revenue recognized for the sale of equipment on an over time basis during the twelve months
ended December 31, 2023, 2022 and 2021 was $6.1 billion, $4.2 billion, and $4.8 billion, respectively.
Baker Hughes Company 2023 Form 10-K | 44
Goodwill and Other Long-lived Assets
We perform an annual impairment test of goodwill for each of our reporting units as of July 1, or more frequently
when circumstances indicate an impairment may exist at the reporting unit level. When performing the annual
impairment test, we have the option of first performing a qualitative assessment to determine the existence of
events and circumstances that would lead to a determination that it is more likely than not that the fair value of a
reporting unit is greater than its carrying amount. If, after assessing the existence of events and circumstances, we
determine it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, there is
no need to perform any further testing. However, if we conclude otherwise, we would be required to perform a
quantitative impairment assessment of goodwill, which involves the use of significant estimates and assumptions
and typically requires analysis of discounted cash flows and other market information, such as trading multiples, and
comparable transactions.
Other long-lived assets, including property, plant and equipment and identifiable finite-lived intangible assets,
are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may
not be recoverable and at least annually for indefinite-lived intangible assets. When testing for impairment, we group
our long-lived assets with other assets and liabilities at the lowest level for which identifiable cash flows are largely
independent of the cash flows of other assets and liabilities. The determination of recoverability is made based upon
the estimated undiscounted future net cash flows, which involves significant estimates and judgments on the part of
management.
The determination of whether goodwill and other long-lived assets are impaired involves a significant level of
judgment and estimation, and changes in our forecasts, business strategy, government regulations, or economic or
market conditions, among other things, could significantly impact these judgments, potentially decreasing the fair
value of one or more reporting units or long-lived assets. Any resulting impairment charges could have a material
impact on our results of operations.
Income Taxes
Our effective tax rate is based on our income, statutory tax rates, and differences between tax laws and U.S.
GAAP in various jurisdictions. Tax laws are complex and subject to different interpretations by the taxpayer and
respective governmental taxing authorities. Our rate may be further impacted by the repatriation of foreign earnings
that are considered indefinitely reinvested to the extent the repatriation would result in additional taxes such as
withholding and income taxes. Indefinite reinvestment is determined by management’s judgment and intentions
concerning the future operations of the Company. In cases where repatriation would otherwise incur significant
withholding or income taxes, these foreign earnings have been indefinitely reinvested in active non-U.S. business
operations. Computation of the potential deferred tax liability associated with these undistributed earnings and any
other basis differences is not practicable.
Deferred income tax assets represent amounts available to reduce income taxes payable in future years. When
evaluating the recoverability of these deferred tax assets, all positive and negative evidence is analyzed including
existing cumulative earnings or loss, forecasted taxable income from the reversal of taxable temporary differences,
future forecasted operating earnings, and available tax planning strategies. The sources of this evidence rely
heavily on estimates. Hence, we use our historical experience and short and long range business forecasts to
provide additional insight. We record a valuation allowance when it is more likely than not that some portion or all of
the deferred tax assets will not be realized. Further, a change to realizability of our deferred tax assets is recognized
in the Company's tax provision in the period in which the change occurs.
Our tax filings routinely are subject to audit by the tax authorities in the jurisdictions where we conduct business.
These audits may result in assessments of additional taxes that are resolved with the tax authorities or through the
courts. We have provided for the amounts we believe will ultimately result from these proceedings, but settlements
of issues raised in these audits may affect our tax rate. We have $467 million of gross unrecognized tax benefits,
excluding interest and penalties, at December 31, 2023. We are not able to reasonably estimate in which future
periods these amounts ultimately will be settled.
Baker Hughes Company 2023 Form 10-K | 45
Allowance for Credit Losses
The estimation of anticipated credit losses that may be incurred as we work through the invoice collection
process with our customers requires us to make judgments and estimates regarding our customers' ability to pay
amounts due to us. We monitor our customers' payment history and current credit worthiness to determine that
collectability is reasonably assured. We also consider the overall business climate in which our customers operate.
For accounts receivable, a loss allowance matrix is utilized to measure lifetime expected credit losses. The matrix
contemplates historical credit losses by age of receivables, adjusted for any forward-looking information and
management expectations. At December 31, 2023 and 2022, the allowance for credit losses totaled $350 million
and $341 million of total gross accounts receivable, respectively. We believe that our allowance for credit losses is
adequate to cover the anticipated credit losses under current conditions; however, uncertainties regarding changes
in the financial condition of our customers, either adverse or positive, could impact the amount and timing of any
additional credit losses that may be required.
NEW ACCOUNTING STANDARDS TO BE ADOPTED
See "Note 1. Summary of Significant Accounting Policies" of the Notes to Consolidated Financial Statements in
Item 8 herein for further discussion of accounting standards to be adopted.
RELATED PARTY TRANSACTIONS
See "Note 18. Related Party Transactions" of the Notes to Consolidated Financial Statements in Item 8 herein
for further discussion of related party transactions.
FORWARD-LOOKING STATEMENTS
This Form 10-K, including MD&A and certain statements in the Notes to Consolidated Financial Statements,
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," "endeavor," "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 1 of Item 1A of this Form 10-K 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.
In light of such risks and uncertainties, we caution you not to place undue reliance on these forward-looking
statements. These forward-looking statements speak only as of the date of this Annual Report, or if earlier, as of the
date they were made. We do not intend to, and disclaim any obligation to, update or revise any forward-looking
statements unless required by securities law.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to certain market risks that are inherent in our financial instruments and arise from changes in
interest rates and foreign currency exchange rates. We may enter into derivative financial instrument transactions to
manage or reduce market risk, but do not enter into derivative financial instrument transactions for speculative
purposes. A discussion of our primary market risk exposure in financial instruments is presented below.
Baker Hughes Company 2023 Form 10-K | 46
INTEREST RATE RISK
All of our long-term debt is comprised of fixed rate instruments. We are subject to interest rate risk on our debt
and investment portfolio. As of December 31, 2023, we had interest rate swaps with a notional amount of $500
million that converted a portion of our $1,350 million aggregate principal amount of 3.337% fixed rate Senior Notes
due 2027 into a floating rate instrument with an interest rate based on a LIBOR index as a hedge of its exposure to
changes in fair value that are attributable to interest rate risk. As of July 1, 2023, the interest rate changed to be
based on a Secured Overnight Financing Rate index. The interest rate swaps are designated and each qualify as a
fair value hedging instrument. The interest rate swaps are considered to be effective at achieving offsetting changes
in the fair value of the hedged liability, and no ineffectiveness is recognized. The mark-to-market of this fair value
hedge was recorded as a gain or loss in interest expense and was equally offset by the gain or loss of the
underlying debt instrument, which also was recorded in interest expense.
The following table sets forth our fixed rate long-term debt, excluding finance leases, and the related weighted
average interest rates by expected maturity dates.
(In millions)
As of December 31, 2023
Long-term debt (1)
2024
2025
2026
2027
2028
Thereafter
Total (2)
$ 107
$ —
$ 600
$ 1,350
$ —
$ 3,756
$ 5,813
Weighted average interest rates
4.08%
—%
2.35%
5.29%
—%
4.06%
4.16%
(1) Fair market value of our fixed rate long-term debt, excluding finance leases, was $5.5 billion at December 31, 2023.
(2) Amounts represent the principal value of our long-term debt outstanding and related weighted average interest rates at
the end of the respective period.
FOREIGN CURRENCY EXCHANGE RISK
We conduct our operations around the world in a number of different currencies, and we are exposed to market
risks resulting from fluctuations in foreign currency exchange rates. Many of our significant foreign subsidiaries have
designated the local currency as their functional currency. As such, future earnings are subject to change due to
fluctuations in foreign currency exchange rates when transactions are denominated in currencies other than our
functional currencies.
Additionally, we buy, manufacture and sell components and products across global markets. These activities
expose us to changes in foreign currency exchange rates, commodity prices and interest rates which can adversely
affect revenue earned and costs of our operating businesses. When the currency in which equipment is sold differs
from the primary currency of the legal entity and the exchange rate fluctuates, it will affect the revenue earned on
the sale. These sales and purchase transactions also create receivables and payables denominated in foreign
currencies and exposure to foreign currency gains and losses based on changes in exchange rates. Changes in the
price of raw materials used in manufacturing can affect the cost of manufacturing. We use derivatives to mitigate or
eliminate these exposures, where appropriate.
We use cash flow hedging primarily to reduce or eliminate the effects of foreign currency exchange rate
changes on purchase and sale contracts. Accordingly, most derivative activity in this category consists of currency
exchange contracts. We had outstanding foreign currency forward contracts with notional amounts aggregating $3.6
billion and $3 billion to hedge exposure to currency fluctuations in various foreign currencies at December 31, 2023
and 2022, respectively. The notional amounts of these derivative instruments do not generally represent cash
amounts exchanged by us and the counterparties, but rather the nominal amount upon which changes in the value
of the derivatives are measured.
As of December 31, 2023, the Company estimates that a 1% appreciation or depreciation in the U.S. dollar
would result in an impact of less than $10 million to our pre-tax earnings; however, the Company is generally able to
mitigate its foreign exchange exposure, where there are liquid financial markets, through use of foreign currency
derivative transactions. Also, see "Note 15. Financial Instruments" of the Notes to Consolidated Financial
Statements in Item 8 herein, which has additional details on our strategy.
Baker Hughes Company 2023 Form 10-K | 47
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Management's Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over our financial
reporting, as such term is defined in Exchange Act Rules 13a-15(f). Our internal control over financial reporting is a
process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted accounting principles.
Under the supervision and with the participation of our management, including our principal executive officer
and principal financial officer, we assessed the effectiveness of our internal control over financial reporting based on
the 2013 framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on our assessment, our principal executive officer and principal
financial officer concluded that our internal control over financial reporting was effective as of December 31, 2023.
This conclusion is based on the recognition that there are inherent limitations in all systems of internal control.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or
improper management override of controls, material misstatements due to error or fraud may not be prevented or
detected on a timely basis. Also, projections of any evaluation of effectiveness to future periods are subject to the
risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with
the policies or procedures may deteriorate.
KPMG LLP, the Company's independent registered public accounting firm, has issued an attestation report on
the effectiveness of the Company's internal control over financial reporting.
/s/ LORENZO SIMONELLI
Lorenzo Simonelli
Chairman, President and
Chief Executive Officer
/s/ NANCY BUESE
Nancy Buese
Chief Financial Officer
/s/ REBECCA CHARLTON
Rebecca Charlton
Senior Vice President, Controller
and Chief Accounting Officer
Houston, Texas
February 5, 2024
Baker Hughes Company 2023 Form 10-K | 48
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors
Baker Hughes Company:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of financial position of Baker Hughes Company and
subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of income (loss),
comprehensive income (loss), changes in equity, and cash flows for each of the years in the three-year period ended
December 31, 2023, and the related notes (collectively, the consolidated financial statements). In our opinion, the
consolidated financial statements present fairly, in all material respects, the financial position of the Company as of
December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-
year period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria
established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission, and our report dated February 5, 2024 expressed an unqualified opinion on the
effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of
material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of
material misstatement of the consolidated financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the
amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated
financial statements that was communicated or required to be communicated to the audit committee and that: (1)
relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our
especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter
in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating
the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or
disclosures to which it relates.
Revenue recognition on certain agreements for sales of equipment manufactured to unique customer
specifications
As discussed in Note 1 to the consolidated financial statements, the Company enters into agreements for
sales of equipment manufactured to unique customer specifications on an over time basis. Revenue from
these types of contracts is recognized to the extent of progress towards completion measured by actual costs
incurred relative to total expected costs. The Company provides for potential losses on these types of
contracts when it is probable that a loss will be incurred.
We identified revenue recognition for certain contracts from the sales of equipment manufactured to unique
customer specifications as a critical audit matter. Complex auditor judgment was required in evaluating the
Company's long-term estimates of the expected costs to be incurred in order to complete these contracts.
Baker Hughes Company 2023 Form 10-K | 49
The following are the primary procedures we performed to address this critical audit matter. We evaluated the
design and tested the operating effectiveness of certain internal controls related to the Company's revenue
recognition process for sales of equipment manufactured to unique customer specifications. This included
controls pertaining to the Company's estimation of costs expected to be incurred to complete contracts for
sales of equipment manufactured to unique customer specifications. We evaluated the Company's ability to
accurately estimate costs expected to be incurred to complete the contracts for sales of equipment
manufactured to unique customer specifications. We evaluated the estimated costs expected to be incurred to
complete the equipment manufactured to unique customer specifications for the contracts by:
– questioning the Company's finance and project managers regarding progress to date based on the
latest project reports and the costs expected to be incurred until completion;
– observing project review meetings performed by the Company or inspecting relevant minutes of those
meetings to identify changes in the estimated costs expected to be incurred to complete the contract
and related contract margins;
– assessing the remaining estimated costs expected to be incurred by expenditure category by
comparing to the actual costs incurred during the current year for the selected project; and
– investigating changes to the contract margin when compared to the prior year's estimated contract
margin.
We have served as the Company's auditor since 2017.
/s/ KPMG LLP
Houston, Texas
February 5, 2024
Baker Hughes Company 2023 Form 10-K | 50
REPORT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors
Baker Hughes Company:
Opinion on Internal Control Over Financial Reporting
We have audited Baker Hughes Company and subsidiaries' (the Company) internal control over financial reporting as
of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all
material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria
established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated statements of financial position of the Company as of December 31, 2023 and
2022, the related consolidated statements of income (loss), comprehensive income (loss), changes in equity, and
cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes
(collectively, the consolidated financial statements), and our report dated February 5, 2024 expressed an unqualified
opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the
Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit
also included performing such other procedures as we considered necessary in the circumstances. We believe that
our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
/s/ KPMG LLP
Houston, Texas
February 5, 2024
Baker Hughes Company 2023 Form 10-K | 51
BAKER HUGHES COMPANY
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(In millions, except per share amounts)
Revenue:
Sales of goods
Sales of services
Total revenue
Costs and expenses:
Cost of goods sold
Cost of services sold
Selling, general and administrative
Restructuring, impairment and other
Total costs and expenses
Operating income
Other non-operating income (loss), net
Interest expense, net
Income before income taxes
Provision for income taxes
Net income (loss)
Less: Net income (loss) attributable to noncontrolling interests
Year Ended December 31,
2023
2022
2021
$ 15,617 $ 12,236 $ 12,248
9,889
8,920
8,254
25,506
21,156
20,502
13,309
10,445
10,458
6,946
2,611
323
6,311
2,510
705
5,995
2,470
269
23,189
2,317
19,971
1,185
19,192
1,310
554
(216)
2,655
(685)
1,970
27
(911)
(252)
22
(600)
(578)
23
(583)
(299)
428
(758)
(330)
(111)
(219)
Net income (loss) attributable to Baker Hughes Company
$
1,943 $
(601) $
Per share amounts:
Basic income (loss) per Class A common share
Diluted income (loss) per Class A common share
Cash dividend per Class A common share
$
$
$
1.93 $
(0.61) $
1.91 $
(0.61) $
(0.27)
(0.27)
0.78 $
0.73 $
0.72
See accompanying Notes to Consolidated Financial Statements
Baker Hughes Company 2023 Form 10-K | 52
BAKER HUGHES COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In millions)
Net income (loss)
Less: Net income (loss) attributable to noncontrolling interests
Net income (loss) attributable to Baker Hughes Company
Other comprehensive income (loss):
Foreign currency translation adjustments
Cash flow hedges
Benefit plans
Other comprehensive income (loss)
Less: Other comprehensive loss attributable to noncontrolling interests
Other comprehensive income (loss) attributable to Baker Hughes Company
Comprehensive income (loss)
Less: Comprehensive income (loss) attributable to noncontrolling interests
Comprehensive income (loss) attributable to Baker Hughes Company
$
2,118 $
(879) $
See accompanying Notes to Consolidated Financial Statements
Year Ended December 31,
2023
2022
2021
$
1,970 $
(578) $
27
1,943
23
(601)
153
(269)
3
19
175
—
175
2,145
27
2
(14)
(281)
(3)
(278)
(859)
20
(330)
(111)
(219)
(305)
(16)
170
(151)
(16)
(135)
(481)
(127)
(354)
Baker Hughes Company 2023 Form 10-K | 53
BAKER HUGHES COMPANY
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(In millions, except par value)
ASSETS
Current Assets:
Cash and cash equivalents
Current receivables, net
Inventories, net
All other current assets
Total current assets
Property, plant and equipment, less accumulated depreciation
Goodwill
Other intangible assets, net
Contract and other deferred assets
All other assets
Deferred income taxes
Total assets
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable
Short-term and current portion of long-term debt
Progress collections and deferred income
All other current liabilities
Total current liabilities
Long-term debt
Deferred income taxes
Liabilities for pensions and other postretirement benefits
All other liabilities
Equity:
Class A common stock, $0.0001 par value - 2,000 authorized, 998 and 1,006
issued and outstanding as of December 31, 2023 and 2022, respectively
Class B common stock, $0.0001 par value - 1,250 authorized, nil issued and
outstanding as of December 31, 2023 and 2022
Capital in excess of par value
Retained loss
Accumulated other comprehensive loss
Baker Hughes Company equity
Noncontrolling interests
Total equity
Total liabilities and equity
December 31,
2023
2022
2,646 $
7,075
5,094
1,486
16,301
4,893
6,137
4,093
1,756
3,043
722
36,945 $
4,471 $
148
5,542
2,830
12,991
5,872
176
978
1,409
2,488
5,958
4,587
1,559
14,592
4,538
5,930
4,180
1,503
2,781
657
34,181
4,298
677
3,822
2,278
11,075
5,980
229
960
1,412
—
—
—
26,983
(8,819)
(2,796)
15,368
151
15,519
36,945 $
—
28,126
(10,761)
(2,971)
14,394
131
14,525
34,181
$
$
$
$
See accompanying Notes to Consolidated Financial Statements
Baker Hughes Company 2023 Form 10-K | 54
BAKER HUGHES COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In millions, except per share amounts)
Balance at December 31, 2020
Comprehensive loss:
Net loss
Other comprehensive loss
Dividends on Class A Common Stock ($0.72 per share)
Distributions to GE
Effect of exchange of Class B common stock and associated
BHH LLC Units for Class A common stock
Repurchase and cancellation of Class A common stock
Stock-based compensation cost
Other
Balance at December 31, 2021
Comprehensive income (loss):
Net income (loss)
Other comprehensive loss
Dividends on Class A Common Stock ($0.73 per share)
Distributions to GE
Effect of exchange of Class B common stock and associated
BHH LLC Units for Class A common stock
Repurchase and cancellation of Class A common stock
Stock-based compensation cost
Other
Balance at December 31, 2022
Comprehensive income (loss):
Net income
Other comprehensive income
Dividends on Class A Common Stock ($0.78 per share)
Repurchase and cancellation of Class A common stock
Stock-based compensation cost
Other
Balance at December 31, 2023
Class A and
Class B
Common
Stock
Capital in
Excess of
Par Value
Retained
Earnings
(Loss)
Accumulated
Other
Comprehensive
Loss
Non-
controlling
Interests
(1,778) $ 5,349 $ 18,242
Total
— $ 24,613 $ (9,942) $
(219)
(592)
3,584
(418)
205
(17)
— 27,375 (10,160)
1
(601)
(726)
2,060
(823)
207
33
— 28,126 (10,761)
1,943
(1)
(786)
(538)
197
(16)
(135)
(477)
5
(2,385)
(278)
(309)
1
(2,971)
175
(111)
(16)
(157)
(330)
(151)
(592)
(157)
(3,107)
(21)
—
(434)
205
(37)
1,916 16,746
(21)
23
(3)
(17)
(578)
(281)
(726)
(17)
(1,751)
(6)
—
(828)
207
(31)
2
131 14,525
27
1,970
175
(786)
(538)
197
(24)
151 $ 15,519
(7)
— $ 26,983 $ (8,819) $
(2,796) $
See accompanying Notes to Consolidated Financial Statements
Baker Hughes Company 2023 Form 10-K | 55
BAKER HUGHES COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
Cash flows from operating activities:
Year Ended December 31,
2023
2022
2021
Net income (loss)
Adjustments to reconcile net income (loss) to net cash flows from operating activities:
$
1,970 $
(578) $
(330)
Depreciation and amortization
(Gain) loss on business dispositions
(Gain) loss on equity securities
Stock-based compensation cost
Property, plant and equipment impairment, net
(Benefit) provision for deferred income taxes
Inventory impairment
Changes in operating assets and liabilities:
Current receivables
Inventories
Accounts payable
Progress collections and deferred income
Contract and other deferred assets
Other operating items, net
1,087
1,061
1,105
(40)
(555)
197
(1)
(59)
35
(986)
(461)
61
1,639
(211)
386
451
265
207
166
105
31
(625)
(885)
605
1,103
(76)
58
—
845
205
7
133
—
(126)
170
246
(72)
262
(71)
Net cash flows from operating activities
3,062
1,888
2,374
Cash flows from investing activities:
Expenditures for capital assets
Proceeds from disposal of assets
Proceeds from sale of equity securities
Proceeds from business dispositions
Net cash paid for acquisitions
Other investing items, net
Net cash flows used in investing activities
Cash flows from financing activities:
Repayment of long-term debt
Proceeds from the issuance of long-term debt
Repayment of commercial paper
Dividends paid
Repurchase of Class A common stock
Distributions to GE
Other financing items, net
Net cash flows used in financing activities
Effect of currency exchange rate changes on cash and cash equivalents
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
(1,224)
208
372
293
(301)
(165)
(817)
(651)
—
—
(786)
(538)
—
(53)
(989)
217
26
—
(767)
(51)
(1,564)
—
—
—
(726)
(828)
(17)
(21)
(856)
315
147
70
(87)
(52)
(463)
(1,313)
1,250
(832)
(592)
(434)
(157)
(65)
(2,028)
(1,592)
(2,143)
(59)
158
2,488
(97)
(1,365)
3,853
$
2,646 $
2,488 $
(47)
(279)
4,132
3,853
See "Note 22. Supplementary Information" for additional cash flow disclosures
See accompanying Notes to Consolidated Financial Statements
Baker Hughes Company 2023 Form 10-K | 56
Baker Hughes Company
Notes to Consolidated Financial Statements
NOTE 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF THE BUSINESS
Baker Hughes Company ("Baker Hughes," "the Company," "we," "us," or "our") is an energy technology
company with a diversified portfolio of technologies and services that span the energy and industrial value chain.
BASIS OF PRESENTATION
The accompanying consolidated financial statements of the Company have been prepared in accordance with
accounting principles generally accepted in the United States of America ("U.S." and such principles, "U.S. GAAP")
and pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") for annual financial
information. The consolidated financial statements include the accounts of Baker Hughes and all of its subsidiaries
and affiliates which it controls or variable interest entities for which we have determined that we are the primary
beneficiary. All intercompany accounts and transactions have been eliminated.
In the Company's consolidated financial statements and notes, certain amounts have been reclassified to
conform with the current year presentation. In the notes to the consolidated financial statements, all dollar and share
amounts in tabulations are in millions of dollars and shares, respectively, unless otherwise indicated. Certain
columns and rows in our financial statements and notes thereto may not add due to the use of rounded numbers.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates
and judgments that affect the reported amounts of assets and liabilities, disclosure of any contingent assets or
liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the
reporting period. We base our estimates and judgments on historical experience and on various other assumptions
and information that we believe to be reasonable under the circumstances. Estimates and assumptions about future
events and their effects cannot be perceived with certainty, and accordingly, these estimates may change as new
events occur, as more experience is acquired, as additional information is obtained and as our operating
environment changes. While we believe that the estimates and assumptions used in the preparation of the
consolidated financial statements are appropriate, actual results could differ from those estimates. Estimates are
used for, but are not limited to, determining the following: allowance for credit losses and inventory valuation
reserves; recoverability of long-lived assets; revenue recognition on long-term contracts; valuation of goodwill;
useful lives used in depreciation and amortization; income taxes and related valuation allowances; accruals for
contingencies; actuarial assumptions to determine costs and liabilities related to employee benefit plans; stock-
based compensation expense; valuation of derivatives; and the fair value of assets acquired and liabilities assumed
in acquisitions.
Foreign Currency
Assets and liabilities of non-U.S. operations with a functional currency other than the U.S. dollar have been
translated into U.S. dollars using our period end exchange rates, and revenue, expenses, and cash flows have been
translated at average rates for the respective periods. Any resulting translation gains and losses are included in
other comprehensive income (loss). The impact of remeasurement of monetary assets and liabilities denominated in
currencies other than the functional currency of the Company or its subsidiaries is included in the consolidated
statements of income (loss).
Revenue from Sale of Equipment
Performance Obligations Satisfied Over Time
We recognize revenue on agreements for sales of equipment manufactured to unique customer specifications
including long-term construction projects, on an over time basis, utilizing cost inputs as the measurement criteria in
Baker Hughes Company 2023 Form 10-K | 57
Baker Hughes Company
Notes to Consolidated Financial Statements
assessing the progress toward completion. Our estimate of costs to be incurred to fulfill our promise to a customer
is based on our history of manufacturing similar assets for customers and is updated routinely to reflect changes in
quantity or pricing of the inputs. We begin to recognize revenue on these contracts when the contract specific
inventory becomes customized for a customer, which is reflective of our initial transfer of control of the incurred
costs. We provide for potential losses on any of these agreements when it is probable that we will incur the loss.
Our billing terms for these over time contracts vary, but are generally based on achieving specified milestones.
The differences between the timing of our revenue recognized (based on costs incurred) and customer billings
(based on contractual terms) results in changes to our contract asset or contract liability positions.
Performance Obligations Satisfied at a Point In Time
We recognize revenue for non-customized equipment at the point in time that the customer obtains control of
the good. Equipment for which we recognize revenue at a point in time includes equipment we manufacture on a
standardized basis for sale to the market. We use proof of delivery for certain large equipment with more complex
logistics associated with the shipment, whereas the delivery of other equipment is generally determined based on
historical data of transit times between regions.
On occasion we sell equipment with a right of return. We use our accumulated experience to estimate and
provide for such returns when we record the sale. In situations where arrangements include customer acceptance
provisions based on seller or customer-specified objective criteria, we recognize revenue when we have concluded
that the customer has control of the equipment and that acceptance has or is likely to occur.
Our billing terms for these point in time equipment contracts vary, but are generally based on shipment of the
equipment to the customer.
Revenue from Sale of Services
Performance Obligations Satisfied Over Time
We sell product services under long-term product maintenance or extended warranty agreements in our
Industrial & Energy Technology segment. These agreements require us to maintain the customers' assets over the
service agreement contract terms, which generally range from 10 to 20 years. In general, these are contractual
arrangements to provide services, repairs, and maintenance of a covered unit (gas turbines for mechanical drive or
power generation, primarily on liquefied natural gas ("LNG") applications). These services are performed at various
times during the life of the contract, thus the costs of performing services are incurred on an other than straight-line
basis. We recognize related sales based on the extent of our progress toward completion measured by actual costs
incurred in relation to total expected costs. We provide for any loss that we expect to incur on any of these
agreements when that loss becomes probable. The Company utilizes historical customer data, prior product
performance data, statistical analysis, third-party data, and internal management estimates to calculate contract-
specific margins. In certain contracts, the total transaction price is variable based on customer utilization, which is
excluded from the contract margin until the period that the customer has utilized to appropriately reflect the revenue
activity in the period earned. In addition, revenue for certain oilfield services is recognized on an over time basis as
performed.
Our billing terms for these contracts are generally based on asset utilization (i.e. usage per hour) or the
occurrence of a major maintenance event within the contract. The differences between the timing of our revenue
recognized (based on costs incurred) and customer billings (based on contractual terms) results in changes to our
contract asset or contract liability positions.
Performance Obligations Satisfied at a Point In Time
We sell certain tangible products, largely spare equipment, through our services business. We recognize
revenue for this equipment at the point in time that the customer obtains control of the good, which is at the point in
time we deliver the spare part to the customer. Our billing terms for these point in time service contracts vary, but
are generally based on shipment of the equipment to the customer.
Baker Hughes Company 2023 Form 10-K | 58
Baker Hughes Company
Notes to Consolidated Financial Statements
Research and Development
Research and development costs are expensed as incurred and relate to the research and development of new
products and services. These costs amounted to $658 million, $556 million and $492 million for the years ended
December 31, 2023, 2022 and 2021, respectively. Research and development expenses were reported in "Cost of
goods sold" and "Cost of services sold" in the consolidated statements of income (loss).
Cash and Cash Equivalents
Short-term investments with original maturities of three months or less are included in cash equivalents unless
designated as available-for-sale and classified as investment securities.
Allowance for Credit Losses
We monitor our customers' payment history and current credit worthiness to determine that collectability of the
related financial assets is reasonably assured. We also consider the overall business climate in which our
customers operate. For accounts receivable, a loss allowance matrix is utilized to measure lifetime expected credit
losses. The matrix contemplates historical credit losses by age of receivables, adjusted for any forward-looking
information and management expectations.
Concentration of Credit Risk
Our current receivables are spread over a broad and diverse group of customers across many countries. We
grant credit to our customers and perform periodic credit evaluations of our customers' financial conditions,
including monitoring our customers' payment history and current credit worthiness to manage this risk. We do not
generally require collateral in support of our current receivables, but we may require payment in advance or security
in the form of a letter of credit or a bank guarantee.
Inventories
All inventories are stated at the lower of cost or net realizable values and they are measured on a first-in, first-
out ("FIFO") basis or average cost basis. As necessary, we record provisions and maintain reserves for excess,
slow moving and obsolete inventory. To determine these reserve amounts, we regularly review inventory quantities
on hand and compare them to estimates of future product demand, market conditions, production requirements and
technological developments.
Property, Plant and Equipment
Property, plant and equipment ("PP&E") is initially stated at cost and is depreciated over its estimated economic
life. Subsequently, PP&E is measured at cost less accumulated depreciation, which is generally provided by using
the straight-line method over the estimated economic lives of the individual assets, and impairment losses. We
manufacture a substantial portion of our tools and equipment in our OFSE segment and the cost of these items,
which includes direct and indirect manufacturing costs, is capitalized in inventory and subsequently moved to PP&E.
Other Intangible Assets
We amortize the cost of other intangible assets over their estimated useful lives unless such lives are deemed
indefinite. The cost of intangible assets is generally amortized on a straight-line basis over the asset's estimated
economic life. Finite-lived intangible assets are reviewed for impairment whenever events or changes in
circumstances indicate that the related carrying amounts may not be recoverable. In these circumstances, they are
tested for impairment based on undiscounted cash flows and, if impaired, written down to fair value based on either
discounted cash flows or appraised values. Intangible assets with indefinite lives are tested annually for impairment
and written down to fair value as required. Refer to the Impairment of Goodwill and Other Long-Lived Assets
accounting policy.
Baker Hughes Company 2023 Form 10-K | 59
Baker Hughes Company
Notes to Consolidated Financial Statements
Impairment of Goodwill and Other Long-lived Assets
We perform an annual impairment test of goodwill on a qualitative or quantitative basis for each of our reporting
units as of July 1, in conjunction with our annual strategic planning process, or more frequently when circumstances
indicate an impairment may exist at the reporting unit level. When performing the annual impairment test we have
the option of first performing a qualitative assessment to determine the existence of events and circumstances that
would lead to a determination that it is more likely than not that the fair value of a reporting unit is less than its
carrying amount. If such a conclusion is reached, we would then be required to perform a quantitative impairment
assessment of goodwill. However, if the assessment leads to a determination that it is more likely than not that the
fair value of a reporting unit is greater than its carrying amount, then no further assessments are required. A
quantitative assessment for the determination of impairment is made by comparing the carrying amount of each
reporting unit with its fair value, which is generally calculated using a combination of market, comparable transaction
and discounted cash flow approaches. Potential impairment indicators include, but are not limited to, (i) the results
of our most recent annual or interim impairment testing, in particular the magnitude of the excess of fair value over
carrying value observed, (ii) downward revisions to internal forecasts, and the magnitude thereof, if any, and (iii)
declines in our market capitalization below our book value, and the magnitude and duration of those declines, if any.
We review PP&E, intangible assets and certain other long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be recoverable and at least annually for
indefinite-lived intangible assets. When testing for impairment, we group our long-lived assets with other assets and
liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other
assets and liabilities (or asset group). The determination of recoverability is made based upon the estimated
undiscounted future net cash flows. The amount of impairment loss, if any, is determined by comparing the fair
value, as determined by a discounted cash flow analysis, with the carrying value of the related assets.
Financial Instruments
Our financial instruments include cash and equivalents, current receivables, investments, accounts payables,
short and long-term debt, and derivative financial instruments.
We monitor our exposure to various business risks including commodity prices, interest rates, and foreign
currency exchange rates, and we regularly use derivative financial instruments to manage these risks. At the
inception of a new derivative, we designate the derivative as a hedge, or we determine the derivative to be
undesignated as a hedging instrument. We document the relationships between the hedging instruments and the
hedged items, as well as our risk management objectives and strategy for undertaking various hedge transactions.
We assess whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in
cash flows of the hedged item at both the inception of the hedge and on an ongoing basis.
We record all derivatives as of the end of our reporting period in our consolidated statements of financial
position at fair value. For the forward contracts held as undesignated hedging instruments, we record the changes
in fair value in our consolidated statements of income (loss) along with the change in the fair value, related to
foreign exchange movements, of the hedged item. Changes in the fair value of forward contracts designated as
cash flow hedging instruments are recognized in other comprehensive income until the hedged item is recognized in
earnings.
Fair Value Measurements
For financial assets and liabilities measured at fair value on a recurring basis, fair value is the price we would
receive to sell an asset or pay to transfer a liability in an orderly transaction with a market participant at the
measurement date. In the absence of active markets for the identical assets or liabilities, such measurements
involve developing assumptions based on market observable data and, in the absence of such data, internal
information that is consistent with what market participants would use in a hypothetical transaction that occurs at the
measurement date.
Baker Hughes Company 2023 Form 10-K | 60
Baker Hughes Company
Notes to Consolidated Financial Statements
Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our
market assumptions. Preference is given to observable inputs. These two types of inputs create the following fair
value hierarchy:
•
•
•
Level 1 - Quoted prices for identical instruments in active markets.
Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar
instruments in markets that are not active; and model-derived valuations whose inputs are observable or
whose significant value drivers are observable.
Level 3 - Significant inputs to the valuation model are unobservable.
We maintain policies and procedures to value instruments using the best and most relevant data available. In
addition, we perform reviews to assess the reasonableness of the valuations. With regard to Level 3 valuations
(including instruments valued by third parties), we perform a variety of procedures to assess the reasonableness of
the valuations. Such reviews include an evaluation of instruments whose fair value change exceeds predefined
thresholds (and/or does not change) and consider the current interest rate, currency and credit environment, as well
as other published data, such as rating agency market reports and current appraisals.
Recurring Fair Value Measurements
Derivatives
When we have Level 1 derivatives, which are traded either on exchanges or liquid markets, we use closing
prices for valuation. The majority of our derivatives are valued using internal models and are included in Level 2.
These internal models maximize the use of market observable inputs including interest rate curves and both forward
and spot prices for currencies and commodities. Derivative assets and liabilities included in Level 2 primarily
represent foreign currency and commodity forward contracts for the Company.
Investments in Debt and Equity Securities
When available, we use quoted market prices to determine the fair value of investment securities, and they are
included in Level 1. Level 1 securities primarily include publicly traded equity securities.
For investment securities for which market prices are observable for identical or similar investment securities
but not readily accessible for each of those investments individually (that is, it is difficult to obtain pricing information
for each individual investment security at the measurement date), we use pricing models and observable inputs that
are consistent with what other market participants would use and these are included in Level 2. The inputs and
assumptions to the models are derived from market observable sources including: benchmark yields, reported
trades, broker/dealer quotes, issuer spreads, benchmark securities, bids, offers, and other market-related data.
When we use valuations that are based on significant unobservable inputs, we classify the investment securities in
Level 3.
Non-Recurring Fair Value Measurements
Certain assets are measured at fair value on a non-recurring basis and are subject to fair value adjustments
only in certain circumstances. These assets can include long-lived assets that have been reduced to fair value when
they are held for sale, equity securities without readily determinable fair value, equity method investments and long-
lived assets that are written down to fair value when they are impaired, and the remeasurement of retained
investments in formerly consolidated subsidiaries upon a change in control that results in a deconsolidation of a
subsidiary, if we sell a controlling interest and retain a noncontrolling stake in the entity.
Investments in Equity Securities
Investments in equity securities (in which we do not have a controlling financial interest or significant influence,
most often because we hold a voting interest of 0% to 20%) with readily determinable fair values are measured at
fair value with changes recognized in earnings and reported in "Other non-operating income (loss), net" in the
Baker Hughes Company 2023 Form 10-K | 61
Baker Hughes Company
Notes to Consolidated Financial Statements
consolidated statements of income (loss). Equity securities that do not have readily determinable fair values are
recorded at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly
transactions for identical or similar equity securities of the same issuer. These changes are recorded in "Other non-
operating income (loss), net" in the consolidated statements of income (loss).
Equity method investments are equity holdings in entities in which we do not have a controlling financial
interest, but over which we have significant influence, most often because we hold a voting interest of 20% to 50%.
At December 31, 2023 and 2022, the aggregate carrying amount of our equity method investments was $979 million
and $919 million, respectively. The results of our equity method investments are presented in the consolidated
statements of income (loss) as follows: (i) if the investment is integral to our operations, their results are included in
"Selling, general and administrative," and (ii) if the investment is not integral to our operations, their results are
included in "Other non-operating income (loss), net." Investments in, and advances to, equity method investments
are presented on a one-line basis in "All other assets" in the consolidated statements of financial position.
Income Taxes
We file U.S. federal and state income tax returns which primarily includes our distributive share of items of
income, gain, loss, and deduction of Baker Hughes Holdings LLC ("BHH LLC"), our primary operating company and
a wholly owned subsidiary of the Company since December 2022, which was treated as a partnership for U.S. tax
purposes until December 30, 2023. Effective December 30, 2023, the Company and various subsidiaries completed
a reorganization that resulted in BHH LLC no longer being treated as a partnership for U.S. tax purposes. As a
partnership, BHH LLC was not subject to U.S. federal income tax under current U.S. tax laws. However, as of
December 31, 2023, BHH LLC will be included and taxed as part of the Company's consolidated U.S. tax return.
Non-U.S. current and deferred income taxes owed by the subsidiaries of BHH LLC are reflected in the Company's
financial statements.
We account for taxes under the asset and liability method. Under this method, deferred income taxes are
recognized for temporary differences between the financial statement and the tax base of assets and liabilities
based on enacted tax rates expected to be in effect when taxes are actually paid or recovered, as well as for net
operating losses and tax credit carryforwards. The effect of a change in tax laws or rates on deferred tax assets and
liabilities is recognized in income in the period in which such change is enacted. Future tax benefits are recognized
to the extent that realization of such benefits is more likely than not, and a valuation allowance is established for any
portion of a deferred tax asset that management believes is not more likely than not to be realized.
Significant judgment is required in determining our tax expense and in evaluating our tax positions, including
evaluating uncertainties. Our tax filings are subject to audit by the tax authorities in the jurisdictions where we
conduct business. These audits may result in assessments of additional taxes that are resolved with the tax
authorities or through the courts. We have provided for the amounts that we believe will ultimately result from these
proceedings. We recognize uncertain tax positions that are "more likely than not" to be sustained if the relevant tax
authority were to audit the position with full knowledge of all the relevant facts and other information. For those tax
positions that meet this threshold, we measure the amount of tax benefit based on the largest amount of tax benefit
that has a greater than 50% chance of being realized in a final settlement with the relevant authority. We classify
interest and penalties associated with uncertain tax positions as income tax expense. The effects of tax adjustments
and settlements from taxing authorities are presented in the financial statements in the period they are finalized.
Supply Chain Finance Programs
On January 1, 2023, we adopted Financial Accounting Standards Board ("FASB") Accounting Standards Update
("ASU") No. ASU 2022-04, Liabilities – Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier
Finance Program Obligations, which enhances the transparency of supplier finance programs and requires certain
disclosures for a buyer in a supplier finance program.
Under the supply chain finance ("SCF") programs, administered by a third party, our suppliers are given the
opportunity to sell receivables from us to participating financial institutions at their sole discretion at a rate that
leverages our credit rating and thus might be more beneficial to our suppliers. Our responsibility is limited to making
payment on the terms originally negotiated with our supplier, regardless of whether the supplier sells its receivable
Baker Hughes Company 2023 Form 10-K | 62
Baker Hughes Company
Notes to Consolidated Financial Statements
to a financial institution. The range of payment terms we negotiate with our suppliers is consistent, irrespective of
whether a supplier participates in the program.
As of December 31, 2023 and 2022, $332 million and $275 million of SCF program liabilities are recorded in
"Accounts payable" in the consolidated statements of financial position, respectively, and reflected in net cash flows
from operating activities in the consolidated statements of cash flows when settled.
NEW ACCOUNTING STANDARDS TO BE ADOPTED
In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax
Disclosures" ("ASU 2023-09"), which is intended to enhance the transparency and decision usefulness of income
tax disclosures. The amendments in ASU 2023-09 provide for enhanced income tax information primarily through
changes to the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for the Company
prospectively to all annual periods beginning after December 15, 2024. Early adoption is permitted. The Company is
currently evaluating the impact of this standard on our disclosures.
In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to
Reportable Segment Disclosures" ("ASU 2023-07"), which enhances the disclosures required for operating
segments in the Company's annual and interim consolidated financial statements. ASU 2023-07 is effective
retrospectively for fiscal years beginning after December 15, 2023 and for interim periods within fiscal years
beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of
this standard on our disclosures.
All other new accounting pronouncements that have been issued, but not yet effective are currently being
evaluated and at this time are not expected to have a material impact on our financial position or results of
operations.
NOTE 2. CURRENT RECEIVABLES
Current receivables consist of the following at December 31:
Customer receivables
Other
Total current receivables
Less: Allowance for credit losses
Total current receivables, net
2023
2022
$
6,033 $
1,392
7,425
(350)
$
7,075 $
5,083
1,216
6,299
(341)
5,958
Customer receivables are recorded at the invoiced amount. The "Other" category consists primarily of advance
payments to suppliers, indirect taxes, and customer retentions.
NOTE 3. INVENTORIES
Inventories, net of reserves of $389 million and $396 million in 2023 and 2022, respectively, consist of the
following at December 31:
Finished goods
Work in process and raw materials
Total inventories, net
2023
2022
$
$
2,626 $
2,468
5,094 $
2,419
2,168
4,587
For the year ended December 31, 2023, we recorded inventory impairments of $35 million primarily in our
Oilfield Services & Equipment segment ("OFSE"). For the year ended December 31, 2022, we recorded inventory
Baker Hughes Company 2023 Form 10-K | 63
Baker Hughes Company
Notes to Consolidated Financial Statements
impairments of $31 million, primarily in our Industrial & Energy Technology ("IET") segment. See "Note 20.
Restructuring, Impairment, and Other" for further information.
NOTE 4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following at December 31:
Useful Life
2023
2022
Land and improvements (1)
Buildings, structures and related equipment
Machinery, equipment and other
Total cost
Less: Accumulated depreciation
8 - 10 years (1) $
5 - 40 years
1 - 20 years
332 $
2,264
7,974
10,570
(5,678)
Property, plant and equipment, less accumulated depreciation
$
4,893 $
347
2,120
7,192
9,659
(5,121)
4,538
(1) Useful life excludes land.
Depreciation expense relating to property, plant and equipment was $830 million, $839 million and $852 million
for the years ended December 31, 2023, 2022 and 2021, respectively. See "Note 20. Restructuring, Impairment and
Other" for additional information on property, plant and equipment impairments.
NOTE 5. GOODWILL AND INTANGIBLE ASSETS
GOODWILL
The changes in the carrying value of goodwill are detailed below by segment:
Oilfield Services
& Equipment
Industrial & Energy
Technology
Balance at December 31, 2021, gross
$
Accumulated impairment at December 31, 2021
Balance at December 31, 2021
19,825 $
(18,273)
1,552
(161)
41
—
1,432
—
1,432
95
14
4,661 $
(254)
4,407
—
417
(96)
4,728
(230)
4,498
43
55
Total
24,486
(18,527)
5,959
(161)
458
(96)
6,160
(230)
5,930
138
69
Disposition
Acquisitions
Currency exchange and other
Total
Classified as held for sale (1)
Balance at December 31, 2022
Acquisitions
Currency exchange and other
Balance at December 31, 2023
$
1,541 $
4,596 $
6,137
(1) The reduction in IET goodwill reflects a transfer of goodwill to business held for sale related to our Nexus Controls
business. See "Note 21. Business Dispositions and Acquisitions" for further information.
As a result of our goodwill impairment assessment performed in the year ended December 31, 2023, there were
no goodwill impairments deemed necessary.
Baker Hughes Company 2023 Form 10-K | 64
Baker Hughes Company
Notes to Consolidated Financial Statements
OTHER INTANGIBLE ASSETS
Intangible assets consist of the following at December 31:
2023
2022
Gross
Carrying
Amount
Accumulated
Amortization
Net
Gross
Carrying
Amount
Accumulated
Amortization
Net
Customer relationships
$
1,945 $
(818) $ 1,127 $
1,917 $
(729) $ 1,189
Technology
Trade names and trademarks
Capitalized software
Finite-lived intangible assets
Indefinite-lived intangible assets
1,253
290
1,413
4,901
2,202
(899)
(186)
(1,107)
(3,010)
—
354
104
306
1,891
2,202
1,212
287
1,308
4,725
2,202
(803) $
(175)
(1,040)
(2,747)
—
409
112
268
1,978
2,202
Total intangible assets
$
7,103 $
(3,010) $ 4,093 $
6,927 $
(2,747) $ 4,180
Finite-lived intangible assets are generally amortized on a straight-line basis with estimated useful lives ranging
from 1 to 35 years. Amortization expense was $257 million, $222 million and $253 million for the years ended
December 31, 2023, 2022 and 2021, respectively. No impairment for indefinite-lived intangible assets were
recorded in 2023.
Estimated amortization expense for each of the subsequent five fiscal years is expected to be as follows:
Year
2024
2025
2026
2027
2028
Estimated
Amortization
Expense
$
243
201
156
134
115
Baker Hughes Company 2023 Form 10-K | 65
Baker Hughes Company
Notes to Consolidated Financial Statements
NOTE 6. CONTRACT AND OTHER DEFERRED ASSETS
Contract assets reflect revenue earned in excess of billings on our long-term contracts to construct technically
complex equipment, provide long-term product service and maintenance or extended warranty arrangements and
other deferred contract related costs. Our long-term product service agreements are provided by our IET segment.
Our long-term equipment contracts are provided by both our IET and OFSE segments. Contract assets consist of
the following at December 31:
Long-term product service agreements
$
418 $
Long-term equipment contracts and certain other service agreements
Contract assets (total revenue in excess of billings)
Deferred inventory costs
Other costs to fulfill or obtain a contract (1)
Contract and other deferred assets
1,184
1,602
126
28
$
1,756 $
392
955
1,347
125
31
1,503
2023
2022
(1) Other costs to fulfill or obtain a contract consist primarily of non-recurring engineering costs incurred and expected to be
recovered.
Revenue recognized during the years ended December 31, 2023 and 2022 from performance obligations
satisfied (or partially satisfied) in previous years related to our long-term service agreements was $15 million and
$20 million, respectively. This includes revenue recognized from revisions to cost or billing estimates that may affect
a contract's total estimated profitability resulting in an adjustment of earnings.
NOTE 7. PROGRESS COLLECTIONS AND DEFERRED INCOME
Contract liabilities include progress collections, which reflects billings in excess of revenue, and deferred income
on our long-term contracts to construct technically complex equipment, long-term product maintenance or extended
warranty arrangements. Contract liabilities consist of the following at December 31:
Progress collections
Deferred income
Progress collections and deferred income (contract liabilities)
2023
2022
$
$
5,405 $
137
5,542 $
3,713
109
3,822
Revenue recognized during the years ended December 31, 2023 and 2022 that was included in the contract
liabilities at the beginning of the year was $2,999 million and $2,185 million, respectively.
NOTE 8. LEASES
Our leasing activities primarily consist of operating leases for administrative offices, manufacturing facilities,
research centers, service centers, sales offices and certain equipment.
The following table presents operating lease expense:
Operating Lease Expense
Long-term fixed lease
Long-term variable lease
Short-term lease (1)
Total operating lease expense
2023
2022
2021
276 $
254 $
73
503
48
477
852 $
779 $
255
32
440
727
$
$
(1)
Leases with a term of one year or less, including leases with a term of one month or less.
Baker Hughes Company 2023 Form 10-K | 66
Operating
Leases
244
178
122
79
57
234
914
145
769
189
552
741
Baker Hughes Company
Notes to Consolidated Financial Statements
Cash flows used in operating activities for operating leases approximates our expense for the years ended
December 31, 2023, 2022 and 2021.
As of December 31, 2023, maturities of our operating lease liabilities are as follows:
Year
2024
2025
2026
2027
2028
Thereafter
Total lease payments
Less: imputed interest
Total
$
$
Amounts recognized in the consolidated statements of financial position for operating leases consist of the
following:
All other current liabilities
All other liabilities
Total
2023
2022
$
$
220 $
549
769 $
Right-of-use assets of $769 million and $757 million as of December 31, 2023 and 2022, respectively, are
included in "All other assets" in the consolidated statements of financial position. The weighted-average remaining
lease term for our operating leases was approximately seven years for the years ended December 31, 2023 and
2022. The weighted-average discount rate used to determine the operating lease liability as of December 31, 2023
and 2022 was 3.3% and 3.1%, respectively.
Baker Hughes Company 2023 Form 10-K | 67
Baker Hughes Company
Notes to Consolidated Financial Statements
NOTE 9. DEBT
The carrying value of our short-term and long-term debt consist of the following at December 31:
2023
2022
Amount
Effective
Interest
Rate (1)
Amount
Effective
Interest
Rate (1)
Short-term and current portion of long-term debt
1.231% Senior Notes due December 2023
8.55% Debentures due June 2024 (2)
Other debt
Total short-term and current portion of long-term debt
Long-term debt
8.55% Debentures due June 2024 (2)
2.061% Senior Notes due December 2026
3.337% Senior Notes due December 2027
6.875% Notes due January 2029 (2)
3.138% Senior Notes due November 2029
4.486% Senior Notes due May 2030
5.125% Senior Notes due September 2040 (2)
4.080% Senior Notes due December 2047
Other long-term debt
Total long-term debt
Total debt
$
$
—
109
39
148
—
598
1,294
268
523
498
1,281
1,338
73
5,872
6,020
— % $
4.1 %
4.9 %
— %
2.4 %
5.3 %
3.9 %
3.2 %
4.6 %
4.2 %
4.1 %
6.3 %
$
649
—
29
677
114
597
1,277
273
523
497
1,286
1,338
75
5,980
6,658
1.5 %
— %
2.9 %
4.1 %
2.4 %
3.8 %
3.9 %
3.2 %
4.6 %
4.2 %
4.1 %
4.2 %
(1) Effective interest rate is based on the carrying value including issuance costs, interest rate swaps, and step-up
adjustments from the Baker Hughes Incorporated ("BHI") acquisition recorded for certain Senior Notes and Debentures.
(2) Represents long-term fixed rate debt obligations assumed in connection with the acquisition of BHI.
The carrying value of our short-term and long-term debt includes issuance costs, changes in fair value of the
debt instrument hedged by interest rate swaps, and step-up adjustments for the BHI acquisition. At December 31,
2023 and 2022, these adjustments resulted in a net increase to the carrying value of our debt totaling $95 million
and $91 million, respectively. The estimated fair value of total debt at December 31, 2023 and 2022 was $5,571
million and $5,863 million, respectively. For a majority of our debt the fair value was determined using quoted
period-end market prices. Where market prices are not available, we estimate fair values based on valuation
methodologies using current market interest rate data adjusted for our non-performance risk.
Maturities of debt for each of the five years in the period ending December 31, 2028, and in the aggregate
thereafter, are listed in the table below:
Total debt
$
148 $
4 $
614 $ 1,308 $
— $
3,946
2024
2025
2026
2027
2028
Thereafter
In November 2023, BHH LLC entered into a $3 billion committed unsecured revolving credit facility ("the New
Credit Agreement") with commercial banks maturing in November 2028. The New Credit Agreement contains
certain representations and warranties, certain affirmative covenants and negative covenants, in each case we
consider customary. Upon the occurrence of certain events of default, our obligations under the New Credit
Agreement may be accelerated. Such events of default include payment defaults to lenders under the New Credit
Agreement and other customary defaults. No such events of default have occurred. The New Credit Agreement is
Baker Hughes Company 2023 Form 10-K | 68
Baker Hughes Company
Notes to Consolidated Financial Statements
fully and unconditionally guaranteed on a senior unsecured basis by Baker Hughes. In addition, we have
authorization to issue up to $3 billion of commercial paper. At December 31, 2023 and 2022, there were no
borrowings under the New Credit Agreement and no outstanding commercial paper.
Baker Hughes Co-Obligor, Inc. is a co-obligor, jointly and severally with BHH LLC on our long-term debt
securities. This co-obligor is a 100%-owned finance subsidiary of BHH LLC that was incorporated for the sole
purpose of serving as a corporate co-obligor of long-term debt securities and has no assets or operations other than
those related to its sole purpose. As of December 31, 2023, Baker Hughes Co-Obligor, Inc. is a co-obligor of our
long-term debt securities totaling $5,908 million.
Certain Senior Notes contain covenants that restrict our ability to take certain actions, including, but not limited
to, the creation of certain liens securing debt, the entry into certain sale-leaseback transactions, and engaging in
certain merger, consolidation and asset sale transactions in excess of specified limits. At December 31, 2023, we
were in compliance with all debt covenants.
NOTE 10. EMPLOYEE BENEFIT PLANS
DEFINED BENEFIT PLANS
We maintain Company sponsored pension plans for certain of our employees. We also maintain unfunded end-
of-service benefit plans that are mandated in certain countries in which we operate. Our primary plans disclosed in
2023 included four U.S. plans and eight non-U.S. plans, primarily in the United Kingdom and Germany, all with plan
assets or obligations greater than $20 million. These defined benefit plans generally provide benefits to employees
based on formulas recognizing length of service and earnings; however, the majority of these plans are either frozen
or closed to new entrants. We also provide certain postretirement health care benefits, through unfunded plans, to a
closed group of U.S. employees who retire and meet certain age and service requirements. The accumulated
postretirement benefit obligation related to these plans was $33 million and $37 million at December 31, 2023 and
2022, respectively.
Funded Status
The funded status position represents the difference between the benefit obligation and the plan assets. Our
primary plans consist of seven funded plans and five unfunded plans. The projected benefit obligation ("PBO") for
pension benefits represents the actuarial present value of benefits attributed to employee services and
compensation and includes an assumption about future compensation levels. The accumulated benefit obligation
("ABO") is the actuarial present value of pension benefits attributed to employee service to date at present
compensation levels. The ABO differs from the PBO in that the ABO does not include any assumptions about future
compensation levels.
Baker Hughes Company 2023 Form 10-K | 69
Baker Hughes Company
Notes to Consolidated Financial Statements
Below is the reconciliation of the beginning and ending balances of benefit obligations, fair value of plan assets
and the funded status of our defined benefit plans ("Pension Benefits").
Change in benefit obligation:
Benefit obligation at beginning of year
Service cost
Interest cost
Actuarial gain (1)
Benefits paid
Settlements
Settlement due to plan termination (2)
Acquisition
Foreign currency translation adjustments
Benefit obligation at end of year
Change in plan assets:
Fair value of plan assets at beginning of year
Actual return on plan assets
Employer contributions
Benefits paid
Settlements
Settlement due to plan termination (2)
Acquisition
Foreign currency translation adjustments
Fair value of plan assets at end of year
Funded status - underfunded at end of year
Accumulated benefit obligation
Pension Benefits
2023
2022
2,634 $
15
116
(4)
(126)
(4)
(246)
—
58
2,443
2,266
121
18
(126)
(4)
(246)
—
51
2,080
(363) $
3,550
23
78
(928)
(119)
(24)
—
202
(148)
2,634
3,147
(850)
32
(119)
(24)
—
214
(134)
2,266
(368)
2,399 $
2,595
$
$
$
(1) The actuarial gain in 2022 was primarily related to a change in the discount rate used to measure the benefit obligation
for our plans.
(2) Plan termination relates to the termination of one of our fully funded frozen U.S. defined benefit plans that was initiated
in April 2022.
The amounts recognized in the consolidated statements of financial position consist of the following at
December 31:
Noncurrent assets
Current liabilities
Noncurrent liabilities
Net amount recognized
Baker Hughes Company 2023 Form 10-K | 70
Pension Benefits
2023
2022
$
$
78 $
(17)
(424)
(363) $
58
(15)
(411)
(368)
Baker Hughes Company
Notes to Consolidated Financial Statements
Information for the plans with ABOs and PBOs in excess of plan assets consist of the following at December 31:
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
Pension Benefits
2023
2022
$
$
$
1,410 $
1,366 $
968 $
1,143
1,103
717
We have a U.S. non-qualified supplemental pension plan ("BH SPP") for certain employees which is included in
the benefit obligations and funded status in the tables above. In order to meet a portion of our obligations of the BH
SPP, we established a trust comprised primarily of mutual fund assets. The value of these assets was $36 million
and $34 million as of December 31, 2023 and 2022, respectively. These assets are not included as plan assets or in
the funded status amounts in the tables above and below.
Net Periodic Cost
The components of net periodic cost consist of the following:
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service credit
Amortization of net actuarial loss
Curtailment / settlement loss
Net periodic cost
Pension Benefits
2023
2022
2021
$
15 $
116
(102)
1
19
(16)
$
33 $
23 $
78
(114)
1
27
2
17 $
27
64
(130)
1
40
2
4
The service cost component of the net periodic cost is included in "Operating income (loss)" and all other
components are included in "Other non-operating income (loss), net" in the consolidated statements of income
(loss).
Assumptions Used in Benefit Calculations
Accounting requirements necessitate the use of assumptions to reflect the uncertainties and the length of time
over which the pension obligations will be paid. The actual amount of future benefit payments will depend upon
when participants retire, the amount of their benefit at retirement and how long they live. To reflect the obligation in
today's dollars, we discount the future payments using a rate that matches the time frame over which the payments
are expected to be made. We also need to assume a long-term rate of return that will be earned on investments
used to fund these payments.
Another assumption used is the interest crediting rate for our U.S. qualified cash balance plan. Under the
provisions of this pension plan, a hypothetical cash balance account has been established for each participant.
Such accounts receive quarterly interest credits based on a prescribed formula.
Weighted average assumptions used to determine benefit obligations for these plans are as follows:
Discount rate
Rate of compensation increase
Interest crediting rate
Pension Benefits
2023
2022
4.54 %
3.26 %
3.98 %
4.89 %
3.30 %
4.31 %
Baker Hughes Company 2023 Form 10-K | 71
Baker Hughes Company
Notes to Consolidated Financial Statements
Weighted average assumptions used to determine net periodic cost for these plans are as follows:
Discount rate
Expected long-term return on plan assets
Interest crediting rate
Pension Benefits
2023
2022
2021
4.89 %
5.05 %
4.31 %
2.15 %
3.85 %
2.60 %
1.66 %
4.07 %
2.60 %
We determine the discount rate using a bond matching model, whereby the weighted average yields on high-
quality fixed-income securities have maturities consistent with the timing of benefit payments. Lower discount rates
increase the size of the benefit obligations while higher discount rates reduce the size of the benefit obligation. The
compensation assumption is used in our active plans to estimate the annual rate at which the pay for plan
participants will grow. If the rate of growth assumed increases, the size of the pension obligations will increase.
The expected return on plan assets is the estimated long-term rate of return that will be earned on the
investments used to fund the pension obligations. To determine this rate, we consider the current and target
composition of plan investments, our historical returns earned, and our expectations about the future.
Accumulated Other Comprehensive Loss
The amount recorded before-tax in accumulated other comprehensive loss related to our defined benefit plans
consists of the following at December 31:
Net actuarial loss
Net prior service cost
Total
Plan Assets
Pension Benefits
2023
2022
$
$
333 $
15
348 $
348
15
363
We have investment committees that meet regularly to review portfolio returns and to determine asset-mix
targets based on asset/liability studies. Third-party investment consultants assist these committees in developing
asset allocation strategies to determine our expected rates of return and expected risk for various investment
portfolios. The investment committees considered these strategies in the formal establishment of the current asset-
mix targets based on the projected risk and return levels for all major asset classes.
Baker Hughes Company 2023 Form 10-K | 72
Baker Hughes Company
Notes to Consolidated Financial Statements
The table below presents the fair value of the plan assets at December 31:
Debt securities
Fixed income and cash investment funds
$
1,122 $
1,482
2023
2022
Equity securities
Global equity securities (1)
U.S. equity securities (1)
Insurance contracts
Real estate
Private equities
Other investments (2)
Total plan assets
227
157
103
34
35
402
$
2,080 $
180
102
100
53
37
313
2,266
(1)
Include direct investments and investment funds.
(2) Consists primarily of asset allocation fund investments.
Plan assets valued using Net Asset Value ("NAV") as a practical expedient amounted to $1,967 million and
$2,157 million as of December 31, 2023 and 2022, respectively. The percentages of plan assets valued using NAV
by investment fund type for equity securities, fixed income and cash, and alternative investments were 20%, 57%,
and 23% as of December 31, 2023, respectively, and 13%, 69%, and 18% as of December 31, 2022, respectively.
Those investments that were measured at fair value using NAV as a practical expedient were excluded from the fair
value hierarchy. The practical expedient was not applied for investments with a fair value of $113 million and $109
million as of December 31, 2023 and 2022, respectively. There were investments classified within Level 3 of $103
million and $100 million for non U.S. insurance contracts as of December 31, 2023 and 2022, respectively.
Funding Policy
The funding policy for our Pension Benefits is to contribute amounts sufficient to meet minimum funding
requirements as set forth in employee benefit and tax laws plus such additional amounts as we may determine to be
appropriate. In 2023, we contributed approximately $18 million, which includes benefit payments made directly to
the employee for our unfunded plans. We anticipate we will contribute between approximately $40 million to $45
million to our pension plans in 2024.
The following table presents the expected benefit payments for Pension Benefits over the next 10 years. For
funded Company sponsored plans, the benefit payments are made by the respective pension trust funds.
Year
2024
2025
2026
2027
2028
2029-2033
$
Pension
Benefits
164
127
132
135
136
717
DEFINED CONTRIBUTION PLANS
Our primary defined contribution plan during 2023 was the Company-sponsored U.S. 401(k) plan ("401(k)
Plan"). The 401(k) Plan allows eligible employees to contribute portions of their eligible compensation to an
investment trust. The Company matches employee contributions at the rate of $1.00 per $1.00 employee
contribution for the first 5% of the employee's eligible compensation, and such contributions vest immediately. In
Baker Hughes Company 2023 Form 10-K | 73
Baker Hughes Company
Notes to Consolidated Financial Statements
addition, we make cash contributions for all eligible employees of 4% of their eligible compensation and such
contributions are fully vested after three years of employment. The 401(k) Plan provides several investment options,
for which the employee has sole investment discretion; however, the 401(k) Plan does not offer the Company's
common stock as an investment option. Our costs for the 401(k) Plan and several other U.S. and non-U.S. defined
contribution plans amounted to $217 million and $212 million in 2023 and 2022, respectively.
We have two non-qualified defined contribution plans that are invested through trusts. The assets and
corresponding liabilities were $281 million and $256 million at December 31, 2023 and 2022, respectively, and are
included in "All other assets" and "Liabilities for pensions and other postretirement benefits," respectively, in the
consolidated statements of financial position.
NOTE 11. INCOME TAXES
The provision for income taxes consists of the following:
Current:
U.S.
Foreign
Total current
Deferred:
U.S.
Foreign
Total deferred
Provision for income taxes
2023
2022
2021
$
33 $
711
744
(27)
(32)
(59)
6 $
489
495
40
65
105
$
685 $
600 $
11
614
625
(24)
157
133
758
On August 16, 2022, the U.S. enacted The Inflation Reduction Act which included a number of additional credits
and deductions for businesses and individuals. The Inflation Reduction Act also included the adoption of the
Corporate Alternative Minimum Tax in 2023, which is based on financial statement book income of large
corporations. In 2023, the Company is not subject to the Corporate Alternative Minimum Tax.
The geographic sources of income before income taxes consist of the following:
U.S.
Foreign
Income before income taxes
2023
2022
2021
$
$
882 $
1,773
2,655 $
(698) $
720
22 $
(724)
1,152
428
Baker Hughes Company 2023 Form 10-K | 74
Baker Hughes Company
Notes to Consolidated Financial Statements
The provision for income taxes differs from the amount computed by applying the U.S. statutory income tax rate
to the income before income taxes for the reasons set forth below for the years ended December 31:
2023
2022
2021
Income before income taxes
$
2,655
$
22
$
Taxes at the U.S. federal statutory income tax rate
Effect of foreign operations (2)
Tax impact of partnership structure
Change in valuation allowances (1)
Tax expense (benefit) due to unrecognized tax benefits
Other - net
Provision for income taxes (3)
Actual income tax rate
558
112
(103)
53
(5)
70
5
338
6
164
(7)
94
$
685
$
600
$
25.8 %
2,727.3 %
177.1 %
428
90
216
137
70
201
44
758
(1) For December 31, 2023, this amount was reduced by $81 million that is related to the release of a valuation allowance
for certain deferred tax assets.
(2) For December 31, 2022, $140 million of this amount relates to the charges associated with the sale and suspension of
our Russia operations.
(3) For December 31, 2021, $121 million of this amount was previously indemnified under the Tax Matters Agreement with
General Electric ("GE") of which $119 million was included in tax expense due to unrecognized tax benefits. In
December 2022, the Company and GE entered into an agreement to terminate the Tax Matters Agreement.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as
operating loss and tax credit carryforwards.
As a result of an internal reorganization completed on December 30, 2023, BHH LLC became a single member
LLC thereby terminating the partnership for U.S. income tax purposes. As of December 31, 2023, U.S. deferred tax
assets and liabilities are now recorded based on the inside book basis versus tax basis difference and are no longer
recorded based on the Company's outside basis difference in the BHH LLC partnership. As a result, in 2023 the
deferred tax asset related to the investment in partnership has been adjusted accordingly and other deferred tax
assets and liabilities, including PP&E, intangible assets, and lower tier investment in partnerships & subsidiaries,
have been increased to reflect the tax effect of the inside basis difference of those respective assets and liabilities.
Baker Hughes Company 2023 Form 10-K | 75
Baker Hughes Company
Notes to Consolidated Financial Statements
The tax effects of differences that give rise to significant portions of the deferred income tax assets and deferred
income tax liabilities as of December 31 consist of the following:
Deferred tax assets:
Operating & capital loss carryforwards
Tax credit & other carryforwards
Investment in partnerships & subsidiaries
Property, plant and equipment
Employee benefits
Goodwill and other intangible assets
Receivables
Inventory
Other
Total deferred income tax asset
Valuation allowances
Total deferred income tax asset after valuation allowance
Deferred tax liabilities:
Indefinite-lived intangible assets
Fair value of derivative financial instruments
Other
Total deferred income tax liability
Net deferred tax asset
2023
2022
3,332 $
936
286
169
241
137
111
73
181
5,466
(4,416)
1,050
(380)
(90)
(34)
(504)
546 $
2,074
1,087
846
128
62
46
94
52
163
4,552
(4,090)
462
—
—
(34)
(34)
428
$
$
At December 31, 2023, we had approximately $417 million of non-U.S. tax credits which may be carried forward
indefinitely under applicable foreign law, $366 million of U.S. foreign tax credits and $153 million of other U.S.
Federal and state tax credits and other carryforwards, the majority of which will expire after tax year 2027 under
U.S. Federal and state tax law. Additionally, we had $3,299 million of net operating loss carryforwards ("NOLs"), of
which approximately $252 million will expire within five years, $1,862 million will expire between six years and 20
years, and the remainder can be carried forward indefinitely. Lastly, we had $33 million of capital loss carryforwards,
the majority of which can be carried forward indefinitely.
We record a valuation allowance when it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of the deferred tax assets depends on the ability to generate
sufficient taxable income of the appropriate character in the future and in the appropriate taxing jurisdictions. At
December 31, 2023, $4,416 million of valuation allowances are recorded against various deferred tax assets,
primarily related to foreign operating and capital losses of $2,987 million and U.S. foreign and non-U.S. tax credit
carryforwards of $770 million.
Indefinite reinvestment is determined by management’s intentions concerning the future operations of the
Company. In cases where repatriation would otherwise incur significant withholding or income taxes, these earnings
have been indefinitely reinvested in the Company's active non-U.S. business operations. As of December 31, 2023,
the cumulative amount of undistributed foreign earnings is approximately $3,708 million. Computation of the
potential deferred tax liability associated with these undistributed earnings and any other basis differences is not
practicable.
At December 31, 2023, we had $467 million of tax liabilities for total gross unrecognized tax benefits related to
uncertain tax positions. In addition to these uncertain tax positions, we had $83 million and $79 million related to
interest and penalties, respectively, for total liabilities of $629 million for uncertain positions. If we were to prevail on
all uncertain positions, the net effect would result in an income tax benefit of approximately $559 million. The
remaining $71 million is comprised of $41 million for deferred tax assets that represent tax benefits that would be
received in different taxing jurisdictions or in a different character and $30 million increased valuation allowances.
Baker Hughes Company 2023 Form 10-K | 76
Baker Hughes Company
Notes to Consolidated Financial Statements
The following table presents the changes in our gross unrecognized tax benefits included in the consolidated
statements of financial position.
Asset / (Liability)
Balance at beginning of year
Additions for tax positions of the current year
Additions for tax positions of prior years
Reductions for tax positions of prior years
Settlements with tax authorities
Lapse of statute of limitations
Balance at end of year
2023
2022
$
(496) $
(531)
(15)
(50)
32
26
36
(19)
(99)
100
24
29
$
(467) $
(496)
It is expected that the amount of unrecognized tax benefits will change in the next twelve months due to expiring
statutes, audit activity, tax payments, and competent authority proceedings related to transfer pricing or final
decisions in matters that are the subject of litigation in various taxing jurisdictions in which we operate. At
December 31, 2023, we had approximately $40 million of tax liabilities related to uncertain tax positions, each of
which are individually insignificant, and each of which are reasonably possible of being settled within the next twelve
months.
We conduct business in more than 120 countries and are subject to income taxes in most taxing jurisdictions in
which we operate, each of which may have multiple open years subject to examination. All Internal Revenue
Service examinations have been completed and closed through 2015 for the most significant U.S. returns. We
believe that we have made adequate provision for all income tax uncertainties in all jurisdictions.
NOTE 12. STOCK-BASED COMPENSATION
The Company has the Long-Term Incentive Plan ("LTI Plan") under which we may grant restricted stock units
("RSU"), performance share units ("PSU"), stock options and other equity-based awards to employees and non-
employee directors providing services to the Company and our subsidiaries. The Company also provides an
Employee Stock Purchase Plan for eligible employees. A total of up to 29.5 million shares of Class A common stock
are reserved and available for issuance pursuant to awards granted under the LTI Plan over its term which expires
on the date of the annual meeting of the Company in 2031. A total of 25.1 million shares of Class A common stock
are available for issuance as of December 31, 2023.
Stock-based compensation cost was $197 million, $207 million and $205 million for the years ended December
31, 2023, 2022 and 2021, respectively. Stock-based compensation cost is measured at the date of grant based on
the calculated fair value of the award and is generally recognized on a straight-line basis over the vesting period of
the equity grant. The compensation cost is determined based on awards ultimately expected to vest; therefore, we
have reduced the cost for estimated forfeitures based on historical forfeiture rates. Forfeitures are estimated at the
time of grant and revised, if necessary, in subsequent periods to reflect actual forfeitures. There were no stock-
based compensation costs capitalized as the amounts were not material.
Restricted Stock
We may grant to our officers, directors and key employees RSUs, where each unit represents the right to
receive, at the end of a stipulated period, one unrestricted share of stock with no exercise price. Certain RSUs are
subject to cliff or graded vesting, generally ranging over a period of three years. Non-employee directors are
granted RSUs that immediately vest on the grant date. Cash dividend equivalents are accumulated on RSUs and
are payable upon vesting of the awards. We determine the fair value of RSUs based on the market price of our
common stock on the date of grant.
Baker Hughes Company 2023 Form 10-K | 77
Baker Hughes Company
Notes to Consolidated Financial Statements
The following table presents the changes in RSUs outstanding and related information (in thousands, except
per unit prices):
Unvested balance at December 31, 2022
Granted
Vested
Forfeited
Unvested balance at December 31, 2023
Number of
Units
Weighted Average
Grant Date Fair
Value Per Unit
14,342 $
6,404
(7,351)
(1,282)
12,113 $
24.31
30.20
23.60
26.43
27.70
In 2023, the total intrinsic value of RSUs vested (defined as the value of shares awarded based on the price of
our common stock at vesting date) was $227 million and unvested RSUs was $414 million. The total grant date fair
value of RSUs vested in 2023 was $173 million. As of December 31, 2023, there was $178 million of total
unrecognized compensation cost related to unvested RSUs, which is expected to be recognized over a weighted
average period of 1.76 years.
Performance Share Units
We may grant PSUs to certain officers and key employees. The PSUs are stock-based awards tied to
predefined company metrics and contain a payout modifier based on total shareholder return ("TSR"). PSUs
generally cliff vest after a service period of three years. Cash dividend equivalents are accumulated on PSUs and
are payable upon vesting of the awards. The fair value of the awards determined for the predefined company
metrics are based on the market price of our common stock on the date of grant. The fair value of the PSU awards
is determined based on a Monte Carlo simulation method.
The following table presents the changes in PSUs outstanding and related information (in thousands, except per
unit prices):
Unvested balance at December 31, 2022
Granted
Vested
Cancelled (1)
Forfeited
Unvested balance at December 31, 2023
Number of
Units
Weighted Average
Grant Date Fair
Value Per Unit
3,525 $
1,222
(827)
(563)
(529)
2,828 $
25.56
30.17
20.61
21.85
29.06
28.70
(1)
Includes adjustments based on achievement of predefined company metrics.
The total intrinsic value of PSUs vested and unvested, (defined as the value of the shares awarded at the year-
end market price) was $23 million and $97 million, respectively, as of December 31, 2023. The total grant date fair
value of PSUs vested in 2023 was $17 million. Total unrecognized compensation cost related to unvested PSUs,
which is expected to be recognized over a weighted average period of 1.89 years, was $28 million as of
December 31, 2023.
Stock Options
We previously granted stock options to our officers, directors and key employees. Stock options generally vest
in equal amounts over a vesting period of three years provided that the employee has remained continuously
employed by the Company through such vesting date. We have not granted stock options to officers, directors, or
key employees since 2019.
Baker Hughes Company 2023 Form 10-K | 78
Baker Hughes Company
Notes to Consolidated Financial Statements
The following table presents the changes in stock options outstanding and related information (in thousands,
except per option prices):
Outstanding at December 31, 2022
Exercised
Expired
Outstanding and exercisable at December 31, 2023
Number of
Options
Weighted Average
Exercise Price
Per Option
2,907 $
(492)
(174)
2,241 $
33.02
26.44
39.79
33.92
The weighted average remaining contractual term for options outstanding and options exercisable at
December 31, 2023 was 3.4 years. The maximum contractual term of options outstanding is 5.1 years.
There were nil, 530 thousand and 850 thousand options that vested in 2023, 2022 and 2021, respectively. The
total fair value of options vested was nil, $3 million and $7 million, in 2023, 2022 and 2021, respectively.
Unrecognized compensation cost related to unvested stock options was immaterial as of December 31, 2023.
The total intrinsic value of stock options exercised (defined as the amount by which the market price of our
common stock on the date of exercise exceeds the exercise price of the option) in 2023 was $3 million. The total
intrinsic value of stock options outstanding and options exercisable at December 31, 2023 was $6 million. The
intrinsic value of stock options outstanding is calculated as the amount by which the quoted price of $34.18 of our
common stock as of the end of 2023 exceeds the exercise price of the options.
Employee Stock Purchase Plan
The employee stock purchase plan provides for eligible employees to purchase shares of Class A common
stock quarterly on an after-tax basis in an amount between 1% and 20% of their annual pay at a 15% discount of
the fair market value of our Class A common stock at the end of each quarterly offering period. An employee may
not purchase more than $3,000 in any of the three-month measurement periods described above
or $12,000 annually.
A total of 21.5 million shares of Class A common stock are authorized for issuance, and at December 31, 2023,
there were 8.7 million shares of Class A common stock reserved for future issuance.
NOTE 13. EQUITY
COMMON STOCK
We are authorized to issue 2 billion shares of Class A common stock, 1.25 billion shares of Class B common
stock and 50 million shares of preferred stock each of which have a par value of $0.0001 per share. The number of
shares outstanding of Class A and Class B common stock at December 31, 2023 is 998 million and nil, respectively.
We have not issued any preferred stock. Each share of Class B common stock and the associated member units of
BHH LLC form a paired interest. While each share of Class B common stock has equal voting rights to a share of
Class A common stock, it has no economic rights, meaning holders of Class B common stock have no right to
dividends or any assets in the event of liquidation of the Company. Our Class B common stock was previously held
by GE. As of December 31, 2023 and 2022, there were no shares of Class B common stock issued and
outstanding.
We have a share repurchase program which we expect to fund from cash generated from operations, and we
expect to make share repurchases from time to time subject to the Company's capital plan, market conditions, and
other factors, including regulatory restrictions. The repurchase program may be suspended or discontinued at any
time and does not have a specified expiration date. In 2023 and 2022, the Company repurchased and canceled
16.3 million and 29.7 million shares of Class A common stock, each for $538 million and $828 million, representing
an average price per share of $33.09 and $27.91, respectively. As of December 31, 2023, the Company had
authorization remaining to repurchase up to approximately $2.2 billion of its Class A common stock.
Baker Hughes Company 2023 Form 10-K | 79
Baker Hughes Company
Notes to Consolidated Financial Statements
The following table presents the changes in the number of shares outstanding (in thousands):
2023
2022
Class A
Common
Stock
Class B
Common
Stock
Class A
Common
Stock
Class B
Common
Stock
Balance at beginning of year
Issue of shares upon vesting of restricted stock units (1)
Issue of shares on exercise of stock options (1)
Issue of shares for employee stock purchase plan
Exchange of Class B common stock for Class A common stock (2)
Repurchase and cancellation of Class A common stock
Balance at end of year
1,005,960
5,738
434
1,846
—
(16,269)
997,709
—
—
—
—
—
—
909,142
116,548
6,316
1,632
2,017
—
—
—
116,548 (116,548)
(29,694)
— 1,005,960
—
—
(1) Share amounts reflected above are net of shares withheld to satisfy the employee's tax withholding obligation.
(2) When shares of Class B common stock, together with associated BHH LLC member units ("LLC Units"), were
exchanged for shares of Class A common stock, such shares of Class B common stock were canceled.
During 2023 and 2022, the Company declared and paid aggregate regular dividends of $0.78 and $0.73 per
share, respectively, to holders of record of the Company's Class A common stock.
ACCUMULATED OTHER COMPREHENSIVE LOSS ("AOCL")
The following tables present the changes in accumulated other comprehensive loss, net of tax:
Foreign
Currency
Translation
Adjustments
Cash Flow
Hedges
Benefit
Plans
Accumulated
Other
Comprehensive
Loss
Balance at December 31, 2021
$
(2,125) $
(10) $
(250) $
(2,385)
Other comprehensive income (loss) before
reclassifications
Amounts reclassified from accumulated other
comprehensive loss
Deferred taxes
Other comprehensive income (loss)
Less: Other comprehensive loss attributable to
noncontrolling interests
Less: Reallocation of AOCL based on change in ownership
of BHH LLC Units
Balance at December 31, 2022
Other comprehensive income (loss) before
reclassifications
Amounts reclassified from accumulated other
comprehensive loss
Deferred taxes
Other comprehensive income (loss)
Balance at December 31, 2023
(294)
25
—
(269)
(3)
275
(2,666)
153
—
—
153
(1)
3
—
2
—
1
(9)
12
(8)
(1)
3
2
27
(43)
(14)
—
32
(296)
(14)
28
5
19
(293)
55
(43)
(281)
(3)
308
(2,971)
151
20
4
175
$
(2,513) $
(6) $
(277) $
(2,796)
Baker Hughes Company 2023 Form 10-K | 80
Baker Hughes Company
Notes to Consolidated Financial Statements
The amounts reclassified from accumulated other comprehensive loss during the years ended December 31,
2023 and 2022 represent (i) gains (losses) reclassified on cash flow hedges when the hedged transaction occurs,
(ii) the amortization of net actuarial gain (loss), prior service credit, settlements, and curtailments which are included
in the computation of net periodic pension cost (see "Note 10. Employee Benefit Plans" for additional details), and
(iii) the release of foreign currency translation adjustments.
NOTE 14. EARNINGS PER SHARE
Basic and diluted net income (loss) per share of Class A common stock is presented below:
(In millions, except per share amounts)
2023
2022
2021
Net income (loss)
Less: Net income (loss) attributable to noncontrolling interests
Net income (loss) attributable to Baker Hughes Company
Weighted average shares outstanding:
Class A basic
Class A diluted
Net income (loss) per share attributable to common stockholders:
Class A basic
Class A diluted
$
$
$
$
1,970 $
27
1,943 $
1,008
1,015
(578) $
23
(601) $
987
987
1.93 $
1.91 $
(0.61) $
(0.61) $
(330)
(111)
(219)
824
824
(0.27)
(0.27)
Shares of our Class B common stock do not share in earnings or losses of the Company and are not
considered in the calculation of basic or diluted earnings per share ("EPS") above. As such, separate presentation
of basic and diluted EPS of Class B under the two class method has not been presented. The basic weighted
average shares outstanding for our Class B common stock were nil, 30 million, and 215 million for the years ended
December 31, 2023, 2022 and 2021, respectively. The basic weighted average shares outstanding for both our
Class A and Class B common stock combined were 1,008 million, 1,017 million, and 1,039 million for the years
ended December 31, 2023, 2022 and 2021, respectively.
For the year ended December 31, 2023, Class A diluted shares include the dilutive impact of equity awards
except for approximately 2 million options that were excluded because the exercise price exceeded the average
market price of our Class A common stock and is therefore antidilutive. For the years ended December 31, 2022,
and 2021, we excluded all outstanding equity awards from the computation of diluted net loss per share because
their effect is antidilutive.
NOTE 15. FINANCIAL INSTRUMENTS
RECURRING FAIR VALUE MEASUREMENTS
Our assets and liabilities measured at fair value on a recurring basis consist of derivative instruments and
investment securities.
Assets
Derivatives
Investment securities
Total assets
Liabilities
Derivatives
Total liabilities
2023
2022
Net
Level 1 Level 2 Level 3
Balance Level 1 Level 2 Level 3
Net
Balance
$ — $
1,040
1,040
34 $ — $
—
34
2
2
34 $ — $
1,042
1,076
748
748
18 $ — $
—
18
—
—
18
748
766
—
$ — $
(76)
(76) $
—
— $
(76)
(76) $
—
— $
(86)
(86) $
—
— $
(86)
(86)
Baker Hughes Company 2023 Form 10-K | 81
Baker Hughes Company
Notes to Consolidated Financial Statements
Investment securities (1)
Non-U.S. debt securities (2)
Equity securities
Total
2023
2022
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
$
$
66 $
527
593 $
1 $ — $
67 $ — $ — $ — $
451
452 $
975
(3)
(3) $ 1,042 $
557
557 $
191
191 $
—
— $
—
748
748
(1) Gains (losses) recorded to earnings related to these securities were $405 million, $(271) million and $(843) million for
the years ended December 31, 2023, 2022, and 2021, respectively.
(2) As of December 31, 2023, our non-U.S. debt securities are classified as available for sale securities and mature within
two years.
As of December 31, 2023 and 2022, the balance of our equity securities with readily determinable fair values is
$975 million and $748 million, respectively, and is comprised mainly of our investment in ADNOC Drilling, and is
recorded primarily in "All other current assets" in the consolidated statements of financial position. We measured our
investments at fair value based on quoted prices in active markets.
Gains (losses) recorded to earnings for our equity securities with readily determinable fair values were $435
million, $(264) million, and $(843) million for the years ended December 31, 2023, 2022 and 2021, respectively.
Gains (losses) related to our equity securities with readily determinable fair values are reported in "Other non-
operating income (loss), net" in the consolidated statements of income (loss).
OTHER EQUITY INVESTMENTS
During the second quarter of 2023, certain equity securities without a readily determinable fair value were
remeasured as of the date that an observable transaction occurred, which resulted in the Company recording a gain
of $118 million. Gains (losses) related to our equity securities without readily determinable fair values are reported in
"Other non-operating income (loss), net" in the consolidated statements of income (loss).
FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS
Our financial instruments include cash and cash equivalents, current receivables, certain investments, accounts
payable, short and long-term debt, and derivative financial instruments. Except for long-term debt, the estimated fair
value of these financial instruments at December 31, 2023 and 2022 approximates their carrying value as reflected
in our consolidated financial statements. For further information on the fair value of our debt, see "Note 9. Debt."
DERIVATIVES AND HEDGING
We use derivatives to manage our risks and do not use derivatives for speculation. The table below summarizes
the fair value of all derivatives, including hedging instruments and embedded derivatives.
2023
2022
Assets
(Liabilities)
Assets
(Liabilities)
Derivatives accounted for as hedges
Currency exchange contracts
Interest rate swap contracts
Derivatives not accounted for as hedges
Currency exchange contracts and other
Total derivatives
$
$
10 $
—
24
34 $
(3) $
(52)
(21)
(76) $
1 $
—
17
18 $
—
(69)
(17)
(86)
Derivatives are classified in the consolidated statements of financial position depending on their respective
maturity date. As of December 31, 2023 and 2022, $31 million and $17 million of derivative assets are recorded in
Baker Hughes Company 2023 Form 10-K | 82
Baker Hughes Company
Notes to Consolidated Financial Statements
"All other current assets" and $3 million and $1 million are recorded in "All other assets" in the consolidated
statements of financial position, respectively. As of December 31, 2023 and 2022, $23 million and $17 million of
derivative liabilities are recorded in "All other current liabilities" and $53 million and $69 million are recorded in "All
other liabilities" in the consolidated statements of financial position, respectively.
FORMS OF HEDGING
Cash Flow Hedges
We use cash flow hedging primarily to mitigate the effects of foreign exchange rate changes on purchase and
sale contracts. Accordingly, the vast majority of our derivative activity in this category consists of currency exchange
contracts. In addition, we are exposed to interest rate risk fluctuations in connection with long-term debt that we
issue from time to time to fund our operations. Changes in the fair value of cash flow hedges are recorded in a
separate component of equity (referred to as "Accumulated Other Comprehensive Income" or "AOCI") and are
recorded in earnings in the period in which the hedged transaction occurs. See "Note 13. Equity" for further
information on activity in AOCI for cash flow hedges. The maximum term of cash flow hedges that hedge forecasted
transactions was approximately two years and one year at December 31, 2023 and 2022, respectively.
Fair Value Hedges
All of our long-term debt is comprised of fixed rate instruments. We are subject to interest rate risk on our debt
portfolio and may use interest rate swaps to manage the economic effect of fixed rate obligations associated with
certain debt. Under these arrangements, we agree to exchange, at specified intervals, the difference between fixed
and floating interest amounts calculated by reference to an agreed-upon notional principal amount.
As of December 31, 2023 and 2022, we had interest rate swaps with a notional amount of $500 million that
converted a portion of our $1,350 million aggregate principal amount of 3.337% fixed rate Senior Notes due 2027
into a floating rate instrument with an interest rate based on a LIBOR index as a hedge of its exposure to changes in
fair value that are attributable to interest rate risk. As of July 1, 2023, the interest rate changed to be based on a
Secured Overnight Financing Rate index. We concluded that the interest rate swap met the criteria necessary to
qualify for the short-cut method of hedge accounting, and as such, an assumption is made that the change in the
fair value of the hedged debt, due to changes in the benchmark rate, exactly offsets the change in the fair value of
the interest rate swaps. Therefore, the derivative is considered to be effective at achieving offsetting changes in the
fair value of the hedged liability, and no ineffectiveness is recognized. The mark-to-market of this fair value hedge is
recorded as gains or losses in interest expense and is equally offset by the gain or loss of the underlying debt
instrument, which also is recorded in interest expense.
NOTIONAL AMOUNT OF DERIVATIVES
The notional amount of a derivative is used to determine, along with the other terms of the derivative, the
amounts to be exchanged between the counterparties. We disclose the derivative notional amounts on a gross
basis to indicate the total counterparty risk but it does not generally represent amounts exchanged by us and the
counterparties. A substantial majority of the outstanding notional amount of $4.2 billion and $3.8 billion at
December 31, 2023 and 2022, respectively, is related to hedges of anticipated sales and purchases in foreign
currency, commodity purchases, changes in interest rates, and contractual terms in contracts that are considered
embedded derivatives and for intercompany borrowings in foreign currencies.
COUNTERPARTY CREDIT RISK
Fair values of our derivatives can change significantly from period to period based on, among other factors,
market movements and changes in our positions. We manage counterparty credit risk (the risk that counterparties
will default and not make payments to us according to the terms of our agreements) on an individual counterparty
basis.
Baker Hughes Company 2023 Form 10-K | 83
Baker Hughes Company
Notes to Consolidated Financial Statements
NOTE 16. REVENUE RELATED TO CONTRACTS WITH CUSTOMERS
DISAGGREGATED REVENUE
We disaggregate our revenue from contracts with customers by product line for both our OFSE and IET
segments, as we believe this best depicts how the nature, amount, timing and uncertainty of our revenue and cash
flows are affected by economic factors. In addition, management views revenue from contracts with customers for
OFSE by geography based on the location to where the product is shipped or the services are performed.
Effective October 1, 2023, IET began operating through five product lines - Gas Technology Equipment, which
will now include the Pumps business; Gas Technology Services; Industrial Solutions, which brings together the
Condition Monitoring and PSI businesses, along with IET Digital initiatives; Industrial Products, which brings
together the Inspection business merging with the Valves and Gears businesses; and a newly formed product line,
Climate Technology Solutions, which will combine our carbon capture, utilization and storage ("CCUS"), hydrogen,
clean power and emissions abatement capabilities, that previously was reported in each of the individual IET
product lines, into one business focused on serving the energy transition. The financial information for 2022 and
2021 have been recast to conform to the new product line presentation.
The series of tables below present our revenue disaggregated by these categories.
Total Revenue
Well Construction
Completions, Intervention & Measurements
Production Solutions
Subsea & Surface Pressure Systems
Oilfield Services & Equipment
Gas Technology Equipment
Gas Technology Services
Total Gas Technology
Industrial Products
Industrial Solutions
Controls (1)
Total Industrial Technology
Climate Technology Solutions
Industrial & Energy Technology
Total
2023
2022
2021
$
4,387 $
3,854 $
4,170
3,854
2,950
15,361
4,232
2,600
6,832
1,962
983
41
2,987
326
10,145
3,559
3,587
2,230
13,229
2,599
2,440
5,039
1,697
884
208
2,789
98
7,926
$
25,506 $
21,156 $
3,301
3,106
3,135
2,486
12,028
3,039
2,696
5,735
1,598
880
217
2,695
43
8,473
20,502
(1) The sale of Nexus Controls business was completed in April 2023.
Oilfield Services & Equipment Geographic Revenue
2023
2022
2021
North America
Latin America
Europe/CIS/Sub-Saharan Africa
Middle East/Asia
Oilfield Services & Equipment
$
4,116 $
3,764 $
2,761
2,655
5,829
2,099
2,483
4,883
2,904
1,681
2,865
4,579
$
15,361 $
13,229 $
12,028
Baker Hughes Company 2023 Form 10-K | 84
Baker Hughes Company
Notes to Consolidated Financial Statements
REMAINING PERFORMANCE OBLIGATIONS
As of December 31, 2023, the aggregate amount of the transaction price allocated to the unsatisfied (or
partially unsatisfied) performance obligations was $33.5 billion. As of December 31, 2023, we expect to recognize
revenue of approximately 61%, 74% and 90% of the total remaining performance obligations within 2, 5, and 15
years, respectively, and the remaining thereafter. Contract modifications could affect both the timing to complete as
well as the amount to be received as we fulfill the related remaining performance obligations.
NOTE 17. SEGMENT INFORMATION
The Company's segments are determined as those operations whose results are reviewed regularly by the chief
operating decision maker ("CODM"), who is our Chief Executive Officer, in deciding how to allocate resources and
assess performance. We report our operating results through two operating segments, OFSE and IET. Each
segment is organized and managed based upon the nature of our markets and customers and consists of similar
products and services. These products and services operate across upstream oil and gas and broader energy and
industrial markets. The following is a description of each segment's business operations:
Oilfield Services & Equipment provides products and services for onshore and offshore oilfield operations
across the lifecycle of a well, ranging from exploration, appraisal, and development, to production, rejuvenation, and
decommissioning. OFSE is organized into four product lines: Well Construction, which encompasses drilling
services, drill bits, and drilling & completions fluids; Completions, Intervention, and Measurements, which
encompasses well completions, pressure pumping, and wireline services; Production Solutions, which spans
artificial lift systems and oilfield & industrial chemicals; and Subsea & Surface Pressure Systems, which
encompasses subsea projects services and drilling systems, surface pressure control, and flexible pipe systems.
Beyond its traditional oilfield concentration, OFSE is expanding its capabilities and technology portfolio to meet the
challenges of a net-zero future. These efforts include expanding into new energy areas such as geothermal and
CCUS, strengthening its digital architecture and addressing key energy market themes.
Industrial & Energy Technology provides technology solutions and services for mechanical-drive,
compression and power-generation applications across the energy industry, including oil and gas, LNG operations,
downstream refining and petrochemical markets, as well as lower carbon solutions to broader energy and industrial
sectors. IET also provides equipment, software, and services that serve a wide range of industries including
petrochemical and refining, nuclear, aviation, automotive, mining, cement, metals, pulp and paper, and food and
beverage. IET is organized into five product lines - Gas Technology Equipment, Gas Technology Services,
Industrial Products, Industrial Solutions, and Climate Technology Solutions.
Revenue and operating income for each segment are used by the CODM to assess the performance of each
segment in a financial period. The performance of our operating segments is evaluated based on segment
operating income (loss), which is defined as income (loss) before income taxes before the following: net interest
expense, net other non-operating income (loss), corporate expenses, restructuring, impairment and other charges,
inventory impairments, and certain gains and losses not allocated to the operating segments. Consistent accounting
policies have been applied by all segments within the Company, for all reporting periods. Intercompany revenue and
expense amounts have been eliminated within each segment to report on the basis that management uses
internally for evaluating segment performance. Summarized financial information for the Company's segments is
shown in the following tables.
Revenue
Oilfield Services & Equipment
Industrial & Energy Technology
Total
2023
2022
2021
$
$
15,361 $
13,229 $
10,145
7,926
25,506 $
21,156 $
12,028
8,473
20,502
Baker Hughes Company 2023 Form 10-K | 85
Baker Hughes Company
Notes to Consolidated Financial Statements
Income before income taxes
Oilfield Services & Equipment
Industrial & Energy Technology
Total segment
Corporate
Inventory impairment (1)
Restructuring, impairment and other
Other non-operating income (loss), net
Interest expense, net
2023
2022
2021
$
1,746 $
1,201 $
1,310
3,055
(380)
(35)
(323)
554
(216)
1,135
2,336
(416)
(31)
(705)
(911)
(252)
830
1,177
2,006
(429)
—
(269)
(583)
(299)
428
Income (loss) before income taxes
$
2,655 $
22 $
(1) Charges for inventory impairments are reported in "Cost of goods sold" in the consolidated statements of income (loss).
The following table presents total assets at December 31:
Assets
Oilfield Services & Equipment
Industrial & Energy Technology
Total segment
Corporate and eliminations (1)
Total
2023
2022
$
17,925 $
13,781
31,706
5,239
$
36,945 $
17,181
12,286
29,467
4,714
34,181
(1) The assets in Corporate and eliminations consist primarily of the Baker Hughes trade name, cash, and tax assets. It
also includes adjustments to eliminate intercompany investments and receivables reflected within the total assets of
each of our reportable segments.
The following table presents depreciation and amortization:
Depreciation and amortization
Oilfield Services & Equipment
Industrial & Energy Technology
Total segment
Corporate
Total
The following table presents capital expenditures:
Capital expenditures
Oilfield Services & Equipment
Industrial & Energy Technology
Total segment
Corporate
Total
2023
2022
2021
$
849 $
845 $
217
1,066
21
197
1,042
19
$
1,087 $
1,061 $
874
208
1,082
23
1,105
2023
2022
2021
$
960 $
791 $
229
1,189
35
183
974
15
$
1,224 $
989 $
659
182
841
15
856
Baker Hughes Company 2023 Form 10-K | 86
Baker Hughes Company
Notes to Consolidated Financial Statements
The following table presents consolidated revenue based on the location to where the product is shipped or the
services are performed. Other than the U.S., no other country accounted for more than 10% of our consolidated
revenue during the periods presented.
Revenue
U.S.
Non-U.S.
Total
2023
2022
2021
$
$
6,557 $
4,942 $
18,949
16,214
25,506 $
21,156 $
4,497
16,005
20,502
The following table presents net property, plant and equipment by its geographic location at December 31:
Property, plant and equipment - net
U.S.
Non-U.S.
Total
NOTE 18. RELATED PARTY TRANSACTIONS
2023
2022
$
$
1,579 $
3,314
4,893 $
1,554
2,984
4,538
We have an aeroderivative joint venture ("Aero JV") we formed with GE in 2019. The Aero JV is jointly
controlled by GE and us, each with ownership interest of 50%, and therefore, we do not consolidate the Aero JV.
We had purchases from the Aero JV of $517 million, $528 million, and $603 million during the years ended
December 31, 2023, 2022 and 2021, respectively. We have $71 million and $110 million of accounts payable at
December 31, 2023 and 2022, respectively, for products and services provided by the Aero JV in the ordinary
course of business. Sales of products and services and related receivables with the Aero JV were immaterial for the
years ended December 31, 2023, 2022 and 2021.
During the second quarter of 2022, GE's ownership interest in the Company and BHH LLC was reduced to less
than 5%. As a result, considering all aspects of our relationship with GE, as of June 30, 2022, we no longer
considered GE a related party. We had purchases with GE and its affiliates of $293 million during the six months
ended June 30, 2022, and $716 million during the year ended December 31, 2021, respectively. In addition, we sold
products and services to GE and its affiliates for $83 million during the six months ended June 30, 2022, and $185
million during the year ended December 31, 2021, respectively.
NOTE 19. COMMITMENTS AND CONTINGENCIES
LITIGATION
We are subject to legal proceedings arising in the ordinary course of our business. Because legal proceedings
are inherently uncertain, we are unable to predict the ultimate outcome of such matters. We record a liability for
those contingencies where the incurrence of a loss is probable and the amount can be reasonably estimated. Based
on the opinion of management, we do not expect the ultimate outcome of currently pending legal proceedings to
have a material adverse effect on our results of operations, financial position or cash flows. However, there can be
no assurance as to the ultimate outcome of these matters.
On July 31, 2018, International Engineering & Construction S.A. ("IEC") initiated arbitration proceedings in New
York administered by the International Center for Dispute Resolution ("ICDR") against the Company and its
subsidiaries arising out of a series of sales and service contracts entered between IEC and the Company's
subsidiaries for the sale and installation of LNG plants and related power generation equipment in Nigeria
("Contracts"). Prior to the filing of the IEC Arbitration, the Company's subsidiaries made demands for payment due
under the Contracts. On August 15, 2018, the Company's subsidiaries initiated a separate demand for ICDR
arbitration against IEC for claims of additional costs and amounts due under the Contracts. On October 10, 2018,
IEC filed a Petition to Compel Arbitration in the United States District Court for the Southern District of New York
against the Company seeking to compel non-signatory Baker Hughes entities to participate in the arbitration filed by
IEC. The complaint is captioned International Engineering & Construction S.A. et al. v. Baker Hughes, a GE
Baker Hughes Company 2023 Form 10-K | 87
Baker Hughes Company
Notes to Consolidated Financial Statements
company, LLC, et al. No. 18-cv-09241 ("S.D.N.Y 2018"); this action was dismissed by the Court on August 13, 2019.
In the arbitration, IEC alleges breach of contract and other claims against the Company and its subsidiaries and
seeks recovery of alleged compensatory damages, in addition to reasonable attorneys' fees, expenses and
arbitration costs. On March 15, 2019, IEC amended its request for arbitration to alleged damages of $591 million of
lost profits plus unspecified additional costs based on alleged non-performance of the contracts in dispute. The
arbitration hearing was held from December 9, 2019 to December 20, 2019. On March 3, 2020, IEC amended their
damages claim to $700 million of alleged loss cash flow or, in the alternative, $244.9 million of lost profits and
various costs based on alleged non-performance of the contracts in dispute, and in addition $4.8 million of
liquidated damages, $58.6 million in take-or-pay costs of feed gas, and unspecified additional costs of rectification
and take-or-pay future obligations, plus unspecified interest and attorneys' fees. On May 3, 2020, the arbitration
panel dismissed IEC's request for take-or-pay damages. On May 29, 2020, IEC quantified their claim for legal fees
at $14.2 million and reduced their alternative claim from $244.9 million to approximately $235 million. The Company
and its subsidiaries have contested IEC's claims and are pursuing claims for compensation under the contracts. On
October 31, 2020, the ICDR notified the arbitration panel's final award, which dismissed the majority of IEC's claims
and awarded a portion of the Company's claims. On January 27, 2021, IEC filed a petition to vacate the arbitral
award in the Supreme Court of New York, County of New York. On March 5, 2021, the Company filed a petition to
confirm the arbitral award, and on March 8, 2021, the Company removed the matter to the United States District
Court for the Southern District of New York. On November 16, 2021, the court granted the Company's petition to
confirm the award and denied IEC's petition to vacate. During the second quarter of 2022, IEC paid the amounts
owed under the arbitration award, which had an immaterial impact on the Company's financial statements. On
February 3, 2022, IEC initiated another arbitration proceeding in New York administered by the ICDR against certain
of the Company's subsidiaries arising out of the same project which formed the basis of the first arbitration. On
March 25, 2022, the Company's subsidiaries initiated a separate demand for ICDR arbitration against IEC for claims
of additional costs and amounts due; such claims against IEC have now been resolved, with any consideration
having an immaterial impact on the Company's financial statements. At this time, we are not able to predict the
outcome of the proceeding which is pending against the Company's subsidiaries.
On March 15, 2019 and March 18, 2019, the City of Riviera Beach Pension Fund and Richard Schippnick,
respectively, filed in the Delaware Court of Chancery shareholder derivative lawsuits for and on the Company's
behalf against GE, the then-current members of the Board of Directors of the Company and the Company as a
nominal defendant, related to the decision to (i) terminate the contractual prohibition barring GE from selling any of
the Company's shares before July 3, 2019; (ii) repurchase $1.5 billion in the Company's stock from GE; (iii) permit
GE to sell approximately $2.5 billion in the Company's stock through a secondary offering; and (iv) enter into a
series of other agreements and amendments that will govern the ongoing relationship between the Company and
GE (collectively, the "2018 Transactions"). The complaints in both lawsuits allege, among other things, that GE, as
the Company's controlling stockholder, and the members of the Company's Board of Directors breached their
fiduciary duties by entering into the 2018 Transactions. The relief sought in the complaints includes a request for a
declaration that the defendants breached their fiduciary duties, that GE was unjustly enriched, disgorgement of
profits, an award of damages sustained by the Company, pre- and post-judgment interest, and attorneys' fees and
costs. On March 21, 2019, the Chancery Court entered an order consolidating the Schippnick and City of Riviera
Beach complaints under consolidated C.A. No. 2019-0201-AGB, styled in re Baker Hughes, a GE company
derivative litigation. On May 10, 2019, Plaintiffs voluntarily dismissed their claims against the members of the
Company's Conflicts Committee, and on May 15, 2019, Plaintiffs voluntarily dismissed their claims against former
Baker Hughes director Martin Craighead. On June 7, 2019, the defendants and nominal defendant filed a motion to
dismiss the lawsuit on the ground that the derivative plaintiffs failed to make a demand on the Company's Board of
Directors to pursue the claims itself, and GE and the Company's Board of Directors filed a motion to dismiss the
lawsuit on the ground that the complaint failed to state a claim on which relief can be granted. The Chancery Court
denied the motions on October 8, 2019, except granted GE's motion to dismiss the unjust enrichment claim against
it. On October 31, 2019, the Company's Board of Directors designated a Special Litigation Committee and
empowered it with full authority to investigate and evaluate the allegations and issues raised in the derivative
litigation. The Special Litigation Committee filed a motion to stay the derivative litigation during its investigation. On
December 3, 2019, the Chancery Court granted the motion and stayed the derivative litigation until June 1, 2020.
On May 20, 2020, the Chancery Court granted an extension of the stay to October 1, 2020, and on September 29,
2020, the Court granted a further extension of the stay to October 15, 2020. On October 13, 2020, the Special
Litigation Committee filed its report with the Court. On April 17, 2023, the Court granted the Special Litigation
Baker Hughes Company 2023 Form 10-K | 88
Baker Hughes Company
Notes to Consolidated Financial Statements
Committee's motion to terminate the litigation. On May 16, 2023, the plaintiffs filed a notice of appeal. On February
1, 2024, the Supreme Court of the State of Delaware affirmed the judgment of the Court of Chancery.
On or around February 15, 2023, the lead plaintiff and three additional named plaintiffs in a putative securities
class action styled The Reckstin Family Trust, et al., v. C3.ai, Inc., et al., No. 4:22-cv-01413-HSG, filed an amended
class action complaint (the "Amended Complaint") in the United States District Court for the Northern District of
California. The Amended Complaint names the following as defendants: (i) C3.ai., Inc. ("C3 AI"), (ii) certain of C3
AI's current and/or former officers and directors, (iii) certain underwriters for the C3 AI initial public offering (the
"IPO"), and (iv) the Company, and its President and CEO (who formerly served as a director on the board of C3 AI).
The Amended Complaint alleges violations of the Securities Act of 1933 and the Securities Exchange Act of 1934
(the "Exchange Act") in connection with the IPO and the subsequent period between December 9, 2020 and
December 2, 2021, during which BHH LLC held equity investments in C3 AI. The action seeks unspecified damages
and the award of costs and expenses, including reasonable attorneys' fees. At this time, we are not able to predict
the outcome of these proceedings.
We insure against risks arising from our business to the extent deemed prudent by our management and to the
extent insurance is available, but no assurance can be given that the nature and amount of that insurance will be
sufficient to fully indemnify us against liabilities arising out of pending or future legal proceedings or other claims.
Most of our insurance policies contain deductibles or self-insured retentions in amounts we deem prudent and for
which we are responsible for payment. In determining the amount of self-insurance, it is our policy to self-insure
those losses that are predictable, measurable and recurring in nature, such as claims for automobile liability,
general liability and workers compensation.
ENVIRONMENTAL MATTERS
Item 103 of SEC Regulation S-K requires disclosure of certain environmental matters when a governmental
authority is a party to the proceedings and such proceedings involve potential monetary sanctions that the Company
reasonably believes will exceed a specified threshold. The Company uses a threshold of $1 million for such
proceedings. Applying this threshold, there are no environmental matters to disclose for this period.
Estimated remediation costs are accrued using currently available facts, existing environmental permits,
technology and enacted laws and regulations. Our cost estimates are developed based on internal evaluations and
are not discounted. Accruals are recorded when it is probable that we will be obligated to pay for environmental site
evaluation, remediation or related activities, and such costs can be reasonably estimated. As additional information
becomes available, accruals are adjusted to reflect current cost estimates.
OTHER
In the normal course of business with customers, vendors and others, we have entered into off-balance sheet
arrangements, such as surety bonds for performance, letters of credit and other bank issued guarantees. We also
provide a guarantee to GE Capital on behalf of a customer who entered into a financing arrangement with GE
Capital. Total off-balance sheet arrangements were approximately $5.1 billion at December 31, 2023. It is not
practicable to estimate the fair value of these financial instruments. As of December 31, 2023, none of the off-
balance sheet arrangements either has, or is likely to have, a material effect on our financial position, results of
operations or cash flows. We also had commitments outstanding for purchase obligations for each of the five years
in the period ending December 31, 2028 of $1,871 million, $366 million, $220 million, $215 million and $47 million,
respectively, and $27 million in the aggregate thereafter.
We sometimes enter into consortium or similar arrangements for certain projects primarily in our OFSE
segment. Under such arrangements, each party is responsible for performing a certain scope of work within the total
scope of the contracted work, and the obligations expire when all contractual obligations are completed. The failure
or inability, financially or otherwise, of any of the parties to perform their obligations could impose additional costs
and obligations on us. These factors could result in unanticipated costs to complete the project, liquidated damages
or contract disputes.
Baker Hughes Company 2023 Form 10-K | 89
Baker Hughes Company
Notes to Consolidated Financial Statements
NOTE 20. RESTRUCTURING, IMPAIRMENT AND OTHER
We recorded restructuring, impairment and other charges of $323 million, $705 million, and $269 million during
the years ended December 31, 2023, 2022 and 2021, respectively.
RESTRUCTURING AND IMPAIRMENT CHARGES
In 2023, we recorded restructuring and impairment charges of $313 million. In 2022, we announced a corporate
restructuring plan in conjunction with a change in our operating segments (the "2022 Plan"). We continued to incur
charges in 2023 related to our 2022 Plan primarily for employee termination expenses. Restructuring charges for
2023 also include costs under a new plan (the "2023 Plan") primarily for employee termination expenses related to
exit activities at specific locations in our segments to align with our market outlook and rationalize our manufacturing
supply chain footprint. These actions also included inventory impairments of $35 million in 2023, recorded in "Cost
of goods sold" in the consolidated statements of income (loss). In the fourth quarter of 2023, we incurred additional
costs related to a planned workforce reduction, primarily in OFSE.
In 2022, we recorded restructuring and impairment charges of $196 million. The charges are related to our 2022
Plan and are primarily for employee termination expenses driven by actions taken by the Company to facilitate the
reorganization into two segments and corporate restructuring. In addition, PP&E impairments and other costs were
recorded related to exit activities at specific locations in the OFSE segment.
In 2021, we recorded restructuring and impairment charges totaling $138 million. Charges incurred were
primarily related to the continuation of our overall strategy to restructure our business, which was designed to
optimize our structural costs for the year-over-year change in activity levels and market conditions.
The following table presents the restructuring and impairment charges by the impacted segment; however,
these net charges are not included in the reported segment results.
Oilfield Services & Equipment
Industrial & Energy Technology
Corporate
Total
2023
2022
2021
$
$
148 $
98
67
313 $
121 $
36
39
196 $
The following table presents restructuring and impairment charges by type, and includes gains on the
dispositions of certain property, plant and equipment as a consequence of exit activities:
Property, plant and equipment
Employee-related termination expenses
Asset relocation costs
Contract termination fees
Other incremental costs
Total
OTHER CHARGES
2023
2022
2021
$
$
(2) $
270
5
1
39
313 $
58 $
121
3
1
13
196 $
121
11
6
138
7
99
20
2
10
138
Other charges included in "Restructuring, impairment and other" in the consolidated statements of income (loss)
were $10 million, $509 million, and $131 million for the years ended December 31, 2023, 2022 and 2021,
respectively.
In 2022, other charges were primarily associated with the discontinuation of our Russia operations. As a result
of the conflict between Russia and Ukraine, we took actions to suspend substantially all of our operational activities
related to Russia. These actions resulted in other charges of $334 million recorded in the second quarter of 2022
Baker Hughes Company 2023 Form 10-K | 90
Baker Hughes Company
Notes to Consolidated Financial Statements
primarily associated with the suspension of contracts including all our IET LNG contracts, and the impairment of
assets consisting primarily of contract assets, PP&E and reserve for accounts receivable. In addition to these
charges, we recorded inventory impairments of $31 million primarily in IET as a result of suspending our Russia
operations, which are reported in "Cost of goods sold" in the consolidated statements of income (loss).
In 2022, we also recorded other charges of $84 million in our OFSE segment primarily related to the impairment
of PP&E and intangibles for the subsea production systems business due to a decrease in the estimated future
cash flows driven by a decline in our long-term market outlook for this business, and $68 million in our IET segment
primarily related to a write-off of an equity method investment and the release of foreign currency translation
adjustments. In 2021, other charges were primarily related to certain litigation matters in our IET segment and the
release of foreign currency translation adjustments for certain restructured product lines in our IET segment. The
2022 and 2021 charges also include separation related costs.
NOTE 21. BUSINESS DISPOSITIONS AND ACQUISITIONS
DISPOSITIONS
We completed several business dispositions over the past three years as described below. Any gain or loss on
a business disposition is reported in "Other non-operating income (loss), net" in the consolidated statements of
income (loss).
During 2023, we completed the sale of businesses and received total cash consideration $293 million. The
dispositions consisted primarily of the sale of our Nexus Controls business in the IET segment to GE in April 2023,
which resulted in an immaterial gain. Nexus Controls specializes in scalable industrial controls systems, safety
systems, hardware, and software cybersecurity solutions and services. GE will continue to provide Baker Hughes
with GE's MarkTM controls products currently in the Nexus Controls portfolio, and we will be the exclusive supplier
and service provider of such GE products for our oil and gas customers' control needs.
The following table presents financial information related to the assets and liabilities of our Nexus Controls
business classified as held for sale and reported in "All other current assets" and "All other current liabilities" in the
consolidated statements of financial position as of December 31, 2022.
Assets and liabilities of business held for sale
Nexus Controls
Assets
Current receivables
Inventories
Property, plant and equipment
Goodwill
Other assets
Total assets of business held for sale
Liabilities
Accounts payable
All other current liabilities
Other liabilities
Total liabilities of business held for sale
Total net assets of business held for sale
$
$
59
36
2
230
10
337
30
56
7
93
244
During 2022, we sold part of our OFSE Russia business to local management for a nominal amount, which
resulted in a loss before income taxes of $451 million.
During 2021, we closed a transaction with Akastor ASA to create a joint venture company ("JV Company") to
deliver global offshore drilling solutions. We contributed our subsea drilling systems business, a division of our
Baker Hughes Company 2023 Form 10-K | 91
Baker Hughes Company
Notes to Consolidated Financial Statements
OFSE segment, to the JV Company and received as consideration 50% of the shares of the JV Company, cash of
$70 million, and a promissory note of $80 million. The transaction resulted in an immaterial gain.
ACQUISITIONS
During 2023, we completed the acquisition of businesses for total cash consideration of $301 million, net of
cash acquired, which consisted primarily of the acquisition of Altus Intervention in the OFSE segment in April 2023.
Altus Intervention is a leading international provider of well intervention services and downhole technology. The
assets acquired and liabilities assumed in these acquisitions were recorded based on preliminary estimates of their
fair values as of the acquisition date. As a result of these acquisitions, we recorded $138 million of goodwill and
$58 million of intangible assets, subject to final fair value adjustments. Pro forma results of operations for these
acquisitions have not been presented because the effects of these acquisitions were not material to our
consolidated financial statements.
During 2022, we completed several acquisitions for total cash consideration of $767 million, net of cash
acquired of $50 million, subject to the finalization of post-closing working capital adjustments. The transactions have
been accounted for using the acquisition method of accounting and accordingly, assets acquired and liabilities
assumed were recorded at their fair values as of the acquisition date. As a result of these acquisitions, we recorded
$458 million of goodwill and $211 million of intangible assets. Pro forma results of operations for these acquisitions
have not been presented because the effects of these acquisitions were not material to our consolidated financial
statements.
NOTE 22. SUPPLEMENTARY INFORMATION
ALL OTHER CURRENT LIABILITIES
All other current liabilities as of December 31, 2023 and 2022 include $1,346 million and $837 million,
respectively, of employee related liabilities.
ALLOWANCE FOR CREDIT LOSSES
The following table presents the change in allowance for credit losses:
Balance at beginning of year
Provision
Write-offs
Prior year recoveries
Other
Balance at end of year
CASH FLOW DISCLOSURES
2023
2022
341 $
79
(26)
(31)
(13)
350 $
400
69
(34)
(44)
(50)
341
$
$
Supplemental cash flow disclosures consist of the following:
Income taxes paid, net of refunds
Interest paid
2023
2022
2021
$
$
595 $
309 $
498 $
291 $
314
305
Baker Hughes Company 2023 Form 10-K | 92
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
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 December 31, 2023, 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 year ended December 31,
2023, that has materially affected, or is reasonably likely to materially affect, our internal controls over financial
reporting.
ITEM 9B. OTHER INFORMATION
Rule 10b5-1 and Non-Rule 10b5-1 Trading Arrangements
During the three months ended December 31, 2023, 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:
Name and Title
James E. Apostolides,
Senior Vice President,
Enterprise Operational
Excellence
Action
Date
Plans
Rule
10b5-1 (1)
Non-
Rule
10b5-1 (2)
Number of
Shares to
be Sold
Expiration
Adoption
November 22,
2023
X
15,000
Earlier of when all shares under
plan are sold and April 8, 2024
(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)
Sixth Amended and Restated Bylaws
On February 1, 2024, the Board of Directors adopted the sixth amended and restated bylaws of the Company
(the “Sixth Amended and Restated Bylaws”), effective February 1, 2024, to remove references to GE and otherwise
make conforming changes to reflect GE’s exit from its investment in the Company.
The foregoing description of the amendments made in the Sixth Amended and Restated Bylaws does not
purport to be complete and is qualified by reference to the Sixth Amended and Restated Bylaws, a copy of which is
attached hereto as Exhibit 3.2 to this Annual Report on Form 10-K and is incorporated herein by reference.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
None.
Baker Hughes Company 2023 Form 10-K | 93
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information regarding our Code of Conduct and the Code of Ethical Conduct Certificates for our principal
executive officer, principal financial officer and principal accounting officer are described in Item 1. Business of this
Annual Report on Form 10-K. Information concerning our directors is set forth in the sections entitled "Proposal
No. 1, Election of Directors - Board Nominees for Directors," and "Corporate Governance - Committees of the
Board" in our Definitive Proxy Statement for the 2024 Annual Meeting of Shareholders to be filed with the SEC
pursuant to the Exchange Act within 120 days of the end of our fiscal year on December 31, 2023 ("Proxy
Statement"), which sections are incorporated herein by reference. For information regarding our executive officers,
see "Item 1. Business - Executive Officers of Baker Hughes" in this Annual Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
Information for this item is set forth in the following section of our Proxy Statement, which section is
incorporated herein by reference: "Executive Compensation."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
Information concerning security ownership of certain beneficial owners and our management is set forth in the
sections entitled "Stock Ownership of Certain Beneficial Owners" and "Stock Ownership of Section 16(a) Director
and Executive Officers" in our Proxy Statement, which sections are incorporated herein by reference.
We permit our employees, officers and directors to enter into written trading plans complying with Rule 10b5-1
under the Exchange Act. Rule 10b5-1 provides criteria under which such an individual may establish a prearranged
plan to buy or sell a specified number of shares of a company's stock over a set period of time. Persons using such
plan must act in good faith with respect to the contract with the broker executing the trades, trading instructions and
the trading plan as a whole. Such plan must be established at a time when the individual is not in possession of
material, nonpublic information and will be subject to a cooling off period to the initial trade thereunder. If an
individual establishes a plan satisfying the requirements of Rule 10b5-1, such individual's subsequent receipt of
material, nonpublic information will not prevent transactions under the plan from being executed. Certain of our
officers have advised us that they have and may enter into stock sales plans for the sale of shares of our Class A
common stock which are intended to comply with the requirements of Rule 10b5-1 of the Exchange Act. In addition,
the Company has and may in the future enter into repurchases of our Class A common stock under a plan that
complies with Rule 10b5-1 or Rule 10b-18 of the Exchange Act.
Baker Hughes Company 2023 Form 10-K | 94
Equity Compensation Plan Information
The information in the following table is presented as of December 31, 2023 with respect to shares of our Class
A common stock that may be issued under our current and prior LTI Plans (in millions, except per share prices).
Equity Compensation Plan
Category
Shareholder-approved plans
Nonshareholder-approved plans
Subtotal (except for weighted average exercise price)
Employee stock purchase plan
Total
Number of
Securities to be
Issued Upon
Exercise of
Outstanding
Options, Warrants
and Rights
Weighted Average
Exercise Price of
Outstanding
Options, Warrants
and Rights
Number of Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans
(excluding securities
reflected in the first
column)
2.2
—
2.2
—
2.2
$ 33.92
—
33.92
—
$ 33.92
25.1
—
25.1
8.7(1)
33.8
(1) Employee stock purchase plan shares of 0.5 million will be issued in the first quarter of 2024 that relate to the three
months ended December 31, 2023 purchase period. The remaining 8.2 million shares are available for future issuance.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information for this item is set forth in the sections entitled "Corporate Governance-Director Independence" and
"Certain Relationships and Related Party Transactions" in our Proxy Statement, which sections are incorporated
herein by reference.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Our independent registered public accounting firm is KPMG LLP, Houston, Texas, Auditor Firm ID: 185.
Information concerning principal accountant fees and services is set forth in the section entitled "Fees Paid to
KPMG LLP" in our Proxy Statement, which section is incorporated herein by reference.
Baker Hughes Company 2023 Form 10-K | 95
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) List of Documents filed as part of this Annual Report.
(1) Financial Statements
All financial statements of the Company as set forth under Item 8 of this Annual Report on Form 10-K.
(2) Financial Statement Schedules
The schedules listed in Reg. 210.5-04 have been omitted because they are not applicable or the required
information is shown in the consolidated financial statements or notes thereto.
(3) Exhibits
Each exhibit identified below is filed as a part of this Annual Report. Exhibits designated with an "*" are filed as
an exhibit to this Annual Report on Form 10-K and exhibits designated with an "**" are furnished as an exhibit to this
Annual Report on Form 10-K. Exhibits designated with a "+" are identified as management contracts or
compensatory plans or arrangements. Exhibits previously filed are incorporated by reference.
Exhibit
Number
Exhibit Description
3.1
3.2*
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
4.11
Second Amended and Restated Certificate of Incorporation of Baker Hughes Company dated October
17, 2019.
Sixth Amended and Restated Bylaws of Baker Hughes Company dated February 1, 2024.
Indenture, dated October 28, 2008, between Baker Hughes Incorporated (as predecessor to Baker
Hughes Holdings LLC) and The Bank of New York Mellon Trust Company, N.A., as trustee.
Second Supplemental Indenture, dated July 3, 2017, to the Indenture dated as of October 28, 2008,
among Baker Hughes Holdings LLC, Baker Hughes Co-Obligor, Inc. and The Bank of New York Mellon
Trust Company, N.A., as trustee.
Third Supplemental Indenture, dated December 11, 2017, to the Indenture dated as of October 28,
2008, among Baker Hughes Holdings LLC, Baker Hughes Co-Obligor, Inc. and The Bank of New York
Mellon Trust Company, N.A., as trustee.
Fourth Supplemental Indenture, dated November 7, 2019, to the Indenture dated as of October 28,
2008, among Baker Hughes Holdings LLC, Baker Hughes Co-Obligor, Inc. and the Bank of New York
Mellon Trust Company, N.A., as Trustee.
Fifth Supplemental Indenture, dated May 1, 2020 to the Indenture dated as of October 28, 2008,
among Baker Hughes Holdings LLC, Baker Hughes Co-Obligor, Inc. and The Bank of New York Mellon
Trust Company, N.A., as Trustee.
Sixth Supplemental Indenture, dated December 9, 2021 to the Indenture dated as of October
28, 2008, among Baker Hughes Holdings LLC, Baker Hughes Co-Obligor, Inc. and The Bank of New
York Mellon Trust Company, N.A., as Trustee.
Seventh Supplemental Indenture dated December 31, 2023, to the Indenture dated as of October 28,
2008, among Baker Hughes Holdings LLC and Baker Hughes Co-Obligor, Inc., as Existing Obligors,
Baker Hughes Company, as Parent Guarantor, and the Bank of New York Mellon Trust Company,
N.A., as Trustee.
Indenture, dated May 15, 1994, between Western Atlas Inc. and The Bank of New York Mellon, as
Trustee.
First Supplemental Indenture dated July 3, 2017, to the Indenture dated as of May 15, 1994, by and
among Baker Hughes Holdings LLC, Baker Hughes Co-Obligor, Inc., Baker Hughes Oilfield
Operations, LLC and Baker Hughes International Branches, LLC, as New Obligors, and The Bank
of New York Mellon Trust Company, N.A., as Trustee.
Second Supplemental Indenture, dated December 31, 2023, to the Indenture dated as of May 15,
1994, by and among Baker Hughes Holdings LLC, Baker Hughes Co-Obligor, Inc., Baker Hughes
Oilfield Operations, LLC and Baker Hughes International Branches, LLC, as Existing Obligors, Baker
Hughes Company, as Parent Guarantor, and The Bank of New York Mellon Trust Company, N.A., as
Trustee.
First Supplemental Indenture, dated as of July 3, 2017, to the Indenture dated as of May 15, 1991,
among Baker Hughes Holdings LLC, Baker Hughes Co-Obligor, Inc. and The Bank of New York
Mellon Trust Company, N.A., as trustee.
Baker Hughes Company 2023 Form 10-K | 96
4.12
4.13
4.14
10.1
10.2
10.3
10.4
10.5
10.6
10.7+
10.8+
10.9+
10.10+
10.11+
Second Supplemental Indenture, dated as of December 31, 2023, to the Indenture dated as of May 15,
1991, among Baker Hughes Holdings LLC and Baker Hughes Co-Obligor, Inc., as Existing Obligors,
Baker Hughes Company, as Parent Guarantor, and the Bank of New York Mellon Trust Company,
N.A., as Trustee.
Description of Securities Registered pursuant to Section 12 of the Securities Exchange Act of 1934.
Form of Stock Certificate for Class A Common Stock of Baker Hughes Company under the Laws of
the State of Delaware.
Transaction Agreement, dated as of February 28, 2019, between Baker Hughes Holdings LLC,
General Electric Company and GE Aero Power LLC.
STDA Side Agreement, dated as of July 31, 2019, between Baker Hughes Holdings LLC and
General Electric Company.
Aero-Derivatives Supply and Technology Development Agreement, dated as of November 13,
2018, between Baker Hughes Holdings LLC and General Electric Company.
Umbrella Aero-Derivatives IP Agreement, dated as of November 13, 2018, between General
Electric Company and Baker Hughes Holdings LLC.
TMA Master Settlement Agreement as of February 13, 2023 among General Electric Company,
Baker Hughes Company, EHHC Newco, LLC and Baker Hughes Holdings LLC to settle disputes
under the Tax Matters Agreement.
Credit Agreement, dated as of November 21, 2023, among Baker Hughes Holdings LLC, as the
borrower, Baker Hughes Company, as the parent guarantor, the lenders party thereto, and
JPMorgan Chase Bank, N.A., as Administrative Agent.
Amended and Restated Baker Hughes Incorporated 2002 Employee Long-Term Incentive Plan.
Amended and Restated Baker Hughes Incorporated 2002 Director & Officer Long-Term Incentive Plan.
Form of Baker Hughes Incorporated Nonqualified Stock Option Award Agreement and Terms
and Conditions for officers dated 2011.
Form of Baker Hughes Incorporated Nonqualified Stock Option Award Agreement and Terms
and Conditions for officers dated January 2014.
Form of Baker Hughes Incorporated Nonqualified Stock Option Award Agreement and Terms
and Conditions for officers June 2014.
10.12+ Baker Hughes Company 2017 Long-Term Incentive Plan.
10.13+ Baker Hughes Company 2021 Long-Term Incentive Plan.
10.14+ Baker Hughes Company Executive Officer Short Term Incentive Compensation Plan as Amended
and Restated.
10.15+ Baker Hughes Company Non-Employee Director Deferral Plan as Amended and Restated.
10.16+ Amendment to the Baker Hughes Company Benefits Plans including the Baker Hughes Company
2017 Long-Term Incentive Plan.
10.17+ Baker Hughes Company Executive Severance Program.
10.18+
First Amendment to the Baker Hughes Company Executive Severance Program effective January
1, 2020.
10.19+ Baker Hughes Company Executive Change in Control Severance Plan.
10.20+ Baker Hughes Company Employee Stock Purchase Plan as Amended and Restated.
10.21+ Baker Hughes Company Supplementary Pension Plan as Amended and Restated Effective as
of December 31, 2018.
10.22+ Amendment to the Baker Hughes Holdings LLC Sponsored Benefit Plans including the Baker
Hughes Company Supplementary Pension Plan.
10.23+ Baker Hughes Company Supplemental Retirement Plan, as amended and restated effective as
of January 1, 2020.
10.24+ Baker Hughes Company Form of Indemnification Agreement dated July 2017.
10.25+ Baker Hughes Company Form of Director and Officer Indemnification Agreement dated March
18, 2020.
10.26+ Baker Hughes Company Form of Stock Option Award Agreement dated July 2017.
10.27+ Baker Hughes Company Form of Senior Executive Stock Option Award Agreement dated July 2017.
10.28+ Baker Hughes Company Form of Stock Option Award Agreement dated January 2018.
10.29+ Offer Letter between Baker Hughes Company and Lorenzo Simonelli, dated as of August 1, 2017.
10.30+ Restricted Stock Unit Award Agreement between Baker Hughes Company and Lorenzo Simonelli
dated as of June 1, 2018.
Baker Hughes Company 2023 Form 10-K | 97
10.31+ Baker Hughes Company Form of Stock Option Award Agreement dated January 2019.
10.32+ Baker Hughes Company Form of Restricted Stock Unit Award Agreement (three year ratable
vest) dated January 2020.
10.33+ Baker Hughes Company Form of Restricted Stock Unit Award Agreement (three year cliff vest)
dated January 2020.
10.34+ Baker Hughes Company Form of ROIC Performance Share Unit Award Agreement dated
January 2020.
10.35+ Baker Hughes Company Form of TSR Performance Share Unit Award Agreement dated January 2020.
10.36+ Baker Hughes Company Form of Stock Option Award Agreement dated January 2020.
10.37+ Baker Hughes Company Form of Restricted Stock Unit Award Agreement (three year cliff vest)
dated January 2021.
10.38+ Baker Hughes Company Form of Restricted Stock Unit Award Agreement (three year ratable
vest) dated January 2021.
10.39+ Baker Hughes Company Form of Performance Share Unit Award Agreement dated January 2021.
10.40+
10.41+ Baker Hughes Company Form of Executive Officer Restricted Stock Unit Award Agreement (three
Form of Transformation Incentive Award Agreement dated January 2021.
year ratable vest) dated January 2022.
10.42+ Baker Hughes Company Form of Executive Officer Restricted Stock Unit Award Agreement (three
year cliff vest) dated January 2022.
10.43+ Baker Hughes Company Form of Executive Officer Performance Share Unit Award Agreement
dated January 2022.
10.44+ Baker Hughes Company Form of Director Stock Unit Award Agreement dated March 2022.
10.45+ Baker Hughes Company Form of Executive Officer Performance Share Unit Award Agreement
dated January 2023.
10.46+ Baker Hughes Company Form of Restricted Stock Unit Award Agreement (2-year cliff vest for
new hires) dated January 2023.
10.47+ Baker Hughes Company Form of Restricted Stock Unit Award Agreement (2-year ratable vest for
10.48
new hires) dated January 2023.
Plea Agreement between Baker Hughes Services International, Inc. and the United States Department of
Justice filed on April 26, 2007, with the United States District Court of Texas, Houston Division.
10.49+* Baker Hughes Company Form of Executive Officer Performance Share Unit Award Agreement
dated February 2024.
19*
21.1*
23.1*
31.1*
31.2*
32**
95*
97*
Insider Trading Policy.
Subsidiaries of the Company.
Consent of KPMG LLP.
Certification of Lorenzo Simonelli, President and Chief Executive Officer, pursuant to Rule 13a-14(a)
of the Securities Exchange Act of 1934, as amended.
Certification of Nancy Buese, Chief Financial Officer, pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934, as amended.
Certification of Lorenzo Simonelli, President and Chief Executive Officer, and Nancy Buese, Chief
Financial Officer, pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended.
Mine Safety Disclosures.
Recoupment of Compensation Policy.
101.INS* XBRL Instance Document - the instance document does not appear in the Interactive Data File
because its XBRL tags are embedded within the Inline XBRL document.
101.SCH* XBRL Schema Document.
101.CAL* XBRL Calculation Linkbase Document.
101.LAB* XBRL Label Linkbase Document.
101.PRE* XBRL Presentation Linkbase Document.
101.DEF* XBRL Definition Linkbase Document.
ITEM 16. FORM 10-K SUMMARY
None.
Baker Hughes Company 2023 Form 10-K | 98
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the
registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: February 5, 2024
BAKER HUGHES COMPANY
/s/ LORENZO SIMONELLI
Lorenzo Simonelli
Chairman, President and Chief
Executive Officer
KNOWN ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes
and appoints Lorenzo Simonelli, Nancy Buese and Georgia Magno, each of whom may act without joinder of the
other, as their true and lawful attorneys-in-fact and agents, each with full power of substitution and resubstitution, for
such person and in his or her name, place and stead, in any and all capacities, to sign any and all amendments to
this Annual Report on Form 10-K, and to file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or their substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed
below by the following persons on behalf of the registrant and in the capacities indicated on this 5th day of February
2024.
Signature
Title
/s/ LORENZO SIMONELLI
(Lorenzo Simonelli)
Chairman, President and Chief Executive Officer
(principal executive officer)
/S/ NANCY BUESE
(Nancy Buese)
Chief Financial Officer
(principal financial officer)
/S/ REBECCA CHARLTON
(Rebecca Charlton)
Senior Vice President, Controller and Chief Accounting Officer
(principal accounting officer)
Baker Hughes Company 2023 Form 10-K | 99
Title
Director
Director
Director
Director
Director
Director
Director
Director
Director
Signature
/s/ ABDULAZIZ M. AL GUDAIMI
(Abdulaziz M. Al Gudaimi)
/s/ W. GEOFFREY BEATTIE
(W. Geoffrey Beattie)
/s/ GREGORY D. BRENNEMAN
(Gregory D. Brenneman)
/s/ CYNTHIA B. CARROLL
(Cynthia B. Carroll)
/s/ NELDA J. CONNORS
(Nelda J. Connors)
/s/ MICHAEL R. DUMAIS
(Michael R. Dumais)
/s/ LYNN L. ELSENHANS
(Lynn L. Elsenhans)
/s/ JOHN G. RICE
(John G. Rice)
/s/ MOHSEN M. SOHI
(Mohsen M. Sohi)
Baker Hughes Company 2023 Form 10-K | 100
Reconciliation of GAAP to Non-GAAP Financial Measures*
Baker Hughes Company presents its financial results in accordance with U.S. GAAP. However, management
believes that additional non-GAAP 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. The following tables reconcile our
GAAP financial information with non-GAAP financial information used in this Annual Report for the year ended
December 31, 2023.
The reconciliations of net income (loss) attributable to Baker Hughes Company (GAAP) to earnings before,
interest, taxes, depreciation and amortization ("EBITDA") (non-GAAP) and adjusted EBITDA (non-GAAP) for the
years ended December 31, 2023 and 2022 are as follows:
(in millions)
Net income (loss) attributable to Baker Hughes Company (GAAP) $
Net income attributable to noncontrolling interests
Provision for income taxes
Interest expense, net
Other non-operating (income) loss, net
Operating income (GAAP)
Depreciation & amortization
EBITDA (non-GAAP)
Restructuring, impairment and other
Inventory impairment
Total operating income adjustments
Adjusted EBITDA (non-GAAP)
$
Year Ended December 31
2022
2023
1,943 $
27
685
216
(554)
2,317
1,087
3,405
323
35
358
3,763 $
(601)
23
600
252
911
1,185
1,061
2,246
705
31
735
2,981
The reconciliation of cash flow from operating activities (GAAP) to free cash flow (non-GAAP) for the year
ended December 31, 2023 is as follows:
(in millions)
Cash flow from operating activities (GAAP)
Less: Cash used for capital expenditures, net of proceeds from disposal of assets
Free cash flow (non-GAAP)
Year Ended
December 31, 2023
3,062
$
(1,016)
2,045
$
The reconciliation of Oilfield Services & Equipment ("OFSE") operating income (GAAP) to OFSE EBITDA (non-
GAAP) and OFSE EBITDA margin (non-GAAP) for the three months ended December 31, 2023 is as follows:
(in millions)
OFSE revenue
OFSE operating income (GAAP)
Add: OFSE depreciation & amortization
OFSE EBITDA (non-GAAP)
OFSE EBITDA margin (non-GAAP) (1)
Three Months
Ended
December 31, 2023
3,956
$
492
$
217
709
17.9%
$
(1) OFSE EBITDA margin (non-GAAP) is defined as OFSE EBITDA (non-GAAP) divided by OFSE revenue.
*Certain columns may not sum up due to the use of rounded numbers.
Shareholder information
Transfer agent and registrar
Corporate communications office
Computershare Investor Services
Computershare
P.O. Box 43078
Providence, RI
02940-3078
Stock exchange listing
Ticker Symbol “BKR”
The Nasdaq Stock Market LLC
Investor relations office
Chase Mulvehill
Vice President, Investor Relations
Investor.relations@bakerhughes.com
+1 281-809-9088
Thomas Millas
Vice President, External Communications
media.relations@bakerhughes.com
Form 10-K
Additional copies of the Company’s
Annual Report (Form 10-K) are available
at no charge by writing to Investor Relations at our
corporate office or by visiting our investor website:
http://investors.bakerhughes.com/
Corporate office addresses
575 N. Dairy Ashford Road, Suite 100
Houston, TX 77079
Telephone: +1 713-439-8600
10th Floor, 245 Hammersmith Road
London W6 8PW
Telephone: +44 207 864 2400
Bakerhughes.com
2023ar