Baker Hughes Co. (NYSE:BKR) Q2 2020 Earnings Conference Call - Final Transcript
Jul 22, 2020 • 09:00 am ET
Good day, ladies and gentlemen, and welcome to the Baker Hughes Company Second Quarter 2020 Earnings Call. [Operator Instructions] Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions]
I would now like to introduce your host for today's conference, Mr. Jud Bailey, Vice President of Investor Relations. Sir, you may begin.
Thank you. Good morning everyone, and welcome to the Baker Hughes second quarter 2020 earnings conference call. Here with me are our Chairman and CEO, Lorenzo Simonelli; and our CFO, Brian Worrell. The earnings release we issued earlier today can be found on our website at bakerhughes.com.
As a reminder, during the course of this conference call, we will provide forward-looking statements. These statements are not guarantees of future performance, and involve a number of risks and assumptions. Please review our SEC filings and our website for a discussion of some of the factors that could cause actual results to differ materially.
As you know, reconciliations of operating income and other GAAP to non-GAAP measures can be found in our earnings release.
With that, I will turn the call over to Lorenzo.
Thank you, Jud. Good morning everyone, and thanks for joining us. The second quarter of 2020 was challenging in several areas, as our company navigated through the impacts of the COVID-19 pandemic and the sharp decline in activity levels due to lower oil and gas prices. Despite these headwinds, I was pleased with how our team executed with strong margin performance in TPS and DS, solid cost out execution in OFS, solid order bookings in OFE and TPS, and another quarter of free cash flow generation.
Although the majority of lockdowns have been easing globally and economic activity likely troughed during the second quarter, visibility on the economic outlook remains extremely limited. More specifically, the risk of a second wave of virus cases globally, the reinstitution of some lockdowns, and the potential for lingering high unemployment create an uncertain economic environment that likely persist through the rest of 2020. We expect this economic uncertainty to weigh on the oil and gas markets, which are currently in an excess supply position. Given these factors, we are preparing for potential future volatility, while also focusing on both structurally reducing our cost base and implementing a number of strategic initiatives across all of our product companies.
In our Oilfield Services segment, despite the challenging environment, we remain strongly engaged with our customers to proactively offer solutions that lower costs, improve efficiency and delivery time for Baker Hughes. In North America, drilling and completion activity declined largely in line with the expectations we referenced on our first quarter call with activity down over 50%, while the US market appears to have troughed, and we started to see some improvements in our production related businesses in June and July. Visibility over the second half of 2020 remains limited. With any incremental activity closely tied to oil prices.
Overall, we maintain our view that US drilling and