Baker Hughes Company (BKR) Earnings Call Transcript & Summary

All right. Good morning. We can go ahead and kick off the conference here with Brian Worrell, the CFO of Baker Hughes. I'm Scott Gruber for those that don't know me. Hopefully most of you do, be embarrassed if you didn't. But Brian, thank you very much for being with us today and for kicking off our conference.

Yes. Good to be here.

So there's always plenty to talk about with Baker, so we could spend a couple of hours up here. But really I wanted to start off with the hot topic, which has been LNG. Obviously, the world has changed here in the last few months. Baker appears to have a huge opportunity ahead of itself to help participate in the LNG build-out, really an accelerated LNG build-out. But if you can just give the audience an updated view on the cycle. Where are we now? How big could this be? And what's changed as a result of the Russia-Ukraine situation?

Yes. Look, as you know, we've always been bullish on natural gas, and LNG is a part of that story. And given the geopolitical uncertainty and what's happening in Russia, Ukraine, everything going on in Europe, what we saw is a bit of a tailwind has become a much bigger tailwind. We think that based on conversations with customers, what we're seeing in terms of long-term agreements being signed, capital being raised, there's likely to be another 100 million to 150 million tons per annum that reaches FID in the next couple of years. That's a little bit higher than we thought coming into the year. And underpinning that is a belief actually that we saw quite early on, but that others see as well is that by 2030, capacity is likely going to exceed 800 million tons per annum to meet the demand that we're seeing people forecast right now. And just to give you a bit of perspective on that. So there's 460 million tons per annum today in operation. We're on 420 million of that 460 million. There's another 150 million tons per annum under construction. We're on 150 million of that 150 million. So that tells you that to meet that 800 million, you're going to have to FID quite a bit between now and 2025, so that 100 million to 150 million in the next couple of years. You're going to see another 100 million or so come through by '25, and I don't see it stopping at that point based on everything I see today. One of the things that I think a lot of people don't -- we can talk about this later, Scott, if you want to that people discount a bit is in the energy transition, just because you make the decision to go with gas, it doesn't preclude you from doing things that are perceived to be more green going forward, especially with a company like us because we can burn different combinations of hydrogen and different fuel mixes. So it's a good step forward from an energy transition standpoint. And then particularly with the geopolitical uncertainty and everything going on in Europe, we see a significant opportunity for gas in total and LNG specifically. So quite bullish.

And I do want to touch on the alternative fuels. However, one of the issues we're grappling with today is timing, right? I mean, these are typically multiyear projects. What can be done to accelerate the build-out? You have a modular design you executed with a partner recently down in the Gulf of Mexico. Are we at the point where we can deploy that on a more widespread scale? What can be done probably to accelerate this build-out?

Yes. Look, I mean, the modular approach is -- has been something we've been incredibly, incredibly happy with. To give you guys perspective, we delivered for VG's Calcasieu Pass from FID to first cargo in 29 months, which is a record. We delivered everything ahead of schedule, customer incredibly happy. And that's typically a 5-year time scale, so this modular approach has cut that down significantly. There are quite a few other initiatives going on. You've probably seen some recent announcements by one of our customers about Fast LNG. So there's a lot that's going on in this space to standardize and to do as much as possible in our facilities, in our factories to then be able to put things together to increase capacity as you go. So the key with the VG work that we've done, and we just announced Plaquemines as well is we build these modules that are basically stacked together to increase a plant capability. It's standard. Once you get the initial design, it can be scaled up quite a bit. Plaquemines, for instance, will likely be around 20 million tons per annum. We booked about 14 million tons of orders, so there's an opportunity there. There's some interesting concepts with floating LNG that cut down the need for a lot of the on-land infrastructure. So again, the build of it can almost be industrialized. Now with any LNG facility, you've got to have the particulars around the gas and the temperature. So there's a lot of peculiarities and particular things you have to do for a particular project, but there are things that can be standardized within a certain window. And I think given the time horizon that people are looking at and trying to get more LNG on, I think you're going to see more modules, more standard approach. And even with some of the larger gas turbines around aeroderivatives, we're seeing much more interest in a modular approach where we do most of the work at our facility and ship -- something that the engineers hate it when I say it, but almost like a LEGO where you kind of put it together, out in the field with a lot of complicated engineering in between. But I'd say standardization is definitely something that's going to help you.

Excellent. And it does seem like the U.S. is at a distinct advantage here geographically in terms of leading the next build-out. Do you have a sense for how much capacity additions you could see in the U.S. versus the rest of the world in terms of -- within that 150 million plus...

Yes. I think the interesting, Scott, is obviously what's going on in Europe right now with Europe basically saying they want to be off of Russian gas. And to give you perspective, that's roughly about 130 MTPA equivalent that comes in from Russia into Europe. Most of that is pipe gas, about 110 of 130 MTPA equivalent. So look, the U.S. is pretty well positioned to be able to fill that demand. We think there's probably 70 million to 90 million tons per annum that could make its way into Europe to backfill that 130 million from a total gas perspective. And the U.S. is well positioned because there's already supply of gas. It's relatively inexpensive, geographically close to Europe. And there are plenty of projects out there. There's 150 million tons per annum of projects that have received FERC approval in the U.S. today. So there's not a lot of hurdles to get there from a regulatory standpoint. It's really just about raising capital, signing up some offtake agreements and moving forward. So I think the U.S. is pretty well positioned. Capital looks to be lining up, and there are a number of players that are out there raising capital. There are others who are putting their own capital to work to move things forward. So I think you will see the U.S. be a pretty big build-out here. Other areas, the Middle East has got capability and capacity to build out more. You're likely to see some projects in Africa go and maybe a little bit in Asia, but I think the U.S. is pretty well positioned. The other thing while I mentioned Europe, too, is if you think about today, the LNG regas capability has to improve in Europe. I mean, Germany announced fast tracking some regasification. The issue that Europe has today is about half of the regas capacity sits in Spain, Portugal and the U.K. The rest of the gas infrastructure to get it to places that use Russian gas more is just not there yet. So there's going to have to be a massive infrastructure build-out as well, and there are going to be opportunities for companies like Baker Hughes to participate in that as well. So I think you're looking at a potential real shift in the overall energy landscape here. And if the European governments are serious about what they're trying to get done, you could see a multiyear spending trajectory that looks pretty good for companies like us.

And then on the call, you mentioned that you were confident that you had enough capacity internally to meet the demand associated with this accelerated build cycle. Could you just shed some color on that? I mean, the build cycle is going to be bigger than we all thought, and it's a tight labor market. Did you have slack capacity? Are you able to better utilize your capacity? And where do you think the bottlenecks could emerge that could slow things down that present some risks?

Yes. Look, during the last downturn, we spent a lot of time working on flex capacity in our facilities. As Scott, when we first started talking, I talked to you guys about how we could move different types of equipment through our factories. And when sort of upstream and LNG were lower, we put more downstream equipment in that could fill the factory. So we've got plenty of physical space. We're only running 2 shifts now at our facilities that do most of this work so there's capability of adding additional shifts. We've got a pretty flexible group of partners for a lot of the, what I'll call, the modularization. So we've got the technology around it. We bring in a lot of labor as we have peaks and troughs. And we've worked with companies to be able to build that flexibility into our systems and processes. And we've built flexible lines to be able to handle different types of equipment going to those lines. So I feel good about our capabilities internally. We've got excess capacity in our yards to be able to do more work with easy expansion opportunities on adjacent land. So we're not going to be the bottleneck. Couple things I work with the teams on, on a consistent basis. Number one is really around supply chain, everything that we're seeing today. We've seen inflation. I mean, I want to talk to Steve. He talked earlier about the CEO that says we need to make more money. I'm with him. Can you -- or her. Can you introduce me if I don't know him already? But we are seeing a lot of inflation potential. And I'd say that's the potential rain cloud standing off to the side of the sunny days that Steve talked about here. In addition to that, particularly in Europe, because what you're seeing from an energy standpoint, you're seeing some suppliers have a tough time making their economic equation work. So the good news for us is we've got a global supply chain. So when Europe is kind of hiccupping, we've got capabilities in India and in China and in Mexico. So that's an area, particularly around castings, that I think we all got to keep our eyes on in terms of capacity and pricing there. The good news for us is when we're out bidding this work, we understand that. And we bid that into the contract, and so we can pass that price along. The other thing that I think we've got to keep an eye on is just EPC capacity and what the EPCs can do on these large build-outs, which is why I really like the smaller modular approach because it's a very different role for an EPC. So there are lots of things to be done there. But I think as we look at the overall build cycle and where things are headed, watching overall price, not necessarily for our equipment and what we do, but sort of the broader build-out and EPC capacity.

I mean, can you also comment on what you're seeing outside of LNG within the TPS business? There does seem to be something of a resurgence in demand for traditional oilfield equipment, processing equipment, compression. Can you speak to what you're seeing outside of LNG?

Yes. Scott, look, our -- the business outside of LNG has been relatively steady and good business. I'd say last year, we actually saw quite a bit of activity in the onshore/offshore production part of the portfolio, particularly with -- we booked -- between FPSOs and offshore platforms, we booked 9 of those, which is a pretty big year. So I would expect that to normalize a little bit there, but we're still seeing healthy demand in the onshore/offshore production space. We're seeing quite a bit of activity in pumps and valves. There's some downstream activity that I think is looking pretty solid as well. And then the new energy areas, starting from an incredibly small base, you're seeing a lot of interest in the capabilities that we bring whether it's the hydrogen station turbines, whether it's carbon capture but a lot of activity there as well. So again, I think you're looking at a multiyear positive cycle for TPS as long as people continue to invest in energy transition. And especially with this energy security situation, I think it's pretty strong backdrop for TPS. And as you know, we said orders would be sort of flattish for the full year in TPS. We now -- look, I could easily see TPS booking somewhere between $8 billion and $9 billion of orders this year just based on all the activity we're seeing.

And can you talk about -- you mentioned the new energy opportunity. A couple of months back, you guys threw out the special TAM for hydrogen and for carbon capture and where you think ultimately the inbound rates for your business to grow to by 2030 or so. Can you refresh that for the audience?

Yes, sure.

Give us some perspective on just how big that business could be relative to the existing TPS business.

Look, we see basically creating another TPS-sized business by the end of the decade, so roughly $6 billion to $7 billion in orders annually. And that's roughly about 10% or so of the TAM, and a lot of people asked, why isn't it bigger like LNG? There are going to be pieces of that TAM that either from a margin or a technology standpoint just don't make sense for us to play in. So we're really focused on those areas where we can drive differentiated technology, a differentiated solution and drive higher margins and returns. But over the last year or so, confidence has been building in how we see that market developing based on conversations with customers and technology development. I will say, Scott, I think one of the things that needs to really play out is the regulatory environment and the economics of this really need to be sorted out particularly around carbon capture. But we said we'd have roughly $100 million to $200 million in orders this year in new energy. I'd say we're definitely going to be on the high end of that if we don't exceed it. We booked about $60 million or so in the first quarter. A lot of that was off the back of some NovaLT16 turbines that's on 100% hydrogen, and that's related to a project with Air Products up in Alberta that we're working with them. We've got a global partnership with Air Products, which we think is one of the best partners in this space. So really happy with that. We booked some big orders going into Saudi, and we're seeing a ton of interest in the flexibility of our turbines. And on carbon capture, there's a lot of work that can be done out there. I mean, the tax credits in the U.S. is starting to make a little bit of a difference. I think they're probably too low to really drive a lot of activity. We're seeing quite a bit of activity in Europe, and we're on more than 40 pilots globally with different technologies we have around carbon capture. And the only thing I'll say about that is it's really not a technical problem. It's an economic issue today that's got to be solved. So I'll give you an example. And you can do a lot of things to decarbonize projects that are going to be going into production in the next year or 2. It's an added cost today to an operator, right? So when you're sitting down and making this decision unless there is some incentive or punishment, why are you going to add incremental cost to your project? So I think it will all catch up. We're going to be ready with a variety of technologies to be able to operate in that space. And we're building out a pretty strong ecosystem of partners to be able to do that. And again, we're going to focus on those areas where we can drive technological differentiation to be able to drive strong margin and return.

And just on that point around some of the decisions to pull the trigger on decarbonizing certain processes, is today's backdrop where energy security's at the floor, inflation is quite high, does that delay the decarbonization efforts? Does it help accelerate them because you kind of want to take a fresh look at how we energize the world? Kind of what's your perspective on how the energy transition fits in the context of the other issues we're dealing with today?

Yes. Look, I think it's mixed. I think if you look at -- let's just take LNG. So if you've already got a project that has been approved, particularly in the U.S. with FERC, you're not going to do anything to mess that up. Because if you change things about that, you're going to go to the back of the line in the process again. So I think the things that you see coming on are going to go as designed. But want to make sure everybody understands, we've been taking carbon out of the process for a number of years with more efficient turbines, with 0 flaring capabilities, 0 leaks. So there's a lot of things that we've been doing in LNG and other places to be able to take carbon out. I think the significant step function change that you're going to see is likely going to be in that stuff that's going to be in the next wave of FID for LNG. In terms of what this can do for the overall energy transition, I think you can actually accelerate it. I think some of the conversations with European customers in particular, even though they're talking about energy security, much more interested in the energy transition aspects and being able to minimize the carbon footprint. But interestingly enough, a lot of things that happened since commodity prices have gone up have generated, obviously, more cash flow for our traditional customers. And they are then probably, I'd say, taking more risks, looking at taking more risks and putting more money to work in some of these newer areas because they've got the opportunity to do that and continue to return capital to shareholders. So it could actually accelerate it if I take a step back and look at the macro picture. But look, it's a ground game. Every region is different. Every customer is different. And we're just -- the commercial activity is in the moment. I'll just leave it at that.

And speaking of customers, rich in cash flow, obviously, that's helping the outlook for the Oilfield Services business despite some exposure to regions in conflict today. Can you talk about the outlook for the second half in Oil Services and what that can mean heading into 2023? Most people have been expecting kind of a mid-teens type growth in OFS in the second half. Could we actually see an acceleration into 2023 as the customers recycle the great cash flows they generate today and really get some of these bigger projects off the ground?

Yes. Look, put Russia aside for a minute. But because of that and because of the commodity price backdrop, we're seeing a lot of activity internationally. And I think it's safe to say that we would expect spending in the second half to be up sort of in the mid-teen range. We've given range kind of low double digits to mid-teens. It looks like it's trending more towards the higher end. And it's pretty broad-based, I'd say, with the Middle East leading the charge in terms of investments and spending growth. All the conversations that we're having, customers are indicating that, that's going to continue into 2023. I think it could accelerate from that point. So the backdrop for '23 looks pretty strong internationally. And then I'm sure a lot of you know what's going on in the U.S. But overall, spending in the U.S. looks to be headed to about a 40% increase, 40%-plus increase this year in total. Some of that's going to be inflation with price increases coming through, but activity levels are definitely up. So listen, I'd say the backdrop for OFS is one of the strongest that we've seen in a number of years. And I think barring any major reset of economic activity that takes demand down significantly, you're going to see customers continue to try to catch up and close this supply-demand imbalance.

And are customers starting to have conversations again about long-cycle gas projects internationally, given the backdrop? Is that an element here? Or is it mainly ramping investment on the oil side?

Look, you're starting to see some. I mean, there's a lot of talk about the North Sea and what the U.K. is going to do in the North Sea. We're having conversations with customers, things are back on the table. The good news is all that stuff, the designs are done. We've worked on it for a number of years. We just haven't pulled the trigger. So you're starting to see some activity there. But I think there's been so much negative press and noise coming out of particularly U.K. government and things that I think people are going to be reticent to pull the trigger on some of that until they get some more guarantees or agreements in place that they're not going to be persona non grata in a year or 2. We are seeing offshore activity increase this year. I think we would anticipate about -- for the market, about 300 trees coming in. Could that be a little bit higher? Sure. Do I see a multiyear investment in these large offshore projects coming back and getting back to '19 levels? Probably not. But again, folks are looking at things that they can do to deploy capital and generate returns relatively quickly. Back to LNG for a minute, talking about gas. If you are a producer today, and I tell you, you've got 10 million tons per annum in nameplate capacity, you generally have probably got offtake agreements for about 8 million tons, and you play about 2 million on the spot market. We generally can produce more than nameplate capacity. These guys are really doing well economically today and taking that marginal production and selling it on the spot market, which was on fire last year and is even more this year. So there's a lot of opportunity to sweat assets better today and be able to generate strong returns for our customers here. My goal is to make sure I get my fair share of that.

And can you speak to the restructuring and margin reset effort within Oilfield Services? This has been a multiyear process, but it does seem like that 20% threshold is within sight. Does that mean the kind of heavy lift on the restructuring is over? And where can you go from here?

Yes. The -- Scott, the heavy lifting is over. We've been lifting for a long time, as you know. But we have gotten most of the work done. We're not done. We're still making some changes in our supply chain, moving some things around to drive efficiencies and better cost. We're also doing a lot around service delivery, especially around remote operations and demanning things at the site, which drive, we think, better performance and lower cost. But most of the work is done. If I take a step back, and I hate it when the businesses talk to me about this. But I do need to call out a couple things to give you a perspective on why margin rates aren't at 20% today. The biggest driver is our chemicals business in Oilfield Services. That business was about 170 basis point drag on margins in the first quarter versus where it normally is. And that's really driven by inflation in the supply chain, scarcities in raw materials and a particular issue we had with one supplier on the Gulf Coast. We also have been seeing some logistics delays because of the global situation that caused a little bit of a problem in the first quarter. If I step back and look at the base business, excluding that, we're already at 20%, right, if I even partially normalize for those businesses. So we think chemicals troughed in the first quarter. We see the margins getting better throughout the year. We've also been driving price increases where we can. So look, I feel good that the business should be able to get to the 20% EBITDA, and we're not stopping there. I mean, our goal here is during good times to have this business that basically performs well above 20%. And then in lower times, the floor is much higher than it has been.

And it seems like you're just starting to get pricing on the international side of the business. Can you speak to that pricing traction? Is it just to offset inflation? Are you starting to get some net pricing? And if it's net, I also imagine there's an element of improved technology uptake, too. Where could those 2 take margins over the next 2 to 3 years? If you get to 20% by the end of this year and the cycle continues kind of 2 years down the road with some pricing as a technology mix shift benefit, where can prices -- where can margins get to?

Yes. I'd say in total, in OFS today, we are seeing price come in ahead of inflation across the board. Now again, it's market- and technology-specific, but you are able to have, I'd say, more rational conversations around price today than we have been, honestly, in quite some time. The large tenders tend to be quite 40 still just because particularly in Middle East markets, you're locking up business for multiyear. So I'd say you're seeing more opportunities on smaller deals, spot market work to be able to drive price. We are seeing that customers are willing to pay for technology and to pay for performance. U.S., a bit different in terms of what's going on today just given the activity level increase and a lot of the supply chain issues, not necessarily mine but more broadly. You're seeing a lot of tightness in the marketplace. And we are able to, I think, have more traction in terms of driving some of those pricing conversations. So net-net, we should continue to be able to offset inflation and drive some improvement there. So I would say you could see margin rates definitely exceed what we've talked about on the backdrop of the pricing activity as well as the productivity that we're driving and chemicals normalized.

Got you. Since we're just starting to get the pricing traction now and contracts are multiyear, would you suggest that a normalized margin in OFS is above the 20% threshold, that we shouldn't think about that as kind of a normal through cycle, but that's like kind of a starting point, now a new higher starting point...

Yes. Look, I think you got to think about it as a higher starting point in terms of when you're seeing significant volume activity, and the market's going up. So that should be the jumping-off point to higher margins during an up cycle. Like I said, the goal here is to do beyond the 20% in an up cycle and keep that floor at a much higher level than it has been historically.

Got you. And then switching to equipment. You mentioned that we're likely to have a cycle but not a strong secular tailwind in terms of growth in production equipment, particularly the big offshore projects. How should we think about the margin structure in that business? That's one that you've been working on for a while. The volume doesn't seem quite to be there to really drive robust margins. So kind of what do you do from here? What's the game plan either to lift margins or maybe strategically do something different?

Yes. Look, we have been driving a lot of cost out of the -- also the front-end business for quite some time, not only structural costs but also product cost. And so we've got products today that cost significantly less than what they cost 4 years ago. They weigh a lot less. They're much easier to install. So we feel good about the lineup that we have there. The issue has been, as you well know and as you pointed out, around the demand side. And the fundamental structural issue in Oilfield Equipment is just overall industry capacity. I mean, if you think about it, we may do 300 trees as an industry this year. At the height, it was north of 600. If I take a look at human capital that's come out of that space, you're probably talking about the industry is geared up to be able to do 450, 500. So there's still excess capacity there. So a lot of the costs that we've been taking out has just been able to keep up with the pressures in the market from a volume standpoint and a pricing standpoint. That business structurally should be able to be in the low double digits, maybe a little bit higher than that. If I look at the height of it, it was in the high double digits, knocking on 20% margin. I don't see that given the volume levels that we've got here. So look, I think realistic is a year with higher volume than we're seeing this year. We should be in the high single digits. We've been pretty vocal about our thoughts on that business, that customers like us having it in the portfolio. There are synergies across the portfolio. But if it's not going to be able to hurdle its cost of capital, we're going to have to look at different structures to help get us there. And so that's not something that's lost on us whether that's the commercial structures, different corporate structures. But that is the space where we'll continue to look to optimize margins and returns. And it's not a place that's attracting a ton of capital today. So we think we position the products, the technology in a place where it is. We're spending a little bit of money to make sure we stay on top of things like controls, where we've got a real competitive advantage and a lot of folks buy from us. But we're happy with the work that we've done. We're not happy with the performance of the business. And a lot of that's market-driven.

Switching gears to digital. There's been an effort to expand your capabilities in industrial asset management. Can you talk about the strategy there? Is the portfolio today in terms of the suite of services kind of full scope and where you want it to be? Are there things you'd like to add? And kind of where do you want to take that business on a multiyear basis?

Yes. So when I take a step back, we've got an incredibly strong franchise around vibration monitoring. And we've got a very strong presence in that space. And we've expanded our monitoring capability on the equipment that we've been monitoring for a number of years, the critical asset. We've added to the portfolio several technologies in terms of we bought some technology that expands the data dictionary and the operating parameters for equipment that we didn't historically monitor, bought a company down in Australia that's global and brought that into the portfolio. I mean, we've got a partnership with a company called Augury that provides additional sensing technology that we can deploy on a larger base of assets. So the goal here is to grow from a position of strength and take everything we've done from that critical asset monitoring, expand it to a broader population within a facility whether that's an LNG facility, an offshore platform, a petrochemical facility, a food and beverage factory and then be able to bring that together so an operator can better understand what's going on within a process, within a line, within a room or an entire facility. We've also, as you well know, partnered with some of the best in terms of AI and infrastructure because I don't want to be all that for everyone. I want to grow from that domain expertise there to ultimately provide asset intelligence that allows people to make better decisions about operating their facilities to drive better productivity, lower cost position and ultimately actually lower emissions. So we're taking the approach that we're going to grow from a position of strength and expand our market capabilities by having a strong ecosystem of partners. Some of the technology we'll buy and bring in-house, others we'll partner with to make sure we stay relevant. But feel pretty good about where we're headed. I think that's a big opportunity for us over the next 5 to 10 years, and we'll continue to update you guys as we see things progress there.

Now the global chip shortage has impacted the business now with some other supply chain issues. Any line of sight on those alleviating?

Look, I'd say we're on top of it as best we can. I -- based on everything I see, I think the rest of the year could remain choppy from a supply standpoint. I feel much better about where we are today versus where we were a year ago. To give you perspective, Scott, if I look out 12 months today, we've got 95%, 96% of what we need on PO today. That's versus a normal of about 40%, 45%. So feel good about that. Most of our suppliers are on 90-day allotment, which gives us a lot more insight into what's actually going to come in. We launched and have started to implement some of the engineering design changes to be more current and vanilla in terms of what we're buying, which isn't always easy for engineers. That allows us then to be able to go to more suppliers and not have to count on smaller runs. So that's in place and is working. So I think the team is on top of it, and we -- I'm not really counting on stabilization until we get into 2023. Saying that, you can see that from an order standpoint, we've grown backlog in Digital Solutions by a couple hundred million over the last 2 quarters. So the demand is certainly there. We're seeing a lot more demand in oil and gas. We're seeing more demand in industries outside of power. Power has been a bit pressured and I think will continue to be pressured as we roll through the rest of this year. But barring a big pullback in economic activity around the world, I think DS should continue to see healthy top line. We'll convert on that backlog, and the gross margins in that business are pretty strong. So when the volume rates get back up, you should see really healthy incrementals and margin accretion there. That -- there's nothing around that business that says it shouldn't be back in the mid- to the high teens level from a margin standpoint, just need the volume to come through.

Now we've walked through the portfolio this morning, but there has been a discussion as to whether you guys would split the portfolio with TPS and digital on one side and OFS and equipment on the other side. What's the decision tree that will propel you guys in one direction or the other? What are you looking at to determine whether the split and the kind of focus of gas business trumps the benefit of having one organization and kind of leveraging the back end?

Yes. Look, last September, we talked, Scott, about making sure everybody understood that we recognize that our markets are moving at different speeds and in different directions long term. And that's why we talked about these 2 broad areas of upstream and then industrial and energy technology. And we've been doing a ton of work internally to see how we can drive the right focus and attention and run those business to be able to drive higher returns and generate strong free cash flow conversion. You probably saw that we announced the creation of CTS, climate technology solutions, and industrial asset management. That's an evolution in our thinking because we wanted to pull some teams together to be dedicated and focused on driving growth in these high-growth areas. And we just announced a reorg in Oilfield Services to move away from product line to more long solutions in 3 broad solution areas. So we are looking at how we operate, how the teams go to market. At the same time, we are evaluating optionality and different structures, everything from legal entities to PAC, to breakage costs if the company were not operating as one. Listen, when I look at the customer base in Baker Hughes today across all the different product companies, top 15 customers are virtually the same. They're just in different orders. So anything that would say, hey, you should be in a separate corporate structure, we need to offset the synergies we see from that, from infrastructure as well as technology. But ultimately, we're going to do what's right for shareholders and what's going to drive the best return in the portfolio. And if a different organization structure inside of Baker today is the right answer for tomorrow or sometime, we'll do that. And if it makes sense to have a different corporate structure, and we think there is more optionality and more opportunity to drive higher returns, we'll do that. But we're doing all the work to evaluate what is the right structure for the company going forward, how we continue to drive margin and free cash flow. And look, I'll just say that we are committed to the financial priorities that we laid out. We were the only ones in the space who kept the dividend during the downturn. We launched the buyback. We've been doing M&A. Since we came together, we sold roughly $1 billion worth of companies and investments and invested $1 billion, so we recycle that capital. And we said we want to return 60% to 80% of free cash flow to shareholders over time. So I say whatever structure makes the most sense will fall out of that. For me, it's not getting an answer on the structure. It's getting an answer on returns and how we drive growth and margins going forward.

It's a great response and a great ending. We're out of time. Brian, thank you very much for participating today and for your insight.

Great. Thanks, Scott.

Thank you.