Bloomberg Audio Studios, podcasts, radio news.
Berkley's Energy Investor Conference kicking off today in New York. Baker Hugh CEO Lorenzo similarly attending following a better than expected earnings report earlier this summer, the company seeing high demand for its drilling services and equipment in international markets and places to say that. Joining us around the table is Lorenzo. Good morning, sir, great to be with you.
Let's talk about the outlook you raised the midpoint of that outlook, competitors did not a similar story with competitors, though, was this better international bankdrop compared to say, what's happening domestically? What explains that divide does emergent right now?
I think, first of all, as you look at Baker Hughes, the strength of our portfolio is much broader than just oil field services, and so as you look at the results that we posted in second quarter and also the increase in guidance, it's really based on that total portfolio capability that we have that extends into rotating equipment, compression and INDUS short sectors as well. As you look at the international markets, again, they are going to continue to grow.
And again we said at the beginning of the year we would see high single digit growth in the international markets. We retain that view as we go into the second half, and as we go into twenty twenty five, the growth will still be there, it will decelerate, and it's really driven by the demand that you're seeing internationally. When you look at the exports, for example, from Saudi Arabia, a lot of that goes to other countries, very little comes
into North America or goes into the developed marketplace. It really is a developing market aspect, and the growing population and demand for energy globally is increasing.
Can you talk to us about the headwinds domestically and where they're coming from. Is it off the back of the consolidation we've seen, we see more careful spending. Is it off the back and lower prices? What's driving it?
There's definitely a lot of the aspects of consolidation that have taken place. There's efficiency also that you're seeing within the puction which has enabled production to stay relatively flat and increasing in some cases. And so domestically, I think again we continue to see weakness as we look at the second half of twenty twenty four, and then also in twenty twenty five, really looking at North America to
be flatish. The gas market may be increasing somewhat, but North America is really the operators are being very pragmatic with their balance sheet, and again, capital discipline is the name of the game.
Yeah, you need a lot less capital now to produce even more oil than you had in the past. But you think it's going to be flat. Some of the numbers we've run actually see thirteen point nine million barrels a day coming from North America and then fourteen in twenty twenty five. Do you think that's an accurate trajectory?
Again, if you look at between thirteen point nine and fourteen, you're looking at a very slight difference, and again it's driven by the efficiency. It's very transactional in North America. So I think it's early to call right now and
will continue to monitor it. Baker Hughes is much more focused on the production side and also the chemical side, and I think what we are seeing is really a focus on existing wells and also improving recovery rates from existing wells, and that's where the mature assets solutions that we provide actually have a huge opportunity and It's actually important to remember seventy percent of the world's production comes from mature wells, and that's a well that's been in
operation for over twenty five years or has fifty percent of its reserve depleted. If you're able to increase the reserve recovery by one percent, you're going to add two to three years of the production required globally. So there's a big focus on capital discipline and maximizing the recovery rates from the mature assets that are available.
You also mentioned gas. Can we talk about liquefied natural gas because yesterday we actually saw the Energy Department go ahead with an export licen Since because the Biden mormonitorium on the export license, the courts have pushed back. Is that a sign that potentially we could see more LERG come online.
First of all, very pleased that the license was given and congratulations to the team there. I think as you look at the global expectations, it's that the monitorium actually ceases in twenty twenty five. As you look at the LNG demand is expected to increase. We've predicted that by twenty thirty we need an installed based capacity of eight hundred million tons per annum and the US can contribute
to that. That being said, you know, you're never sure until it's done, and international projects are continuing to go forward as well, so the LNG will be available and hopefully the United States also participates as it's got plenty of gas that it can explore. A big focus on this program over the last I would say six months or so, I has been the burden that's going to emerge on the energy grid in this country in the
next several years. Every single day we talk about Nvidia and Capex spend coming from some major tech players spending money, throwing money at data centers. Can you walk us through just the scale of demand you're expecting to see and what you're hearing from some of these utility providers and some of these companies, these tech firms and the need for off grid solutions that you can provide. How big is that growth opportunity for you? It is a significant
growth opportunity. And I think you said earlier this isn't just about today. It is a long term trend. If you look at some of the statistics out there, generator of AI, the consumption of electricity by data centers, it's expected to double by twenty twenty six. That's going from two percent to four percent of the electricity usage. Think about that, that's the same amount of electricity that Japan uses on an annual basis. So from an installed capacity perspective,
it's a significant increase. What do we have as a challenge grid stability and also I live in Houston today, I have power outages on a continuous basis and we need off grid solutions and that's where distributed power comes in. That's where opportunities for modular capabilities of gas turbines that are packaged, smaller off grid and they provide the stability
to the data centers for ongoing operations. Because the other important aspect is intermittency is important because a data center can't go down, so you need to have that consistency of power generation.
What does growth look like in this area currently and what will growth look like in the years to come for you exclusively specifically for us.
If you look at the industrial gas turbines that we provide significant opportunity. Just look at the ratio of the increase on the electricity utilization from two to four percent. So we're looking and working with the hyperscalers looking at the ecosystem, we're looking at the opportunity of mini gas turbans being sold into this market.
What's the overall contribution to your revenue mix do you expect to come from that in the next, say several years. The reason I asked that question is we've seen a big rally in utility companies in line with the rally we've seen in AI firms, and if we're to sit here today and think about the changing characteristics of your stock, I need to know what the contribution from that area would be to the overall top and bottom line. What's that going to look like in years to come.
As we look at it, and again, this could be from five hundred megawatts to one point five gig watts, and that's what we're looking at from a scaling perspective, and again from a dollar perspective, it's going to range based on five hundred million to potentially larger, and it's going to come over a series of years. As we go forward. We look at it as a major new
area that we can focus on. We've participated before and we've played in distributed power generation, and we look at this as a growth factor for Baker hues.
A big concern to the US energy industry has always been the cyber attacks, whether it's colonial, it's really happened with Halliburton. Have you seen any impact.
So we haven't seen any impact. Again, though we're very vigilant. Obviously, cybersecurity is a big concern for everybody, and we're all taking the measures accordingly to put the controls in place and very much vigilant on a daily basis.
What does that look like meaning being vigilant? Is it having the proper systems in place? Is there a lot of communication with the US government.
There's definitely a communication that takes place across the sector, and there's also trade associations that discuss it. From a standpoint of vigilance, it means making sure that we're doing our own testing on our own systems, making sure that we're putting in the controls, we're patching with the new security that's available, and also doing our own fishing exercises. And so we've got a team that continuously Red Team,
Blue Team, and we test our own systems. But I also say you can never be too careful, and you've got to stay vigilant, and you've got to be prepared.
You've got a really busy day ahead of you. Before we let you go. This conversation's got to time arise in multiple decades the time horizing of this market. At the moments about five minutes, Can we just reflect on yesterday's price action? What's going on include energy markets at the moment. It's a real tangible concern from your side around demand in China. What's it all about.
I think you're always going to have volatility on a daily basis, and it's something we deal with in the business world. At the same time, leading a company, you've got to focus on the fundamentals and the fundamentals of the long term tra directory and make the right investment decisions.
That's what we're doing at Baker Hughes. And if you look at the macro tailwinds, I think it's undeniable that energy demand is continuing to increase as you look at the population and you look at the development of nations. You also look at developed nations that are now seeing that they don't have enough energy as well, such as here in the United States. So we look at the macro aspect and we're definitely seeing positive tailwinds.
Do you feel like the attitude of fossil fuels has shifted in the last twelve months. Do you think government's particular in the West, have had a bit of a reality check.
I think there is an understanding that it's not just about an energy transition, it's also about an energy expansion, and it's not about the fuel type. It's about reducing emissions. And that's where gas plays a key role, because it is abundant, it's available, and you need affordable, secure, reliable energy.
Lorenzo, appreciate it. You got a long down ahead of you. Thanks for your time. Thank you, Thank you, sir Lorenzo. Similarly, there the baker Hughes c EO