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It's head down to Houston, Texas right now to our very own Alex Steele. She's going to be speaking with Baker Hughes CEO Lorenzo Seminelli. Alex, what do you have for us?
All right?
Thank you so much. Polit's right. Lorenzo Simonelli is chairman and also president and CEO of Baker Hughes. Lorenzo, it's good to see you.
Thanks for joining, Alex. Great to see as well.
You are the premiere oil services providers in the entire world. Everyone is worried about a recession today. Are you seeing any signs of slowdown?
There's clearly a lot of volatility happening in the marketplace, and we've seen that last week and also today. At this moment in time, if you look at the macro trends, there are still tailwinds that point to no recession. The consumer's resilient and from an activity level, as we said at the beginning of the year, we continued to see a positive outlook for Baker Hughes as an energy technology company and that.
Has not changed in the last two months.
It has not changed, and again we monitor the situation on a daily basis. I think again, you've got the macro aspects from an energy perspective that are clear.
Energy demand is increasing.
Also here in the United States, natural gas is a huge opportunity, and we've got a huge opportunity from an export perspective of LERG. So when you look at a company like Baker Hughes, we see a lot of positive trends that go beyond just twenty twenty five and you'll always have volatility, but again, nothing that we're worried about at this stage.
And there are lots of sections. As you mentioned right, there's the oil services demand side. You also make energy export facilities, so there you have a lot of different hands and a lot of different things. So there's that part of it.
Too, correct well, less cyclical for sure.
The issue though, is the tariff situation, which it would seem like you're very exposed to. If we get aluminum, steel and copper tariffs, if we get them on Wednesday twenty five percent, does that affect the pipe you're.
Going to put in the ground.
It really varies, and the tariffs are complicated and you need to go into the full supply chain and also end use perspective. We have Baker Hughes have a very diversified supply chain. We're not the original maker of the
aluminium or the steel. What we're providing is equipment and services, and we're also providing modules, and we have a versatile supply chain that enables us to both from the US as well as from internationally and from an export an import perspective, be able to be diversified and move things around. So as we look at it today, we anticipate that the tariffs will have a negligible impact on Baker Hughes and we're continuing to assess it on a daily basis.
So basically, the supplier might increase prices if they need to, but you can manage it or pass it on.
We can manage it because also we can change supplier. Also we can work with the end customer with regards to efficiencies and changes, and so through a number of different scenarios, we look to manage that and work collaboratively with the end customer.
The other big macro tailwind actually is drill baby drill that has been a quarter zone of the Trump administration. Where you sit our producer's drill baby drilling.
What you're seeing from this administration is clearly an energy renaissance in the United States, and when you look at the opportunity ahead, it is for increased production, both on the oil side the natural gas side.
When you look at the aspect of the.
Operators, they're going to continue to be that capital discipline. They're going to look at the financial returns, and we haven't seen any changes today in the outlook of that. We do think US production will go up, driven predominantly by efficiencies and technology enhancements that we're providing to the sector. And then we see a big opportunity with natural gas, and also as you look at natural gas pricing remaining to be resilient with the opportunity of the LNG exports coming online.
But you don't see the world where we have one million barrels of growth year like we saw in twenty twenty three. Do you see a more muted a growth profile for oil in the US.
It's going to go down to the fundamentals of the demand and supply and also the returns from a shareholder perspective, and I think companies have worked on their capital discipline, so they're going to make sure that that is all in balance as well as meeting the needs from.
A societal perspective.
So I think it's going to be more muted than a million barrels. You are going to those see continued production enhancements and efficiencies and people will look at the price of oil on a regular basis and then decide accordingly what's best for their shareholder.
Yeah, and a tough tape for oil price today, to be sure. So let's get to the other potential tailman, and that is AI and data center build out. How can Baker Hughes play in that space.
Well, it's a great opportunity for Baker Hues And when we think about the grid instability and also the huge increase in demand for power generation, it really fits into off grid application where we can provide our industrial gas turbans, we can provide our geofermal technology, we can provide a number of factors to enable the hyperscalers to go and produce the data centers immediately. We've already seen an increase
in activity. You have seen an announcement we made last week with Fronterra with regards to data centers exclusive of ccs. And it's not just a phenomena within the United States clearly here it's spoken about every day, but also globally, we're seeing increased activity within other areas such as Middle East, such as Asia relative to data center demand and generative AI. We know has a huge energy consumption and that's what we're servicing, and.
That also comes from your industrial and energy technology business. Hence the diversified part we were talking about earlier, making a little less cyclical in terms of that, can you also become a services helper for power demand, like not just here's my gas turbine, but I'm also going to be a services provider for this data center In terms of power.
We're looking at different commercial models and actually working in consortiums, and I think there's going to be different models that different end users require.
In some cases we will be with.
A developer, we will be with a financier and it will be a tan key solution that's provided to a data center operator. In other cases, they'll just want the equipment and they'll want to have the power turned on.
So we are, like in LNG, able to have the different model that's required for the end user, and that's something at Baker Hughes we think is very important we've got to be able to meet the different requirements with the capabilities we have, So we're looking at a variety of options right now.
I'm glad you brought up ELL and G again. Do you expect if there is an end of the war in Ukraine, are you guys at the table thinking about a lot more Russian gas coming into Europe and then displacing flows that we see elsewhere.
I think we're confident that flows have redirected themselves already.
And count for Russian gas well.
Yes, because the Russian gas has been flowing elsewhere as well. So there's an aspect of a demand. It's increasing, and there's going to be a requirement for incremental natural gas and LNG as we look out to twenty thirty. We've always said there needs to be an installed base capacity of eight hundred million tons per annum.
That is very much taking place, and we see the.
Incremental build now happening in twenty five, twenty six, and twenty seven with the pores being lifted in the United States. So we don't see the aspect of Russian gas coming back as differing the outlook that we had previously, because it's been there. It's just been elsewhere and the flows will always change according to what's available.
Would Russia, they'll become an opportunity, a business opportunity for you.
Let's wait and see.
You know, we'll monitor the situation relative to global sanctions or so the rule of law, and also from a society perspective and values within Baker Hughes, so we'll monitor the situation.
One last question oil price weakness.
Does it persist?
And what do you think is actually behind that?
Right now?
We live in a world where on a daily basis there's a lot of different news and so there is volatility in the marketplace.
I think give it some time. We've got to look at the next.
Sixty eight weeks and I think that's when you start to really assess are.
There going to be changes going forward?
Right now, demand is strong, we know that the outlook for demand is strong, and I think we're just going through some volatile times. And at Baker Hugh's I can tell you I don't look at the oil price daily. It's really not a consideration relative to the investments we make longer term and also the way in which we run the business so that we can safeguard to supply and the end product for our customers.
They always say that I never look at the oil price. All right, Lorenza, thanks a lot. I really appreciate Lorenzo Seminelli. I'm chairman, president and CEO of Baker Hughes Paul.
Back to you, all right, Alex, thank you so much. We appreciate that. That's Alex Steel speaking with Baker Hugh CEO Lorenzo Simonelli at Sarah Week. That is where all the energy hanchos globally get together in Houston. It's their big conference every year.