Baker Hughes Aktie

Good morning, and welcome to the first session of Bernstein's 42nd Annual Strategic Decisions Conference. My name is Bob Brackett. I'm Co-Head of Energy and transition for Bernstein, as wells Global Metals and Mining. This room, I encourage you to stay in. We'll have the majority of the S&P Energy coming through this room starting now and moving through all the way to Friday. So this is Room Energy.

We are not expecting a fire drill or any sort of drill, and so if the alarms ring, please take it seriously. Your primary exit will be out to the back of the room to the right, down to the escalator area where you came up. If for any reason that is blocked, there're internal stairways, just straight out of the room marked with exit signs.

Ultimately, this is your conversation. This is a fireside chat, but scattered across the room, you'll find these blue cards. There's QR codes that will take you to an app where you can enter your questions. In theory, you could ask questions out loud as well.

Before we get to your questions, we'll start first by introducing and welcoming Lorenzo Simonelli, the Chairman and Chief Executive Officer, Baker Hughes. We'll have a fireside chat. And if you spent time with me in the past, I normally follow a pyramid principle. I start with sort of high-level macro issues, then we dig in the strategy, then move into operations, financials, et cetera. Do it a little differently today. Lorenzo and Baker have been coming to SDC for many years now, but typically doing one-on-one meetings that generously offer the fireside chat.

And so we'll start by talking broadly about the company. We'll definitely bring up the Strait of Hormuz for those that are here to hear about that. And then we'll start to talk about the various business lines. With that, I thank you. I thank Lorenzo and we'll begin.

And so we'll begin Lorenzo, effectively, today's Baker Hughes is a new Baker Hughes, roughly a decade old, already been through two $100 cycles, one mid-50 cycle, one negative cycle. But who is Baker Hughes today versus who you were 10 years ago?

Well, Bob, thank you very much. And it's great to be here today. And it's funny when you look at 10 years, but you hear the name Baker Hughes, and it is a name that is synonymous in the oil and gas industry for over 100 years. And today, the Baker Hughes is very different than what it was. And during the course of the 10 years, we fundamentally transitioned the company and transformed it into becoming much more of an expansive area of capability for the energy cycle.

And I break it down into a few areas. As you look at the first 5 years from 2017 to 2022, we had a number of the cycles. We were obviously going through a separation from what was at the time, General Electric. And in fact, that completed at the end of 2019. We went through the pandemic. We went through the exit of Russia. And that gave us a lot of time to go through the roller coasters and decide what is the right pathway for Baker Hughes going forward.

And in 2022, we launched a free horizon view of how we were going to transform Baker Hughes into really an industrialized energy solutions company and merging the capabilities that we see as critical in providing the energy sources for industrial applications and for the growth that's happening within industries. And from 2022 to 2025 was Horizon 1, and year-on-year, we improved profitability by really focusing on the fundamentals of operational efficiency. Also streamlining some of our processes, focusing on cleaning up some of the portfolio as well as focusing the team very much on factors that we could control.

And I'm pleased to say that by the end of 2025, we increased margins by over 300 basis points and nearly doubled EBITDA. And really, that set us on to the pathway of Horizon 2, which, again, we started at the beginning of this year, which is really continuing to advance the aspect of industrialized energy solutions as a company. And that means a lot more of the portfolio being applicable to, not just the extraction and the aspect of production of oil and gas, but also the enhancement of all types of molecules and monetization of those molecules for industrial applications when you think of nitrogen, you think of oxygen, you think of LNG.

And we see the molecule aspect very important to Baker Hughes. Geothermal as we go through CCUS, it's management of this as we look to provide more energy to the world, lower emissions and also productivity to our customers. And Baker Hughes today is not your typical oilfield services and equipment company. It's very different than what it used to be. And the name has been changed in very much the last 5 years and a path going forward to continue to change it as well. And it culminated with the announcement last July of the Chart acquisition as well, which further moves us into the industrialized areas. And really decreases some of the exposure to the volatility of the oil and gas space.

In the past, there were three dominant oil service companies and you'd say, other they've got different colors on their trucks. And that's how they're differentiated, right? I'm simplifying a bit. How are you differentiated now? Who is your peer set, it's Baker X and Y? How would you answer that question?

So number one, we changed our color from before because we were also synonymous with this red, blue and we actually decided to change the branding of Baker Hughes and it's an evolution that's happened over time. The way in which we're structured, though, is we do have an oilfield services and equipment segment. What differentiates, though, our oilfield services and equipment business versus some of the traditional peers such as SLB or Halliburton that you referenced as different colors is, number one, we're 75% international. Also, we're 50% offshore, and we're much more production focused.

We have less exposure the upstream cycles, and that's something that we enjoy from the production chemicals, the artificial lift element. It's an ongoing OpEx that takes place within the industry of the extraction. So you have your segment of Oilfield Services and Equipment. And then you have this Industrial Energy Technology segment, which, again, is very much different than the peer group of oilfield services. It has turbines, it has pumps, it has valves. It has compressors. It has condition monitoring, digital applications. And it's synonymous with being able to provide power generation, it's synonymous with liquefaction of natural gas, geothermal, CCUS, hydrogen, looking at industrial applications, also downstream midstream as well as then industrial applications as you go to off-site, off-grid, data centers.

And that's a space that obviously is continuing to grow significantly. And when you look at the mix today, we're about 50-50, and we've got a portion of the business still, obviously, in oil and gas, but we've got a number of end markets that are differentiated than our traditional oilfield services and equipment peers.

And you -- in a former life, I was a strategic planner. And one of my complaints about strategy is people will always bring you more and more ideas, new ideas, let's try this. And I eventually just defined strategy as telling me what you will not do as opposed to what you could do or want to do or might do. What will Baker not do strategically?

Yes, we're very much focused on, again, the value chain where we have technology differentiation, and we have competence. At the heart of it, we are a technology company that is intrinsic with the ability to extract and monetize a molecule for our customers. We are not going to be an E&P. We are not looking to compete with our customers. We're not looking to be an operator. We're not looking to go into those spaces. Where we're looking to do is enable the connectivity between the energy sources and the industrial outcomes.

And what that means is you're essentially being able to link the subsurface to the top side and then the movement of that molecule into a value creation for the customer as well. And when you look at energy sources and industrial outcomes, they're becoming much more interlinked. You look at today, data centers. They're increasingly coming and saying, "How do I get the power? Where do I get the power from?" You got to have a knowledge of where the natural gas is coming from, how competitive is the natural gas, how you get it to the data center? Is it on-grid, is it off-grid? And this technical competence is something that we look to be prominent in.

What we're not going to do is go outside of the space where we have technical relevance. And we're not looking to go into wind turbines. There's plenty of people doing wind turbines. We're not looking to do solar panels. We're not looking to go into nuclear reactors. We're going to stay very much focused on where we can add the value chain with technology across bringing the molecule and that molecule is not just a hydrocarbon. It's more and more helium, oxygen. You look at natural gas, relative to also space.

And one of the things that's happening in the space sector where there's a huge requirement for propellent and people needing to produce this propellent. And so that's where we, in managing the molecule, have a significant advantage across the value chain because of the portfolio that we have and we're able to match up with the end customer needs and give them the outcome.

I like the terminology around managing the molecule. You also manage electrons.

Oh, yes.

And so there's something around -- and where you are in power solutions and you're content and if I push back, why not nuclear, right? You are turbine experts. Uranium is a molecule.

Yes, there is -- first of all, there are areas that are already very competitive with regards to the aspect of dealing with uranium. We are providing applications that are technical in nature to the nuclear space. But do we need to be in a nuclear power station? No. We can provide the valves that are necessary. We can provide the critical technical competence that we have and exposure into the uranium field and the aspect of potential consequences from radiation, et cetera, we've always stayed away from.

And again, there's plenty of other people that know how to do that well. And we stay in the fields where we're competent. And your point around doing a lot with electrons, we are very much molecule to electron. And that's a key aspect of what we're delivering to data centers as well, which has obviously seen significant growth, and I'm sure we'll talk about.

And if I think about your evolution, oil and gas upstream CapEx globally is somewhere between, call it, $0.5 trillion a year, maybe $600 billion. Data center CapEx and power solutions for data center CapEx are comparable number, a little smaller. If you just look at the data center power requirements, and you're sort of 50-50 a foot in each, where are you in the future? What is that long -- are you going to stay at roughly a top 3 in, let's say, oil services on the oil and gas CapEx side? What's the evolution look like? Do you always stay where you are balanced?

I think over time, and we've depicted this also in the way in which Baker Hughes is evolving. From a percentage of the mix of Baker Hughes, we will continue to expand on the industrial side and continue to decrease on the cyclical side. That doesn't mean from a dollar value, it goes down. It's the growth that's taking place in the company overall. And it's because the end markets are growing significantly, and they allow us to change that mix orientation of the company. And when you look at the last few years, you're already seeing it with the expansion that we've had in Industrial Energy Technology.

We're going to get to the Strait of Hormuz now. We're going to talk about macro, and we're going to walk through the big 3 macro levers. If we could start with the oil side, one, you have employees in the region, you have customers in the region. You've got insights there. Where are we in the very short term geopolitical conflict around the Strait? And then I'll come back and we'll talk about some of the sort of longer-term implications.

So I think like everybody else, I read the newspapers, and I don't have any inside scoop. So we are obviously waiting to see if the Strait of Hormuz can be reopened through the negotiations that are happening. First and foremost, for us, it's the safety of the employees that we have. We have considerable employees at different locations within the region. I personally have been out there a few times to make sure that they're well and also to make sure that we ensure business continuity for our customers. So that's paramount for us.

And I can say that activity is ongoing, and we're working very well with our customers to ensure the safety as well as business continuity. As you look at longer term, clearly, the Strait of Hormuz being closed is going to be a burden for the global economy. And the longer that it continues to be constrained, it's constraining the output of available barrels to the world at large. And it's not just available barrels of oil, it's the subsequent downstream effect of fertilizers and subsequent other products that are also going to have an impact, likewise, helium, et cetera.

So I think it's a much broader aspect than just oil. It's going to be seen in other additives as well as we go downstream. And I can just hope like everybody that the Strait of Hormuz is opened quickly because the longer they are closed, the more it will have an impact downstream later on from a recovery perspective.

And then longer term, I've been arguing for a couple of years now that onshore U.S. shale oil business is fairly mature. You're starting to see signs from your customers of ultimately having to look abroad, right? Shale, by definition, it's a finite resource. It's held remarkably flat at roughly 10 million barrels a day for years now, and we haven't really been able to find the next play, frankly, or the desire for upstream companies to go out and commit the capital to do that.

Now you're starting to see license rounds in Libya reasonably well. You're starting to see offshore. You're starting to see BLM, New Mexico land deals that look billion-dollar deals for small parcels of land. There is a sense in the planning departments of your clients that 5 to 10 years out, they've got to be thinking about something else. So you could have argued that international CapEx is starting -- going to start to win again. Now you've got the geopolitics. Are we entering -- and this is probably the #1 debate we've been having with some of our clients.

Is there an international CapEx cycle coming for upstream, right? Is that how we solve ultimately the risk around the Strait of Hormuz?

So I think the aftermath of this is going to be an increase in investments across multiple areas. Upstream being one, but also as you look at the infrastructure, look at the resilience of being able to get the molecules to the marketplace. And when you think about new countries, as you mentioned, Libya. You're looking at activity increasing in Nigeria. You're looking at other locations in Africa. You see what's happening in Alaska. I don't think the U.S. is finished either. I think technology advancements continues to be there.

And I would say the first mover are going to be some of the shorter-cycle barrels available within North America. And then longer term, clearly, the international upstream is going to continue to increase as well, and that's where there's more molecules available. But I look at infrastructure as being critically important as well. And when you think about the aspect of diversification for energy security, and that's going to be a key element. And it's one of the elements where we play is being able to build incremental infrastructure.

So you have pipelines that are going to be necessary in the Middle East to bypass the Strait of Hormuz. You've got new plants that are going to be required from a perspective of LNG to be able to not just be located in one single location. And all of this actually is a positive tailwind as you look forward beyond what is this current situation where we see incremental opportunity for a company like ours within the infrastructure build, both from the upstream side but also across all of the infrastructure that's going to be needed.

And I think what's clear is prominent in everybody's mind is energy security and being able to have an energy security from an affordability perspective, and obviously then sustainability, but energy security is what we're hearing a lot about.

And we've talked about oil, 20% roughly of the world's oil moves through the Strait of Hormuz. LNG is a comparable number. With LNG, you've had physical damage, right, attacks on the Qatari facilities. And I remember when those headlines came out, was the sort of a funny headlines where you got, Target CEO talks about 17% of capacity being off-line for 3 to 5 years. And starting first, you're like, well, 17%, that's an awfully precise number. That's one over six, right? Okay. Understood that. 3 to 5 years, or you can build a new LNG facility in 3 to 4 years, and these are the Qataris, they can do it faster.

But when you peel that onion, the answer is there's just no turbines at that scale, right? There is a long queue. So talk about the evolution of LNG specifically, if you're Qatari Gas, what can you do in order to get a turbine other than, I guess, beg you and kick somebody out of the queue. What can be done? And then ultimately, does this mean we see a wave of what would have been sort of lower quality or riskier LNG projects? I think like the Mozambiques of the world, the Papua New Guineas and maybe the West Africas. Do we just start to see diverse LNG opportunities as opposed to the best opportunities start to win?

We've always been of a positive view on LNG, and we think natural gas for the future is the clear winner. And LNG is also the clear winner relative to providing energy security because it is abundantly available in multiple locations, and we know how to liquefy and then it can be transported. Specifically on Qatar, I'll let QatarEnergy speak for themselves. The aspect of ongoing projects is moving forward. So if you look at their expansion plans, they are staying committed to their expansion plans.

The reality is that supply chain is constrained, when you need something today on a facility that's potentially been impacted from the conflict. And so those particular trains need to be repaired or need to be changed, and that's why the timeline being given of the 3 to 5 years. Likewise, though, at the same time, they're continuing with the development that they've been progressing with. If you look at Northfield West, you look at Northfield East. So they're also continuing their expansion plans.

You are seeing other locations come into the fold. I think everybody's seen Argentina. And again, we know Argentina is plentiful of gas. We know Algeria is plentiful of gas. We know also the U.S. has a lot of gas, and you've got a lot of U.S. Gulf Coast projects that are looking to move forward. And again, on a fast track with the approval. So we see that there's going to be a significant increase in LNG. And we've always said that LNG, by 2030, you needed 800 million tons per annum of installed capacity. And we see by 2035, 950 million tons of needed capacity.

And we're still very much of that view. And it's going to be one of the key elements to provide that energy security. So we are bullish around LNG, and we think it will be more diversified including Mozambique, and you've got already floaters that are taking place in Mozambique with one of the operators. You've got one of the land operators onshore, you have got the Exxon project that is being looked at. So -- but there's plenty of locations, and I don't think it's necessarily more risky because the U.S. also is very much looked at as a safe haven for investment.

And that LNG business sits within, we'll limit the acronyms, but IET, Industrial Energy Technology. It is the minority of industrial energy and technology. The majority of which are things related to data centers, we have an investor question. How much of Industrial Energy segment supplies data centers? What's the growth rate of demand for those customers? So talk about that segment.

Yes. And I think if we were here a few years ago, a lot of people would have said, Baker Hughes oilfield services, equipment, LNG. And as we've shown through the results and also what we've indicated before, Baker Hughes portfolio is very varied and the end markets in which we can play are very varied, which is one of the key attributes and strengths of the Baker Hughes portfolio. And you just picked on that because if you look at LNG, LNG if you look at 2025 and you look also at first quarter, less than 15% of the order intake, 85% of IET is outside of LNG. When you think about the power generation, you think about the onshore offshore applications, you think about the pipeline applications and specifically on data centers.

Again, when we look at data centers, you look at, again, the first quarter, we did in Power Systems overall a billion dollars, $1.4 billion, $1 billion of that was in data centers, in 2025, we did $1 billion in data centers, and we set out a target initially of $3 billion by between 2025 and 2027. We said in our last earnings call that we were going to be revising that up because, again, the intake is significant. And much broader than data centers is the whole aspect of power generation, which is a significant element of the Industrial Energy Technology segment.

Did I hear a growth rate in there?

No, because Chase won't let me say that.

If I think about delivering power solutions to AI data centers who seem the hungriest, but it's a general problem. There are solutions that are fast and slow, right? There's a spectrum there, and there are solutions that are bad and good. And I would put nuclear in the slow but good category. We can debate that. Are there any fast and good solutions to AI data center power demand that you offer?

There are. And I think what's true today is that the marketplace is hungry for any type of quick power and that will resolve itself with what's most appropriate, what's most economical and what's most efficient. And when you look at the turbines that we provide and you look at the generators that we provide, they are applicable in the sweet spot of the 150 to 300-megawatt range between the NovaLT 16, the Frame 5, also with the BRUSH generator that we provide. And we think -- and again, we've seen it from the efficiencies perspective. We've seen it from the emission standpoint that this is an area that's going to be continuous, because as you look at some of the offerings today, you've got a string of 100 different units, and that's complicated to manage over time.

So clearly, today, there's a lot of different offerings. We have developed these turbines, not just for data centers. We knew data center was one of the end markets. We developed it for multiple end markets, inclusive of pipelines and industrial sites. And this is a very sweet spot for off-grid immediate power. And we think that, again, the grid will take time. This isn't a 1-year event. This is a multiyear, and it will take time for all the other solutions to come on stream.

Eventually, it will also be dependent on how big the data centers become and are they data parks that want to go with their own power plants and go for heavy-duty gas turbines. Do they want to eventually go to the grid? I think a lot of that is still being resolved. We see, though, continuous demand for this 150 to 300-megawatt solution, and we're providing that to the marketplace today. And in fact, we'll take our data center number up, I'm sure when -- in the future. And we've also said from an industrial energy technology perspective that between 2026 and 2028, we'll have $40 billion plus of order intake in Industrial Energy Technology.

Moving to the next business line, Gas Technology Solution. Tell us what -- tell the audience what it is and talk to the opportunity there?

Yes, Gas Technology, and I think it needs to be remembered that it's not as easy as you just take the gas and then it's available for use and then you liquefy it into LNG. You actually need a lot of compression to be able to get it out. You need a lot of processing capability onshore. And a great example is in Algeria. And you look at a project that we're executing with Hassi R’'Mel which is, again, compression stations that enable the gas to be extracted and then also transported through the pipeline to Europe.

And you look at the Master Gas System within Kingdom of Saudi Arabia, the network that's enabling the whole gas to be able to go through the pipeline. And that gas infrastructure is critically important because it's really the elements that enable you then to do something with the gas, not just take it out of the ground.

And then new energy offering, what's within that umbrella?

Yes, new energy, and again, we started back in 2022 talking about new energy because, again, Baker Hughes' capability goes beyond just the traditional areas that people think. When you think about CCUS, CCUS is about the drilling of storage wells. It's about the compression of CO2 into those wells and it's the monitoring of those wells, all capability that Baker Hughes has. When you think of geothermal, again, it's the aspect of both from a conventional and an enhanced geothermal being able to take water and subsurface temperatures and rock formations and be able to generate 200, 300 megawatts and the steam turbine that's required for that as well as the insights into the subsurface.

So key areas of new energy are CCUS, geothermal, emissions management and abatement, deflaring. Today, there is still a lot of flaring that's happening around the world. That is methane. It's natural gas that is wasted. And we have the capabilities to be able to recapture that and reutilize it, and we're executing one of the largest de-flaring projects in Iraq. So again, being able to -- outside of the traditional element, new energy be able to use what's wasted.

And you look at hydrogen, again, forget the color of hydrogen, hydrogen is utilized, and it's going to continue to be utilized in the space of energy spectrum, and we provide the compression that's required for hydrogen. We provide the elements of being able to help manufacture hydrogen. And we're on the NEOM project within the Kingdom of Saudi Arabia. And last but not least, also on the clean integrated power solutions, continuing to look for ways to look at providing CO2-free energy to the world. And those are new technologies that we've been investing in.

So the new energy, very pleased with the growth that we've seen. We started in 2022 at only a couple of hundred million. Everybody said the target that we put out there for 2030 of $6 billion to $7 billion was not necessarily realistic. We did over $2 billion last year. We're going to -- we've said we're going to do this year between $2.4 billion to $2.6 billion in new energy. And it's a field that we continue to see opportunities to take existing capabilities we have within Baker Hughes to a new energy space.

Oil is a big market with great, if volatile, price discovery, natural gas, even power, those are well-established markets. When you start to get into new energy, the challenge with the hydrogen economy or the challenge with a CO2 economy is smaller markets and price struggles. So how do you think about a price of carbon, right? How do you underwrite R&D or technology offerings in CCUS, when you can't go to Bloomberg and pull up the price of CO2 globally?

Bob, I can say the same was said about the LNG and having been in LNG for 30 years, you've got an energy expansion that's happening. And there's a natural cost curve that everything goes through. And just like you've seen LNG grow from many that didn't think it would grow at the outset. There's a natural space within the energy expansion for the new energies to play a role, where it can be competitive. And it's got to find that area.

If you think of hydrogen, hydrogen has aspects that are very beneficial when you think of large-scale mobility. And when you think of Europe, you have hydrogen trucks. When you think of China, you have hydrogen buses. So there are elements that are already emerging in the marketplace. When you look at geothermal, again, something that's been around a long, long time. Technology has now reinvented geothermal with enhanced geothermal which is the ability now to recycle water through the aspect of a rock surface at much lower temperatures than previously needed to be able to produce the same amount of power.

And we announced with Fervo last year, a project with 5 wells producing enough to electrify 180,000 homes. So it's a cost curve that you go through. Again, having been through LNG, I think we have competence in this area to be able to work through the technology and cost curve. And these are not marketplaces that get formed in 1 year. I wish it were the case. And when you look back a few years ago, everybody was in a hydrogen frenzy, we said hydrogen is going to take time.

These things -- unfortunately, energy is complicated, but the world ultimately needs more energy and there's an energy expansion, not at the traction that it is taking place. And I think affordability, sustainability and security are the fundable -- elements that we're looking at.

And you have a choice of strategies to go to market. There's one where you invest in R&D, you create an offering and then you go sell it. There's a trusted partner path and then there's sort of a reactive provider path. How do you think about your new energy strategy for creating product lines or service lines?

We like to partner. We like to partner, and we like to look for good elements of added technology. On the organic path, if it's within our portfolio, we'll stay organic because it's compression related. And one of the things that we do well at Baker Hughes is we take what we have that can be applied to multiple end markets. And we take critical equipment that can be applied to multiple end markets. So we are one of the world's leaders in compression. We're one of the world leaders of rotating equipment.

Rotating equipment is needed in a lot of different places. It's not just one particular. And so as we enhance the capability of that rotating equipment, it goes and feeds a lot of end markets. And then we partner where we need know-how from the outside as well as then being able to assist in the advancement of commercialization, different models and we work with customers and partners alike.

And we do have a follow-up question on the IET business. What does the service part of the turbines business look like compared to your competitors?

So we love the razor-razorblade model. I think it's one that we spent a lot of time educating the marketplace on because the name Baker Hughes doesn't synonymize with an aftermarket. And we have over 9,000 installed units, and they require maintenance. They require servicing and they have a 20- to 30-year lifespan. And as you think about the order intake that we've had and the increase that we have also going forward of installations, all of that is going to grow our aftermarket business later on.

We have a very high attachment rate within the LNG. Overall, for what we have installed, we look to 45% to 50% on the LNG side. It's well above that in the [ 90% ] attachment rate with the service. And the service agreements can be of different natures. And that is a critical aspect of providing durability and also consistency. One of the big things that we're doing at Baker Hughes is shifting from volatility to predictability and consistency.

And we like the aftermarket. We like the more durable end markets. That's why we're focused on production side of the oilfield services and equipment, which is a continuous OpEx. That's why we like the aspect of the service business and that razor-razorblade. I'll give you an anecdote that I find interesting because a lot of people ask, "Well, aren't they just two different animals?"

When you have an artificial lift in the field, that artificial lift requires care and attention, and it requires chemicals. That is an OpEx business. And it's like having a compressor in the field, and having to maintain that compressor or having a liquefaction train and having to maintain that liquefaction. And there's a lot of synergies and capabilities that we can bring across the two segments associated with that. And there's actually a lot of synergy with the way in which we're building the Baker Hughes of the future.

You mentioned a desire for stability. If we went back to the early days of shale, oil price would drive rig count, Baker Hughes' rig count, you should have a Baker Hughes turbine count, right? You should count other things but we'll leave that to Chase. Rig count drove frac crew. And we just had an incredible chaos in the system, boom-bust cycles. Remarkably, we talked earlier, we've had fairly volatile oil prices in the last 10 years in the new Baker, but rig count has been reasonably well behaved. Activity levels have been reasonably well behaved. Do you prefer that, right? I guess from the amount of sleep you get, but from the amount of margin, right, is it a well-behaved industry? And it sounds like that's what you prefer.

So I think, Bob, and you referenced something that historically is very well known, the Baker Hughes rig count. I can't say that I look at the Baker Hughes rig count that often. Because there is a dislocation that's happened over the course of the last 10 years where new technology has driven improvements in rigs and activity levels and production aren't necessarily associated the same way they used to be in the past. And to me, I look at the aspect of what's the actual production and what's the activity level overall on the chemicals required, the ESPs required, what's the drilling.

It's not so much the aspect of the rig count itself. There's a lot of elements that go into it, and then obviously, the price. I think what we're trying to do at Baker Hughes is stay focused on more OpEx levered elements that don't go through the upswings and downswings. And that becomes more durable and it has an aftermarket element to it and the application to multiple end markets because, again, the aspect of being able to understand the subsurface is applicable to CCUS. It's applicable to geothermal. That drilling of that well is applicable to multiple aspects. And likewise, as you think about the turbine or the compressor out there in the field.

Some -- if you hire an engineer out of university, they spend their career moving through Baker. Do they move across, are they agnostic? Will they spend their career bouncing between these various segments? Is it really just a core skill of engineering, keeping rotating equipment operating, et cetera?

Actually, we bring in engineers based on specific capabilities. And if you look at metallurgy, for example, that is consistent across the company. If you look at the elements of AI applications, it's consistent across the company. Clearly, there's some specialized fields. But the benefit is, there's a lot of similarities when it comes to critical equipment or critical services that you're providing, and they require the same engineering know-how.

So we have engineers in their domain and those domain cut across the company, and we have a technology council that make sure that there's consistent sharing and that we actually apply the best of the capabilities across the company.

Move a bit to financial strategy, and we do have a question I'll get to on pigeonhole. First and foremost, you've acquired or we are close months away from closing on your all-cash acquisition of Chart Industries. Doing that will bring net debt to EBITDA up, there's a plan, a path to get it down 1, 1.5 while supporting R&D, while supporting the dividend, et cetera. Describe why Chart and then am I getting the near-term financial strategy, right? And then I'll have a follow-up.

So Chart is very much in line with the strategy that we communicated and the continued evolution across the capability of broadening Baker Hughes and industrial applications. And if you think of the capability Chart has from a cryogenics, from the aspect of cold boxes with what they do from a management of the molecule, it fits very nicely and complementary to the capabilities we have. And in fact, we've worked with them with customers in the past and know them well. So we see it as very much a continuation of the portfolio expansion to further link the energy sources to industrial outcomes and very happy with the capabilities that they'll bring into the fold.

With regards to the financials, as you mentioned, yes, it's an all-cash transaction, and we will be taking debt to equity up at the outset. And then we said we're always going to be remaining capital disciplined. We are going to be bringing that down. We've already announced a number of actions and also dispositions. We have been continuously looking at the portfolio on what makes sense to have in the portfolio, what doesn't. Recently, we also announced the intent to dispose of Waygate Technologies at the beginning of this year. And that's going to be an aspect of continuing to bring that down to the 1, 1.5 within a logical time frame, safeguarding the dividend, safeguarding the capital investments we need to make. And we are very conscious of needing to have a strong balance sheet as we go forward.

And we have a question. Can you provide any more detail on the progress at NEOM on the development side, the product marketing side?

The only update I can provide you is that we're delivering the requirements from our standpoint, and they are continuing to execute the aspect of the development as they've been communicating and no change from that.

And then in our final couple of minutes, what's the value proposition for owning Baker Hughes stock?

Well, clearly, the upside coming in now, it's the durability of what we're creating for the long term. And I think when you look at the macro picture, and the macro picture is one where there will always be volatility and there'll always be geopolitics. However, the world needs more energy. I think that's a fundamental truth that is there. And it's not just more energy, it's more variety of sources of energy. And that's going to be a key aspect as well. You're seeing that with the increase of data centers and artificial intelligence.

All of that is going to further actually necessitate more energy being available. Also, as you look at going forward, it needs to be sustainable and affordable. So you need to have players with technology that can provide those solutions that actually drive that productivity and can connect the energy sources to the industrial outcomes working in partnership with the end users, and that's the -- really the proposition that we're able to provide with not just a 1 year, it is a decade-long growth trajectory.

And I've said it before, I'll say it again. We are in an energy demand decade. And it's maybe a bold statement. However, you look at all of the indicators, they point to the words, more infrastructure being required, where our rotating equipment, pumps, valves is necessary, turbines. You're looking at more power generation, so turbines being required. You're looking at more CCUS, which requires the subsurface knowledge, the drilling. You're looking at more oil and more gas production. And all of those factors really give a good trajectory for Baker Hughes going forward.

And that's what we laid out also in Horizon 2 with some of the indicators for where we're taking the company by 2028 with a margin profile which is at 20% EBITDA as a combined company without Chart.

Fantastic. Thank you, Lorenzo, for your time. Thank you, audience, for your time.

Thank you very much, Bob.

Good day, ladies and gentlemen, and welcome to the Baker Hughes Company First Quarter 2026 Earnings Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's call, Mr. Chase Mulvehill, Vice President of Investor Relations. Sir, you may begin.

Thank you. Good morning, everyone, and welcome to the Baker Hughes First Quarter Earnings Conference Call. Here with me are our Chairman and CEO, Lorenzo Simonelli; and our CFO, Ahmed Moghal. The earnings release we issued yesterday evening can be found on our website at bakerhughes.com.

We will also be using a presentation with our prepared remarks during this webcast, which can be found on our investor website. As a reminder, we will provide forward-looking statements during this conference call. These statements are not guarantees of future performance and involve a number of risks and assumptions. Please review our SEC filings and website for the factors that could cause actual results to differ materially. Reconciliation of adjusted EBITDA and certain GAAP to non-GAAP measures can be found in our earnings release and presentation available on our investor website. With that, I'll turn the call over to Lorenzo.

Thank you, Chase. Good morning, everyone, and thanks for joining us. First, I'd like to provide a quick outline for today's call. I will begin with a summary of our first quarter results and recent portfolio actions, then highlight key awards and address the evolving macro environment including the ongoing situation in the Middle East. I will then turn it over to Ahmed, who will present an overview of our financial results as well as provide guidance for the second quarter and review our outlook for the full year. He will also share an update on the progress with chart integration planning and discuss recent actions to further optimize our portfolio. To conclude, I will highlight the progress we continue to make in positioning Baker Hughes as a leading provider of industrialized energy solutions and then we'll open up the line for questions.

Let us turn to Slide 4. Against the backdrop of ongoing conflict in the Middle East, our top priority remains the safety and well-being of our employees and their families. We remain in close contact with our team and continue to monitor the situation closely. And I am proud of our team's resilience. Despite a complex operating environment, we delivered another strong quarter of financial results, reflecting the strength of our portfolio and disciplined execution, which more than offset the significant impact of regional disruptions. For the first quarter, adjusted EBITDA totaled $1.16 billion, exceeding our guidance range as we continue to deepen our exposure into adjacent end markets and drive structural operational efficiency. Adjusted earnings per share were $0.58, 13% above the same quarter last year, even as results were impacted from the Middle East conflict, the PSI divestiture and the formation of the SPC joint venture. Adjusted EBITDA margin rose 140 basis points year-over-year to 17.6%, driven by strong IET performance, partially offset by lower OFSE margin.

Turning to orders. IET delivered another outstanding quarter with bookings reaching a record of $4.9 billion, marking the third consecutive quarter above $4 billion. This performance reflects ongoing strength across energy infrastructure, highlighted by $1.4 billion in Power Systems orders and further progress in LNG, gas infrastructure and CCS. IET also reported a book-to-bill of 1.5x for the quarter, resulting in a record RPO of $33.1 billion. This marks the fifth consecutive quarter that IET has achieved this milestone. Excluding transactions, RPO rose by 3% on a sequential basis and increased 10% compared to the prior year. These results underscore the diversity and versatility of the IET portfolio, supporting sustained growth across energy infrastructure markets as the importance of energy security continues to rise.

During the first quarter, we generated free cash flow of $210 million. Our first quarter performance demonstrates the durability and robustness of our portfolio. The positive trajectory aided by our business system and the strong momentum in IET. We are confident that our versatile portfolio and track record of operational excellence positions us for sustained growth during Horizon 2 as we continue to navigate a volatile environment. Earlier this month, we announced the divestiture of Waygate Technologies as part of our ongoing portfolio management strategy and comprehensive evaluation to identify further opportunities for enhancing shareholder value. Combined with the sale of PSI to Crane and the joint venture with Cactus, which both closed early in January, we expect to generate gross proceeds of approximately $3 billion in 2026, further strengthening our balance sheet.

Now turning to key awards on Slide 5. In Power Systems, we achieved another outstanding quarter securing orders across our power generation, grid stability and energy management capabilities. For power generation, we converted a prior slot reservation agreement into an integrated solution award for a critical infrastructure project in North America. This contract includes NovaLT 16 gas turbines, BRUSH power generation electric generators, gears and long-term aftermarket services, delivering up to 1 gigawatt of reliable power to support growing energy demand from data centers. Additionally, we announced the contract to provide 25 BRUSH power generation generators to Boom Supersonic. When paired with Boom's gas turbines, this is expected to deliver a total of 1.21 gigawatts of generator capacity for data centers.

In grid stability, we secured a contract with Hitachi Energy to design, manufacture, install and commission 4 synchronous condensers. These will enhance system reliability and stability at 2 energy substations in Australia. By providing crucial voltage support and dynamic response synchronous condensers helped mitigate the challenges associated with intermittent power from renewable sources, ensuring a more reliable and stable grid. In Energy Management, Baker Hughes received a second contract for the engineering and design of hydro stores advanced compressed air energy storage system in the U.S. This collaboration includes up to 1.4 gigawatts of potential equipment orders for compressors, expanders, motors and generators.

Further highlighting our momentum in Energy Management we announced a collaboration with Google Cloud to develop AI-enabled power optimization and sustainability solutions for data center applications. This partnership is a pivotal collaboration that leverages Baker Hughes expertise in Power Systems and Google Cloud's leadership in advanced AI and data analytics, bringing together the core capabilities of both companies to drive innovation and operational efficiency across the data center market. In gas infrastructure, we secured 2 key awards this quarter. We received a significant order for an advanced electric motor-driven compression solution, supporting offshore operations in the Middle East. Additionally, Baker Hughes will deliver gas compression units including three NovaLT gas turbines for the San Matias pipeline in Argentina, marking our first NovaLT deployment in South America.

In LNG, we booked equipment orders totaling $1.2 billion this quarter across key regions. Notably, Qatar Energy awarded us a significant contract for 2 mega trains on the North Field West project representing 16 MTPA of capacity. Our scope includes 6 frame 9 gas turbines, 12 centrifugal compressors and integrated power solutions utilizing three frame 6 gas turbines and free BRUSH power generation generators. We are also seeing potential acceleration of LNG project FIDs in North America. Reflecting this momentum, we recently entered into a strategic agreement with ST LNG to provide critical gas compression and power generation solutions for their proposed 8.4 MTPA LNG export terminal offshore Texas. Additionally, we continue to drive value through our life cycle model, signing a 5-year aftermarket service agreement with Petrobras. This contract covers maintenance, repair and engineering services for up to 64 aeroderivative gas turbines across 19 FPSOs further strengthening our role as a trusted provider for Petrobras critical operations.

Including our 1-gigawatt data center order highlighted earlier, we secured $1.4 billion in new energy orders this quarter, a strong start to the year that reinforces our confidence in achieving our $2.4 billion to $2.6 billion target for 2026. New energy bookings also included a significant award to provide advanced compression and pumping technologies for Qatar Energy, LNG's large-scale carbon capture facility. Our scope includes 6 compression trains powered by variable speed electric motors, enabling the capture and transport of 4.1 million tons of CO2 annually.

In our Downstream Chemicals business, we signed a substantial multiyear agreement with Marathon Petroleum, establishing ourselves as the preferred supplier of hydrocarbon treatment products and services for 12 refineries and 2 renewable fuels facilities throughout North America. This strategic collaboration reinforces our position within the downstream market and demonstrates our commitment to delivering innovative solutions that enhance operational efficiency and support sustainable growth for our customers.

Turning to Energy Upstream. We secured key awards that reflect our differentiated positioning and long-term value proposition to customers across the oilfield services market. In Brazil, we secured a major contract with Petrobras to deliver 91 kilometers of flexible pipe, risers, flowlines and comprehensive maintenance and installation services. Supporting the country's pre-salt and post-salt developments. We also signed a major contract extension with Petrobras to provide integrated workover and P&A solutions for one of the world's largest offshore P&A projects.

Within SSPS, we also received an award from Turkish Petroleum to provide subsea production systems for 5 wells in the Black Sea, including deepwater horizontal tree systems, manifolds, subsea distribution, infrastructure and topside control units. In Argentina Vaca Muerta shale, we signed a 3-year contract with YPF to provide well construction technology, including Lucida, rotary steerable and PermaFORCE drill bits to support unconventional shale development. We also continue to see strong momentum across integrated services, signing a contract with Gulf Energy to drill and complete 43 wells in Kenya's South Lokichar Basin, marking our first fully integrated project in Sub-Saharan Africa.

Moving to digital. We continue to advance our position across both hardware and software solutions. In IET, we secured several contracts to deploy Cordant asset health, including an award for a large U.S. combined cycle power plant, which further illustrates the value of our digital solutions in enhancing efficiency and reliability. Notably, Cordant's power-related orders doubled year-over-year, continuing strong momentum from 2025 when power orders rose by more than 80%. This robust growth highlights both the rapid adoption of our digital offerings within the power sector and our commitment to advancing the global transformation of Power Systems. In OFSE, we expanded our Lucida agreement with a large NOC for ESP surveillance and optimization and signed a new multiyear Lucida contract with expand energy covering gas wells across the Marcellus, Utica and Haynesville Shale basins. Currently, this technology is actively deployed across approximately 75,000 wells globally, providing digital enablement that significantly differentiates our artificial lift portfolio to improve surveillance, optimization and production performance.

Lastly, underscoring the expanding commercial synergy opportunities within our enterprise capabilities, we established a strategic collaboration with XGS Energy and were awarded a contract for initial well design and engineering support for its 150-megawatt geothermal project in New Mexico. Our early involvement positions us to deliver integrated subsurface and surface solutions that set us apart from our competitors.

Turning to the macro on Slide 6. Despite an otherwise constructive global demand backdrop, the Middle East conflict has introduced a meaningful new layer of macro uncertainty. Disruptions across critical energy corridors including the Strait of Hormuz have tightened global oil and LNG balances, leading to sharp price increases. These developments have heightened inflationary pressures, which would present downside risk to global economic growth should the conflict persist over an extended period. The conflict has introduced significant volatility into global oil markets impacting over 10% of global oil volumes. Concerns around the security of key transit routes have tightened near-term supply/demand balances with growing risk of undersupply in 2026. While the duration and full extent of the conflict remain uncertain, it is evident that geopolitical risk has become a structural reality for oil and gas markets. This development has significant consequences for the reliability of supply and global energy security.

To address these challenges, there is a growing need for increased upstream investment to expand global production capacity and ensure we can meet rising demand. Additionally, rebuilding global inventories above historical levels is expected to play a critical role in supporting energy security particularly given the significant drawdown of inventories following the extended closure of the Strait of Hormuz. The conflict has also significantly affected global LNG markets with 20% of worldwide LNG capacity now offline, driving significant price volatility. The recent infrastructure damage in the region and the effective closure of the Strait of Hormuz have materially constrained the LNG market's ability to respond to growing demand likely to result in a supply shortfall this year. Consequently, we are seeing increased sensitivity to price movements in key consuming regions.

In Asia, higher LNG prices have led to fuel switching from natural gas to coal which has helped to moderate additional upward pressure on LNG prices. Meanwhile, in Europe, the gas injection season has begun at a slower pace against relatively low storage levels. Currently, storage levels are only 30% of capacity, 6% below last year and 13% below the seasonal average. These dynamics underscore the ongoing challenges and highlight the importance of energy security across global markets.

Turning to 2026. We now expect global upstream spending to be modestly below our prior outlook of low single-digit declines compared to 2025, driven entirely by a significant reduction in Middle East activity. This is expected to be partially mitigated by more resilient spending across other regions, with North America and international markets outside of the Middle East now expected to be broadly flat compared to last year. This outlook assumes a resolution of the Middle East conflict by midyear and the full reopening of the Strait of Hormuz. That said, geopolitical conditions remain fluid, and the ultimate timing and magnitude of the recovery in the region are subject to a wide range of potential outcomes.

In the near term, we anticipate greater emphasis on optimizing production from existing wells. Once the conflict ends and the Strait of Hormuz is fully opened, we expect a measured increase in activity in the Middle East, led by a meaningful increase in remediation and intervention work as previously shut-in wells are brought back online. The pace of activity in the region will be dictated by producers' ability to restore export flows out of the region. In light of these significant disruptions, we see 2 key structural trends shaping energy markets in the wake of recent geopolitical developments. First, energy security will likely become a foundational priority for government and industry alike, driving greater emphasis on diversifying oil and gas supply sources and increased investment in power and energy infrastructure while also supporting continued development of lower carbon solutions such as geothermal, nuclear and grid modernization. Importantly, this is not just about adding supply. It is about building a more resilient energy system that supports industrial outcomes. That means greater redundancy, more diversified infrastructure and less reliance on single large-scale assets. A more distributed energy system will be critical to supporting future economic growth.

This is where Baker Hughes is uniquely positioned with differentiated capabilities across the full energy value chain, spanning from molecule to electron. By leveraging these strengths, we're able to support customers with integrated life cycle solutions across the full energy spectrum and adjacent industrial markets. Against this backdrop, we are increasingly confident that our Horizon 2 IET order target will exceed $40 billion, supported by strengthening demand across global energy infrastructure markets.

Second, regardless of the outcome of the current conflict, we expect an environment characterized by heightened geopolitical risk that is likely to result in persistent risk premiums for oil and LNG prices. This environment underscores the importance for higher upstream investment, particularly across the U.S., Latin America and other deepwater regions.

To close, let me briefly recap. Despite the ongoing tariff-related pressures and significant Middle East disruption, we delivered strong results with IET achieving 35% year-over-year EBITDA growth and reaching record levels in both orders and backlog. This performance reflects effective execution of the Baker Hughes business system, supported by strong pricing and continued productivity improvements. Looking ahead, we remain focused on the successful closing of the Chart transaction and ensuring a seamless integration process. We are making substantial progress in integration planning and remain confident in delivering our targeted cost synergies of $325 million.

More broadly, our ongoing portfolio management actions, strategic initiatives and comprehensive business evaluation are reinforcing the durability and effectiveness of our long-term strategy. These efforts enable us to navigate an evolving market landscape with confidence and position us to capture new growth opportunities. With that, I'll now turn the call over to Ahmed.

Thanks, Lorenzo. First, I would like to reiterate Lorenzo's comments that our foremost priority is ensuring the safety and well-being of our employees and their families in the Middle East. I'll begin on Slide 8 by presenting an overview of our consolidated results. Next, I'll give a quick update on the pending Chart transaction and discuss progress in our portfolio management strategy. After that, I'll review our segment results and provide a brief summary of the second quarter and the full year guidance.

As Lorenzo mentioned, we once again delivered strong orders in the first quarter with total company orders of $8.2 billion including $4.9 billion from IET. Adjusted EBITDA of $1.16 billion increased 12% year-over-year, driven by robust IET growth, partially offset by the impact of the Middle East disruptions on our OFSE business. Adjusted EBITDA margins increased by 140 basis points year-over-year to 17.6%. GAAP diluted earnings per share were $0.93. Excluding $0.35 of adjusting items in the quarter, diluted earnings per share were $0.58, up 13% year-over-year. During the quarter, we generated free cash flow of $210 million. The first quarter is generally the weakest period for free cash flow due to seasonal factors, but this period was further affected by some delays in customer payments.

Moving on to capital allocation on Slide 9. The company's balance sheet remains strong with our net debt to adjusted EBITDA ratio declining to 0.32x. Following the successful debt offering in March, our cash position increased to $14.8 billion, while liquidity increased to $17.8 billion. The long-term debt issuance in March raised $6.5 billion in U.S. bonds and EUR 3 billion in European bonds, marking our inaugural bond offering in Europe. The proceeds from this offering will be allocated towards closing the Chart acquisition.

Our target remains to reduce our net debt to adjusted EBITDA ratio to between 1 and 1.5x within 24 months after the Chart transaction closes. We plan to achieve this through free cash flow generation and proceeds from our ongoing portfolio management actions. At the start of the quarter, we completed the previously announced SPC and PSI transaction. In addition, we anticipate generating gross proceeds of $1.6 billion from the IPO of HMH in the recently announced sale of Waygate Technologies to Hexagon. As a result, we expect to achieve our $1 billion incremental divestment target ahead of schedule, underscoring our commitment to disciplined capital management and maintaining our strong balance sheet.

With respect to Chart, we remain focused on closing the transaction and executing a seamless integration. With regulatory reviews still underway in certain jurisdictions, we currently expect closing in the second quarter understanding that the timing may evolve as those processes progress. We believe this combination will significantly enhance the value we deliver to customers, broaden our industrial portfolio and enable us to expand into adjacent markets.

On integration, our integration management office led by Jim continues to make significant progress. The team is organized into 17 operational work streams, each focused on ensuring a smooth transition. To date, we have identified more than 250 synergy opportunities and remain confident in achieving the full $325 million of targeted cost synergies. As we have progressed through integration planning, our work has further reinforced both the strategic and industrial rationale of this acquisition while highlighting strong cultural alignment between the 2 organizations.

Let's now turn to segment results, starting with IET on Slide 10.

During the quarter, we booked record IET orders of $4.9 billion, driven by continued strength in Power Systems, LNG and gas infrastructure. Over the last 4 quarters, IET orders totaled $16.6 billion, which is up 25% versus the prior 4 quarters. Our first quarter results reflect outstanding performance in IET with revenue of $3.35 billion at the high end of our guidance range and increasing 14% year-over-year. Compared to last year, revenue was impacted by the PSI and CDC transactions, which together represented a headwind of 3% to aggregate revenue.

Growth was led by strong performance in Gas Tech Services as we continue to work down the overdue aeroderivative backlog. We expect these benefits to carry into the second quarter with a more normalized environment anticipated in the latter half of the year. During the quarter, IET revenue was slightly impacted by shipping delays associated with Middle East disruptions across key trading routes.

IET EBITDA for the quarter increased 35% year-over-year to $678 million. Margins expanded by 310 basis points to 20.2%. This strong margin performance was driven by favorable backlog pricing, elevated project closeout and productivity and ongoing execution of the Baker Hughes business system, further reinforcing our operating discipline.

Turning to OFSE on Slide 11. OFSE delivered another solid quarter, demonstrating resilience despite persistent macroeconomic headwinds and the ongoing challenges in the Middle East. Revenue for the quarter was $3.24 billion, reflecting a 9% sequential decline, while remaining slightly above the midpoint of our guidance range. SPC was excluded from the consolidated results after the formation of a joint venture with Cactus in early January, contributing 4% to OFSE sequential revenue decline.

Relative to our expectations, strong performance in Mexico, Sub-Saharan Africa and the Gulf of America more than offset the disruptions experienced in the Middle East during March, which impacted OFSE revenue by approximately 2% when compared to the fourth quarter of 2025. OFSE reported EBITDA of $565 million, exceeding the midpoint of our guidance range. EBITDA margin declined 70 basis points sequentially to 17.4%. This decline was attributed to the SPC transaction, seasonality and the impact of Middle East disruptions partially offset by an improvement in North America OFSE margins. The quarter was positively impacted by foreign exchange and more favorable mix of direct sales across offshore markets, which generally yield higher margins. In addition, SSPS posted continued strength in orders totaling $650 million, up 22% year-over-year. This is a robust 82% increase when excluding the impact of SPC.

Turning to Slide 12. I will provide our outlook for the second quarter and then comment on our full year 2026 guidance. For clarity, I will speak to the midpoint of the guidance ranges. For the purposes of this guidance, it is assumed that the situation in the Middle East will continue through the end of June without further escalation. The full reopening of the Strait of Hormuz is anticipated thereafter, followed by a measured increase in Middle East activity levels during the second half of the year. This guidance does not account for any potentially significant secondary impacts such as elevated inflationary pressures or broader supply chain disruptions that could arise from the ongoing situation.

Starting with second quarter guidance. We anticipate company revenue of $6.5 billion and adjusted EBITDA of $1.13 billion. For IET, we expect results to demonstrate another quarter of robust year-over-year EBITDA growth led by Gas Technology and CTS. The impact on IET for Middle East related disruptions is expected to be modest in the second quarter. Overall, we forecast IET EBITDA to reach $670 million.

The major factors driving our guidance ranges for IET will be the pace of backlog conversion in GTE, the progress with aeroderivative repairs in GTS, the level of disruptions related to the ongoing conflict in the Middle East, foreign exchange rates and trade policy. For OFSE, we anticipate second quarter results will be impacted by events in the Middle East and a return to a more typical mix of direct sales. While our normal seasonal recoveries anticipated for regions outside the Middle East, we expect this to be offset by significant declines in the Middle East. Consequently, EBITDA is projected to be $540 million for the quarter, with revenues estimated at $3.2 billion.

Outside of the Middle East conflict, factors driving our guidance ranges for OFSE include execution of our SSPS backlog, near-term activity levels, trade policy, foreign exchange rates and pricing across more transactional markets.

Moving to our full year guidance. We are maintaining our company's revenue and adjusted EBITDA guidance range. Currently, we anticipate full year results to be slightly below the midpoint of these guidance ranges, reflecting both our resilience and adaptability in navigating ongoing uncertainty. Although near-term challenges persist due to the conflict in the Middle East, we remain confident that our portfolio positions us to manage short-term disruptions effective.

As we look ahead to full year IET orders, we have started 2026 with strong momentum, driven by a record first quarter led by Power Systems strong performance. Given this momentum, we believe we are well positioned to achieve at least the $14.5 billion midpoint of our order guidance. The growing emphasis on energy security is expected to further support demand for energy infrastructure unlocking potential upside to IET's Horizon 2 order target. We now anticipate achieving at least the midpoint of our full year IET EBITDA guidance of $2.7 billion. Developments in the Middle East may result in minor delays to planned LNG maintenance in GTS. However, we expect these impacts to be more than offset by the first quarter outperformance and revenue conversion from higher backlog levels.

In OFSE, ongoing tensions in the Middle East have introduced considerable uncertainty, which may impact our ability to achieve the midpoint of our original full year guidance range. However, should the conflict conclude by the end of June without significant escalation and provided the Strait of Hormuz is fully operational during the second half of the year, we anticipate being able to achieve the low end of our EBITDA guidance range of $2.325 billion. We will continue to monitor the situation closely and will provide any significant updates if and when appropriate.

In summary, we delivered another quarter of outstanding operational performance, even with ongoing challenges in the Middle East. IET once again delivered very strong results while OFSE demonstrated continued resilience against a difficult backdrop, highlighting the durability of the portfolio. This success is a testament to the strength of the Baker Hughes business system which continues to drive enhanced execution, productivity and profitability across the organization. We also continue to advance our portfolio management strategy with the announcement of the Waygate Technologies divestiture marking another important milestone. Collectively, these efforts reinforce our focus on delivering sustained long-term value for our shareholders. With that, I'll turn the call back to Lorenzo.

Thank you, Ahmed. For those following along, please turn to Slide 14. Following yet another strong quarter, it is clear that we are gaining real momentum in executing our strategy to transform Baker Hughes. Across our three time horizons, our strategy is designed to evolve Baker Hughes into a leading industrialized energy solutions company, one that is uniquely positioned at the intersection of energy and industrial markets. Fundamental to this transformation is our ability to operate across the full energy value chain, spanning from molecule to electron. In Energy upstream, we continue to provide our customers with critical technologies and services that enable efficient and reliable hydrocarbon production. As those molecules move through the system, our energy infrastructure capabilities enable their transportation, processing and subsequent conversion into usable energy. Through the versatility of our IET portfolio, enhanced by the planned acquisition of Chart, we are expanding our reach into industrial markets that directly rely on the energy produced across the value chain broadening our capabilities at the intersection of energy systems, industrial demand and global innovation. What differentiates Baker Hughes is not just our participation across these markets, but our ability to connect them. Our portfolio enables us to integrate solutions across the energy value chain, linking subsurface, surface and end use capabilities in a way that is uniquely differentiated. This is especially important as the lines between energy and industrial markets increasingly converge, unlocking new opportunities for integrated solutions, higher value offerings and a more durable recurring revenue streams. Reliability, scalability and predictability are critical to industrialized energy solutions, and this is precisely where Baker Hughes is positioned to lead.

Across our broad and versatile portfolio, we deliver mission-critical technologies, comprehensive life cycle solutions and advanced digital capabilities for industrialized energy applications. Importantly, our ongoing portfolio actions continue to positively reinforce our path ahead. We continue to execute deliberate and strategic steps to advance our transformation as we build a company capable of initializing energy solutions. Our strategy, unmatched portfolio and distinct capabilities position Baker Hughes to deliver sustainable growth, continued margin expansion and create long-term value for our shareholders and customers as we continue our journey in Horizon 2.

In closing, I would like to thank all Baker Hughes employees for delivering another strong quarter. I especially want to recognize the resilience and focus of our colleagues in the Middle East, who continue to support one another and our customers in a challenging environment. We continue to prioritize the safety of our people and their families. With that, I'll turn the call back over to Chase.

Operator, we can now open the call for questions.

[Operator Instructions] Your first question comes from Arun Jayaram with JPMorgan.

Lorenzo, I wanted to get your thoughts on the impact from the Middle East conflict on the potential for infrastructure spend, both from repairing damaged infrastructure and to add redundancy for greater supply surety, this obviously, as you mentioned, should be a favorable trend for Baker. But I was wondering if you could help us gauge maybe the intermediate and longer-term impact. And I know you signaled how IET orders could exceed your Horizon 2 target, but I wanted to see if you could provide a little bit more color around this. .

Yes, definitely, Arun. And clearly, a lot taking place. And as we look at the current situation, the top priority remains obviously the safety and well-being of our employees and their families in the region. So we're taking all the right precautions and supporting them in these challenging times. As we look at beyond the considerable near-term uncertainty surrounding the situation, what we do recognize is that it's going to drive fundamental structural change across the energy landscape in the future. And first and foremost, energy security is going to become increasingly important, and it's going to really receive more emphasis not just within that region, but also globally with regards to how countries treat their energy security. And it's going to lead to a diversified mix of energy sources that are going to be essential to meet the energy demand. And as a result, we see a stronger focus on diversifying energy supply sources, enhancing the reliability of the global energy markets. And to address this, we're going to see a few things. Firstly, increased upstream investment to expand global production capacity, ensuring we meet the rising demand and supporting the more durable upstream spending cycle in the years ahead. There's going to be a rebuilding of global inventories above historical levels to ensure that energy security is at the foremost and it's going to be playing a particular role in making sure that we avoid significant drawdowns in the future given the extent of what's happened from the Strait of Hormuz closure.

Beyond the aspect of increased upstream investment, we're going to continue to see investment in lower carbon solutions, including geothermal, nuclear and grid modernization as part of the drive to build a more sustainable energy system. It's going to be about diversifying the energy mix and making it more durable, and so you're going to see a theme of increased investment in other areas. Also, it's not just about increasing energy supply. It's about the robust and resilient energy infrastructure, and greater redundancy, diversifying infrastructure, reducing reliance on any single large-scale assets. So as you look at Baker Hughes, we're uniquely positioned to address these needs given the differentiated capabilities across the entire energy value chain from molecule to electron. And as we look at this going forward, we feel good about the opportunity to exceed the $40 billion target for IET orders that we gave out at the end of Horizon 2 in 2028. And it's not just about LNG FIDs, it's also about associated gas infrastructure, pipelines, compression stations and we're seeing the need for more redundancy and investments being made in those areas. Thanks, Arun.

Your next question comes from the line of Scott Gruber with Citi.

You had very strong results here in 1Q. But Ahmed, can you impact the 2Q guide for us a bit more IET usually sees a nice step-up in revenues and margins in Q2, but the guide is a bit more flattish. Obviously, a strong comp, but just curious on some color there. And then in OFSE, you guys seen a recovery in the Middle East until 3Q, no pushback there. But if we do get better activity levels in the second half of the quarter as one of your peers is embedding, just curious how much could that contribute to segment results. And it sounds like there's a bit better outlook across the other end market. So some additional color there would be great, too.

Yes. No, for sure, Scott. Look, I mean, as you said and as we also said in terms of our remarks, there's still a great deal of uncertainty regarding ultimately the duration and depth of the conflict. So there are many different factors that could affect the second quarter as well as the second half. So just as a a quick reminder as you think about the second quarter, we're assuming the conflict persist through the end of June, but with no further major disruptions and that the Strait of Hormuz is not fully operational until we enter the second half of the year. So I think it's helpful to break it down by OFSE and IET. So really starting with OFSE, we -- with the backdrop of those assumptions, we expect a significant impact still to our Middle East operations in the second quarter with that region potentially falling, I'd say, more than 20% sequentially, which is double the rate of decline in the first quarter. And of course, that's driven by the fact that Middle East revenue in April we expect to remain near March level and then hold throughout the second quarter. So effectively 3 months. The mix within that as well, I think, is important. So if you think about service-related revenue in the region will be affected, but the larger impact as we see it right now, is going to be on the product sales side, just given the logistical challenges with equipment imports and exports. And to your specific question around if we see a quicker recovery as we go into the second quarter, there could be some upside to the Middle East revenue assumptions. And obviously, you'd expect us to be prepared to take action accordingly, and that's contemplated in the range for the second quarter. But with that upside, it could be somewhat delayed given the heavier mix of products that I talked about in the region because of that logistical piece.

So outside of the Middle East, if you step back and you look at the rest of OFSE, we're anticipating at this point in time, a typical seasonal recovery across international markets outside of Middle East. And I'd say flattish revenue right now in North America. SSPS, we expect to deliver a sequential increase just driven by their backlog and linearity around that. And then the OFSE margins, we're projecting a sequential decline in the second quarter and that attributed some of the tailwinds that supported the first quarter margins as we went through it. So excluding those first benefits segment, when you look at OFSE's operational margins in the second quarter could be modestly higher sequentially despite some of those supply chain and logistics disruptions. So that's really how we think about OFSE. When you look at IET, our second quarter assumes a modest impact from the conflict, and that's around logistical constraints, I'd say, for shipping products in and out similar to OFSE and that would impact GTE slightly. And then in GTS, specifically, we experienced lower seasonal revenue declines during the first quarter. And that was driven by some of the overdue backlog that we -- the team executed quite well on. So this -- as you've rolled that forward into the second quarter, we would expect that to temper the usual significant sequential growth in GTS that you would see between 1Q and 2Q. So that's one factor I would call out. The other one is that at this time, we do not anticipate any significant impact on GTS from potential LNG maintenance delays. So We, across IoT, have been driving, and now this is more an overall IET sort of view, better linearity. So we anticipate the second quarter segment revenue will be flat quarter-over-quarter. And on the margin side, in Q1, as we said, we had some strong productivity come through as well as favorable project closeout. And with those Q1 tailwinds carry forward the stable revenue. IET margins, we expect to be only modestly up in 2Q. So stepping back and taking all of those factors into account at the company level, we expect the second quarter EBITDA for the company to be relatively flat versus the first quarter. So Scott, hopefully, that -- those building blocks help.

Your next question comes from the line of James West with Melius Research.

I wanted to build on what Scott just asked about and to think a little bit more about the second half. There's a bunch of moving parts. IET's has been an outperformer, maybe that implies that we should -- we want to be conservative in the second half or maybe we don't want to be OFSE, we understand what you're saying about the Middle East, but there's a building and recovery that's gaining momentum. And so I'm curious how we should think about -- we have the full year guidance, but how we should think about kind of 3Q, 4Q unfolding both revenue-wise for OFSE and IET and margin-wise as we track towards your targets for the year? I'm assuming you have better visibility probably IET than OFSE, but any help you can give there would be appreciated.

Yes, James. As we think about the second half, it's really -- the usual multiple variables and the distinction between OFSE and IET, as you pointed out, given the visibility we have on the IET side. So maybe on the OFSE side, I'd say the first consideration is the extent of -- the state of the infrastructure and also the available storage capacity in the region. So that a macro factor that obviously we're looking at. And given that level of uncertainty, we believe it more prudent to assume a measured ramp in the region during the second half of the year. And of course, that assumes that the Strait of Hormuz is fully operational at that point in time. So also across the world, we do see some offsetting activity in regions and now expect North America and international outside of the Middle East to be modestly stronger in the second half compared to what we contemplated at the beginning of the year. And so tying that into the margin profile for OFSE you've seen us be very focused on cost discipline, the cost-out actions that we've been working on for the fourth quarter and the first quarter are starting to come through. And so we still see the potential to achieve the lower end of the OFSE EBITDA guidance range. But of course, there are a lot of factors into the mix.

IET, what I mentioned earlier is better linearity and that carries through, as I think about it, to the first 3 quarters and then a less pronounced 4Q increase when you compare it to prior years. And so while we recognize that there could be some modest impacts in the second half as well, with cost inflation, the logistical challenges we've talked about, some potential project delays and/or potential maintenance delays, we only expect that to be modest at this point in time. And as a reference point, I think it's helpful to look back in 2022 when the start of the Russian-Ukraine conflict kicked off, we basically had only modest LNG maintenance delays that normalized over time following that initial spike in LNG prices. So with the current LNG prices being less pronounced, we expect it to be somewhat muted as we compare it to '22. And the additional factor, I would say, is just thinking about linearity is that we don't expect a significant second half revenue ramp because of overdue derivative -- overdue aeroderivative backlog in GTS. So that will normalize over time. That builds up to just giving us some confidence in saying that we can achieve at least the midpoint of our full year IET EBITDA guidance range of $2.7 billion. So I just do want to emphasize the fact that this is -- it's quite fluid, but this is our best view given the current conditions, and it may change as additional factors emerge, including unforeseen persistent secondary impacts. And as we've always been, we're committed to maintaining the transparency, and we'll update you with the best view and projections for the remainder of the year as all the circumstances evolve. So hopefully, James, that builds out the year a little bit.

Your next question comes from the line of David Anderson with Barclays.

So really impressive to see IET margins above 20% already. But I thought the sale this quarter were the IET orders, it came in well above our expectations. I was hoping you could spend a little bit more time on the Power Solutions side of the orders. Could you talk to -- you mentioned kind of the three primary drivers being generation, grid and management. Can you kind of talk about those three drivers kind of how you see those playing out? It looks like the pace as you're on track to maybe upside for your '26 order guide? And maybe if you could also comment on the longer-term stability of the data center demand, which is clearly an initial lot of people are talking about.

Yes, definitely, Dave, I'll take that one. And maybe let me start by reiterating what we said before that global power demand is in a multiyear growth cycle. And it's important to remember, we're only in the early stages and the current projections indicate that power demand will double by 2040, driven by factors such as data center and AI compute, digital infrastructure expansion, electrification, including EV adoption and the transition of industrial processes from fuel base to electric power solutions. And what we said before, as well from the energy security aspect and making sure that there's redundancy. Also, as you look at the grid constraints becoming more pronounced, particularly in the United States, it's going to drive further investments taking place. And we see a fundamental shift towards behind-the-meter power solutions, and we're seeing also a shift in the customer mindset for these solutions. And it's no longer viewed as short-term bridge solutions. Increasingly, they're being deployed as long-term baseload power infrastructure, which obviously suits our portfolio well. And so as a result, we see the behind-the-meter market reaching $60 billion by 2030, led obviously by data centers, which we've continued to participate in. And it also includes three core capabilities of Baker Hughes. As you think about power generation, grid stability and energy management. And when you take that, we look at the annual market opportunity expanding to more than $100 billion by 2030. And if you look at specifically Power Systems in the first quarter, again, thanks, it was a great performance and again, it shows the breadth of our Power Systems portfolio, securing $1.4 billion of orders across the three capabilities, and that accounted from 30% of total IET order and we see strong momentum across power generation for large data center projects, synchronous condensers that support the grid stability and energy storage solutions for effective energy management. Also, our digital solutions, inclusive of iCenter and Cordant remote digital offerings continue to expand and they increase the opportunities for cross-selling in these areas. So our rapidly expanding installed base is going to allow us to really have a synergy potential within that digital space and software platforms as we go forward. And if you look at the Cordant power-related orders, they doubled year-over-year in first quarter. and sustaining the strong momentum from 2025, and we saw power orders increase over 80%, which, again, we see as strong momentum going forward. .

Our installed base for NovaLT is also set to expand dramatically in the coming years, given -- and we'll give a benefit to our aftermarket services business into 2030 and beyond. And the benefit of our extensive portfolio is going to enable us to deliver integrated power solutions for many different applications in end markets. So you can see we're feeling good about the durability and the robust nature of the demand outlook for Power Systems segment. And again, as we mentioned previously, potentially providing upside to the midpoint of our 2026 IET guidance range. And looking beyond 2026, confident in the strength of our IET orders, supported by what we're seeing is that fundamental rise in energy infrastructure demand. And this trend is expected to drive sustainable growth across power systems, gas infrastructure, LNG and other aspects of the IET portfolio. And given the positive trajectory that we see both within our Equipment and Services segments within IET, we expect continued and sustained growth for IET moving forward, and that's why the $40 billion order plus for 2028 Horizon 2. So hopefully, that gives you a breakdown.

Your next question comes from the line of Stephen Gengaro with Stifel.

You've clearly been busy on the portfolio optimization front. And I'm just curious, after after the sales announced the year-to-date, Waygate and the HMH IPO that Ahmed mentioned, you're already above that $1 billion kind of bogey that you set out there, I think, on the fourth quarter conference call. Can you just give us an update on how you're thinking about the portfolio optimization strategy going forward? Do you think you're largely done? And how should we be thinking about next steps?

Yes, Stephen, I'll take that. As as we've talked about a few times, broadly, I just want to remind everybody on what drives portfolio management actions for us and the criteria we use. So there are four broad strategic criteria on top of the obvious financial ones. First is we like exposure to technologies that have critical applications, critical to customers and so forth. Second is around life cycle models and the ability to drive aftermarket calories. Third is a right to play in terms of commercial and operational synergies across the portfolio. And then I'd say fourth is earnings durability with the expansion into new markets. So that's what we use. And then when you look at a quick recap the recent divestitures, including the Waygate Technologies announcement and HMH IPO proceeds were expected to generate all around $1.6 billion in gross proceeds. And when you couple that with those two recent transactions, we expect to, as you mentioned, achieve and exceed the $1 billion incremental divestment target ahead of the schedule which we're doing in a very disciplined manner and maintaining and strengthening the balance sheet as we continue to go through this. So when you take those Waygate and HMH and you couple that with PSI and the proceeds from SPC joint venture, in aggregate, that's around $3 billion of gross cash proceeds in 2026. But all of these actions, I wouldn't look at them as a single milestone. So it's a continuum part of our ongoing portfolio management progress. So as we progress through the next couple of years, you'll see us remain very disciplined as to the approach and making sure anything that we do is very much aligned with the strategic objectives on driving value and the strength of the balance sheet. But I want to be clear in the near term, our focus is very much on closing and successfully integrating the Chart transaction. So hopefully, Stephen, that gives you a little bit of color on how we think about the portfolio.

Your next question comes from the line of Saurabh Pant with Bank of America.

Lorenzo, so maybe I want to go back to the Power Systems topic you were talking about. The demand side of the situation in response to Dave's question. I want to focus a little bit on the capacity side of things because demand is clearly very strong, right? But on the capacity side, I know you are doubling capacity, but then you're also booked out through 2028, right? My question is, are you capacity constrained relative to the level of demand you are seeing? And when I ask that, Lorenzo not just on NovaLT, but also on products like BRUSH generators, synchronous condensers, you talked about that. So any color on the capacity side of these?

Yes, Saurabh, thank you very much. And as you said and we've said before, power demand is rising, and in North America, in particular, data center growth, manufacturing return and also the required infrastructure is going to be robust demand for power systems equipment inclusive of the generators, gas turbines and power generation, synchronized condensers to support the various aspects and very well suited to the portfolio that Baker Hughes has. The NovaLT remains a core product. And as does the electric motors, gearboxes, generators, synchronized consensus and the control and protection systems. From a capacity standpoint, we're effectively sold out of NovaLT through 2028. And the tightness we're seeing across the broader turbine market is well understood. And we have increased capacity, as we mentioned. We continue to receive strong inbound demand for the NovaLT, and we'll evaluate each opportunity on its own merit. Our focus remains on customers that are becoming long-term partners and also with the financing and offtake firmly in place. And we're looking ahead to continue to closely monitor market conditions through our dynamic planning process, and we'll make the right decisions that are necessary to expand beyond the current doubling plan with guided disciplined assessment of medium- and long-term supply-demand dynamics and a clear return threshold. For our frame 5 gas turbines, which we can also sell into non-oil and gas markets from time to time. We have available capacity in '27 and '28 support orders, which should -- the demand materialize. And importantly, we're actively assessing capacity needs across our entire Power Systems portfolio, not just the NovaLT. As you mentioned, we have added capacity to our BRUSH product lines, which include the generators and synchronized consensus. This will materially add to our annual revenue run rate. And we've also inaugurated our aftermarket NovaLT facility in Italy, which will support the robust services growth. So we're able to maintain flexibility across our manufacturing footprint and supply chain to support additional capacity as needed. And also, we're investing in different growth areas of technology development, which is core to our focus here for the next generation of engines and emissions reduction technologies, and we'll continue to invest across the R&D for Power Systems and also enhance our portfolio so that we can deliver the differentiated solutions to our customers. And taken together, our investments in capacity and innovation really positions us well to deliver sustainable growth and continued margin expansion and long-term value for our shareholders and customers. So appreciate, Saurabh.

And that's all the time we have for questions today. I will hand you back to Mr. Lorenzo Simonelli, Chairman and Chief Executive Officer, to conclude the call.

Yes. Thank you to everyone for taking the time to join our earnings call today, and I look forward to speaking with you all again soon. Operator, you may now close out the call. .

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program, and you may all disconnect. Everyone, have a great day.

Good day, ladies and gentlemen, and welcome to the Baker Hughes Company Fourth Quarter and Full Year 2025 Earnings Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Chase Mulvehill, Vice President of Investor Relations. Sir, you may begin.

Thank you. Good morning, everyone, and welcome to Baker Hughes Fourth Quarter and Full Year Earnings Conference Call. Here with me are our Chairman and CEO, Lorenzo Simonelli; and our CFO, Ahmed Moghal. The earnings release we issued yesterday evening can be found on our website at bakerhughes.com. We will also be using a presentation with our prepared remarks during this webcast, which can be found on our investor website.

As a reminder, we will provide forward-looking statements during this conference call. These statements are not guarantees of future performance and involve a number of risks and assumptions. Please review our SEC filings and website for factors that could cause actual results to differ materially. Reconciliations of adjusted EBITDA and certain GAAP to non-GAAP measures can be found in our earnings release.

With that, I will turn it over to Lorenzo.

Thank you, Chase. Good morning, everyone, and thanks for joining us. First, I'd like to provide a quick outline for today's call. I will start with our strong fourth quarter and full year results, highlight her awards and discuss the macro environment. Following this, we'll walk through the progress we are making as we further scale our Power Systems portfolio and capture growing demand in this space. I will then hand it over to Ahmed, who will present an overview of our financial results followed by an update on the progress we're making on chart integration planning. To conclude, I will summarize the main points before we open the line for questions.

Let us now turn to Slide 4. We continue to execute at a high level, delivering another quarter of strong results. Adjusted EBITDA totaled $1.34 billion, surpassing the midpoint of our guidance range and contributing to a record full year adjusted EBITDA of $4.83 billion. This achievement demonstrates sustained momentum from our business system and ongoing positive performance in industrial and energy technology, which more than offset continued macro-driven softness in oilfield services and equipment.

Adjusted earnings per share rose to $0.78 resulting in a full year adjusted EPS of $2.60, a 10% increase from 2024. Adjusted EBITDA margins for the fourth quarter rose 30 basis points year-over-year to a record 18.1%. While OFS margins declined due to prevailing market conditions, IoT margins increased by 160 basis points to 20%. For the full year, company adjusted EBITDA margins increased by 90 basis points to a record of 17.4%. OFSE margins remained resilient even though revenue declined by 8%, while IET margins demonstrated another year of meaningful expansion, increasing 170 basis points to a historical high of 18.5%.

Turning to orders. IET delivered strong fourth quarter order bookings of $4 billion, contributing to a record full year total of $14.9 billion, exceeding the high end of our guidance range. For the second consecutive year, non-LNG equipment orders represented approximately 85% of total IET orders. This performance highlights the end market diversity and versatility of our IET portfolio, led by growth in power generation and new energy along [indiscernible] continued strength in energy infrastructure and LNG.

IET achieved a record backlog of $32.4 billion at year-end, while book-to-bill exceeded 1x. During the fourth quarter, we generated robust free cash flow of $1.3 billion, contributing to a record annual free cash flow of $2.7 billion. This represents a free cash flow conversion rate of 57% in 2025, above our 45% to 50% target range. This strong performance was driven by enhanced working capital efficiency and higher customer down payments, which contributed to free cash flow for the year exceeding expectations.

Now turning to Slide 5. As I highlighted, we maintained robust order momentum in IT throughout 125. In LNG, we delivered another strong quarter of equipment orders providing critical liquefaction technology for Train 5 at next decade's Rio Grande LNG facility and Commonwealth LNG's export terminal. In 2025, we booked $2.3 billion of LNG equipment orders. Looking ahead to 2026, we expect similar levels of LNG awards, including material orders outside of the U.S. Building on these achievements, we are further strengthening the durability of our life cycle model through major aftermarket service awards. This includes long-term service agreements for [indiscernible] trains 8 and 9 as well as [indiscernible] remote monitoring and diagnostics for next decades, Rio Grande trains 1, 2 and 3.

In Power Systems, orders increased significantly to $2.5 billion in 2025, including $1 billion tied to data center applications, reflecting accelerating demand and growing customer confidence in our solutions. Capitalizing on this strong momentum in Power Systems, 2025 marked a [indiscernible] year for our NovaLT industrial gas turbines. Booking approximately 2 gigawatts of orders across oil and gas, industrial and data center markets. In addition, during the fourth quarter, we secured a large slot reservation agreement for approximately 1 gigawatt of NovaLT capacity to support data center applications which we expect to convert into a firm order in 2026.

Additionally, our Power Systems business secured a major contract to supply over 40 brush generators for gas-fired utility scale power plants which will collectively deliver approximately 7 gigawatts of reliable power and enhanced grid resilience, highlighting the critical role our technologies play in strengthening U.S. energy infrastructure. We also continue to capture synergy opportunities across our Power Systems and compression businesses, highlighted by a significant award to supply an integrated solution for [indiscernible] gas separation complex in Kazakhstan. This project underscores the value of our integrated portfolio in delivering complex, large-scale infrastructure solutions. Further, we are seeing increased commercial synergy potential across the enterprise by combining complementary surface and subsurface OFSE technologies with our extensive IET portfolio, we are unlocking growing synergy opportunities across field management, offshore production, geothermal and CCS.

This is most evident in new energy booking $434 million of orders in the quarter and a record $2 billion for the full year, well above our $1.4 billion to $1.6 billion target. During the quarter, notable new energy awards included the supply of critical turbo machinery equipment for a blue ammonia project in the U.S., along with continued strength for geothermal orders in U.S. and Hungary. Looking forward, we are targeting $2.4 billion to $2.6 billion of new energy orders in 2026.

IET's Cordant solutions sustained robust momentum in 2025, achieving double-digit order growth for the fried consecutive year and a 20% increase in software orders. During the quarter, the business continued to scale its digital software offerings reinforcing recurring revenue and life cycle pull-through across our equipment installed base while also increasing penetration of non-OEM equipment. As the global installed base of critical equipment continues to expand across energy, industrial in power sectors, we are unlocking additional pull-through opportunities for Cordant, leveraging our comprehensive solutions to drive greater value for our customers.

In OFSE, we continue to see strong customer demand across deepwater and Middle East markets, driven by brownfield and OpEx-led developments that leverage our digitally enabled production portfolio. These solutions directly lower operating costs and support recurring production-led spending for our customers. During 2025, we secured approximately $3 billion of Production Solutions awards in the Middle East, including approximately $1 billion of multiyear contracts in the fourth quarter from Kuwait Oil Company, Petroleum Development Oman, and ADNOC. The awards with KOC and PDO cover the deployment of advanced ESP systems and [indiscernible] in over 1,000 wells. In addition, the ADNOC contract includes the deployment of our Access ESP system in the offshore [indiscernible] field, along with continuous digital monitoring services that support recurring revenue over the life of these assets.

Momentum has also continued across subsea markets, driving a near record order quarter for subsea and surface pressure systems with bookings of $1.1 billion and a book-to-bill of 1.4x. During the quarter, we were awarded a multiyear frame agreement for subsea production systems and services for the Coral North LNG project offshore Mozambique.

Now turning to the macro on Slide 6. Despite the ongoing geopolitical and trade-related uncertainty, the global macro environment remains resilient through 2025. While these headwinds are expected to persist, we anticipate modestly stronger year-over-year GDP growth in 2026, supported by continued investment in generative AI easing inflation and a supportive fiscal backdrop in several major economies. This economic resilience is mirrored to the evolving landscape of global energy demand. Long-term energy demand continues to rise driven by population growth, rising living standards and accelerating electrification. At the same time, digital infrastructure, AI and data centers are adding a new and durable layer of energy demand. reinforcing the need for reliable, scalable and dispatchable power.

Industry estimates suggest that AI infrastructure spending totaled more than $500 billion in 2025 and is expected to approach $1 trillion annually in the late 2020s. Resilient power supply has emerged as a key bottleneck which creates a significant opportunity for Baker Hughes as [indiscernible] build-out increases demand for behind-the-meter power solutions, providing speed, reliability and scale. Against this backdrop, we now expect to book approximately $3 billion of data center-related orders between 2025 and 2027.

Given its abundance, cost-effective reliability and comparatively lower emissions profile, natural gas continues to play a central role in powering data centers. Looking ahead to 2040, we expect global natural gas demand growth of approximately 20%. This strong growth in natural gas underpins accelerating investment in gas and power infrastructure, which we expect to represent an increasing share of our $40-plus billion IET order target during Horizon 2.

For LNG, demand continues its strong growth trajectory, increasing by approximately 7% in 2025. Looking forward, LNG demand is expected to increase by at least 75% by 2040, driven primarily by growth across Asia. Reflecting this strength in near-term order visibility, we expect to exceed our 2024 to 2026 LNG FID outlook of 100 MTPA after reaching FID on 83 MTPA of projects over the last 2 years. This further reinforces our long-held view of 800 MTPA installed base by 2030 and advances progress towards our 950 MTPA outlook for 2035.

Turning to oil. Against the backdrop of dynamic geopolitical risk, oil prices have remained somewhat volatile in recent months as markets weigh potential supply disruptions against rising OPEC+ and offshore production. We believe further reduction in idled OPEC+ supply alongside more constructive oil supply and demand balances is required before a broad inflection in [indiscernible] services activity emerges. That [indiscernible] is likely a 2027 catalyst for the sector and may mark the beginning of an up cycle. Taking current macro factors into account, we expect low single-digit declines in global upstream spending in 2026.

In North America, spending is expected to decline at a mid-single-digit rate as operators maintain both capital discipline and inventory preservation. However, our production-weighted exposure positions us to outperform the market. International spending is expected to be slightly down with resilience in the Middle East and Africa, offset by continued softness in other regions. Longer term, the outlook remains constructive, particularly internationally and offshore, where significant investment will be required to sustain production growth and meet rising global oil demand.

We also see continued growth in OpEx-driven upstream investment as operators focus on enhancing recovery rates and extending the life of existing assets that will leverage our differentiated well construction and production solutions portfolio.

Moving to Slide 7 and 8. I want to discuss how Baker Hughes positioned to capture a significant growth opportunity in global power infrastructure spend. and how our Power Systems portfolio is enabling reliability, efficiency, flexibility and long-term decarbonization for customers. This portfolio builds on decades of aeroderivatives and heavy-duty gas turbine technology development, complemented by a deliberate organic investment in our NovaLT gas turbine platform. our acquisition of brush power generation and the pending acquisition of Chart.

Together, these actions have created differentiated capabilities that span power generation, grid stability and energy management. Looking ahead, we plan to continue advancing our Power Systems portfolio with a clear focus on expanding our solutions offering across these 3 capabilities. These strategic efforts positions us strongly for what lies ahead. We believe that global power demand is entering a multiyear cycle.

By 2040, global demand is expected to double to approximately 60,000 terawatt hours. This increase implies a compounded annual growth rate of over 4% and with gas-fired power generation playing a significant role in this expansion. These developments are being driven by several long-term structural trends that are transforming global power markets.

First, digitization and AI-driven compute are fundamentally reshaping power demand. Data center is a rapidly growing source of energy demand, requiring uninterrupted and highly dependable power supply. -- estimates project that data center power demand will increase by a 12% compounded annual growth rate through 2040 as AI workloads increase in scale. Second, the ongoing transition toward electrification in both transportation and industrial sectors is contributing to a structural increase in electricity demand. The adoption of electric vehicles is rising rapidly, with projections indicating that the global EV fleet will approximately triple by 2030 and increased nearly ninefold by 2040.

Additionally, industrial companies are advancing their decarbonization initiatives by transitioning from fuel-based processes to electrically driven alternatives. This includes adopting advanced heat pump technologies and integrating electrified equipment into their industrial operations. Also renewable induration, hydrogen production [indiscernible] and carbon capture systems all require significant incremental power even as they reduce overall emissions intensity.

Collectively, these factors are expected to contribute to a prolonged period of growth in power demand. reinforcing the need for reliable, flexible and energy-efficient power solutions. This trend will drive continued investment across generation, distributed power and grid resilience and it highlights the requirements for mission-critical power system solutions that can deliver both reliability today and transition ready capability for the future.

This is where Baker Hughes is uniquely positioned. Through our Power Systems portfolio, which is highlighted on Slide 8, we sit squarely at the intersection of the key mega trends driving global power demand our strategy is deliberately built around fuel flexibility, electrification, digital integration and portfolio expansion, enabling us to deliver full life cycle power solutions across industrial, data center, grid, renewable and oil and gas markets. The portfolio addresses an annual market opportunity projected to exceed $100 billion by 2030 with solutions that are either currently available or under development, supported by ongoing organic investments.

Let me briefly walk you through our Power Systems portfolio and how it differentiates Baker Hughes as we capture accelerating growth in global power infrastructure spending. Our Power Systems business is built around 3 core capabilities: Power generation, group stability and energy management with digital, integrated systems and aftermarket services spanning across free. For power generation, we offer solutions across simple and combined cycle configurations alongside clean power offerings that include geothermal, Flex fuel and our developing industrial scale oxy-combustion solution. This portfolio brings together a broad range of aeroderivatives and heavy-duty gas turbines for the oil and gas sector alongside industrial gas turbines, steam turbines, turbo expanders and generators that address a wide spectrum of power generation applications across diverse end markets.

We are seeing the strongest growth in our NovaLT industrial gas turbines, engineered for distributed and behind the meter applications. The NovaLT is hydrogen ready and capable of operating on natural gas, blended fuels and up to 100% hydrogen with development plans in place to enable ammonia fuel flexibility, its high efficiency, fast our capability and low NOx performance make it particularly well suited for power generation across data center, industrial facilities and the oil and gas markets as well as the mechanical drive applications.

Our core oil and gas markets also continued to drive strong demand for power generation. In 2025, we secured orders of approximately 3 gigawatts for oil and gas power applications. supporting distributed power across LNG facilities, FPSOs, refineries, petrochemical plants and oil fields. Beyond gas caverns, we bring differentiated capabilities in steam turbines and [indiscernible] expanded, supporting geothermal, biomass, waste-to-energy and pressure recovery applications. with an installed base of more than 700 steam turbines [indiscernible] expanders globally, we have proven our experience in delivering reliable, efficient power across both renewable and industrial markets.

We continue to advance our leadership in geothermal, highlighted by a recent order to supply the 5 organic rank and cycle power plants at [indiscernible] Station power generation project, which is expected to deliver 300 megawatts of clean, reliable and affordable power to the grid. In addition to the surface scope, Baker Hughes is also providing differentiated subsector expertise reflecting our ability to integrate subsurface capabilities with surface power generation.

By combining these capabilities, we are uniquely positioned to enable scalable, repeatable geothermal developments delivering firm renewable baseload power with attractive project economics for our customers. Through our [indiscernible] power generation brand, we also provide generators, electric motors and synchronous condensers supported by life cycle services and digital remote monitoring. These capabilities are increasingly critical as grids become more reliant on intermittent power and require [indiscernible] voltage control and resilience.

Our controls, power electronics and digital platforms including court enable real-time optimization, emissions monitoring and system level reliability that enhance our Power Systems value proposition to customers. We also offer industrial heat pumps and grid stabilization technologies supporting electrification and decarbonization across industrial and power applications.

Looking ahead, the pending acquisition of Chart will add differentiated thermal management capabilities, further complementing our power generation portfolio and enabling the development of integrated tri-generation solutions for customers. To summarize, Baker Hughes offers a broad power solutions portfolio with capability spanning generation, grid stability and energy management that positions us to meet the diverse needs of customers across data centers, industrial, power, renewables and traditional energy markets. As global electricity demand accelerates and energy infrastructure evolves, Baker Hughes is delivering solutions that drive long-term growth operational resilience and low carbon readiness, positioning us exceptionally well for the next phase of growth in the global power market.

Before turning the call over to Ahmed, I want to reiterate the strength of our 2025 results. Despite macro-related headwinds in OFSE and tariff-related trade friction, we delivered 90 basis points of margin expansion driven by continued execution of the Baker Hughes business system and a disciplined focus on pricing optimization and productivity enhancements. At the same time, the breadth and versatility of our portfolio supported a record year of IT orders, underscoring the durability of our strategy. These results demonstrate that Baker Hughes continues to execute and deliver for our customers and shareholders. With that, I'll turn the call over to Ahmed.

Thanks, Lorenzo. I'll begin on Slide 10 with an overview of our consolidated results and then speak to segment details before summarizing our first quarter and full year outlook. As Lorenzo mentioned, we delivered very strong orders in the fourth quarter, with total company orders of $7.9 billion, including $4 billion from IET. Adjusted EBITDA of $1.34 billion increased by 2% year-over-year, driven by continued IT growth while OFSE results were impacted by macro-driven headwinds.

Adjusted EBITDA margins expanded by 30 basis points year-over-year to 18.1%, exceeding 18% for the first time. GAAP diluted earnings per share were $0.88. Excluding $0.10 of adjusting items in the quarter, diluted earnings per share increased 12% year-over-year to $0.78. We generated free cash flow of $1.34 billion for the quarter, supported by strong collections, customer down payments and results from our ongoing working capital efficiency efforts.

Turning to capital allocation on Slide 11. Our balance sheet remains strong with cash increasing to $3.7 billion. Net debt to adjusted EBITDA ratio decreasing to 0.5x and and liquidity increasing to $6.7 billion at year-end. In 2025, we returned $1.3 billion to shareholders in dividends and share repurchases. Our near-term priority is to maintain the strength of our balance sheet in preparation for the closing of the Chart acquisition. With regulatory reviews still underway in certain jurisdictions, we currently expect closing in the second quarter understanding that the timing may evolve as those processes progress.

As previously stated, our objective is to achieve a net debt to adjusted EBITDA ratio of 1 to 1.5x within 24 months following the close of the transaction. This reduction will be accomplished through a combination of ongoing free cash flow generation and proceeds from continued portfolio management initiatives, which are anticipated to yield $1 billion of incremental proceeds. Consistent with our portfolio management and capital allocation framework, we announced earlier this month the completion of the sale of the Precision sensors and instrumentation business as well as the formation of the surface pressure control joint venture with [indiscernible]

These strategic transactions have generated approximately $1.5 billion in gross cash proceeds subject to customary closing adjustments. These actions reflect our disciplined approach to portfolio management and our commitment to maximizing long-term value creation for shareholders. We would like to express our sincere gratitude to the employees of PSI and SBC for their dedication and hard work and wish them continued success going forward. In parallel with these portfolio actions, we are making progress on our comprehensive evaluation.

We are also executing incremental targeted cost-out initiatives with quick cash backs that are expected to support durable margin expansion as we move through 2026. As we further advance our comprehensive evaluation, our top priority remains closing the chart transaction and executing a seamless integration where we see compelling strategic and financial benefits. We're focused on delivering our integration priorities and capturing identified synergies while positioning the combined companies to enhance customer value, strengthen our industrial portfolio and support sustainable profitable growth.

From an integration standpoint, we have now moved into high-level day 1 operating model design, placing strong emphasis on culture, integration and execution planning. Our 2 companies share significant commonalities particularly in our highly complementary portfolios, which together enhance our solutions offering and deliver greater value for customers across the equipment life cycle. Let's now turn to segment results.

Starting with IET on Slide 12. During the quarter, we booked strong IET orders of $4 billion, primarily driven by continued power systems and LNG order momentum. For the full year, IET achieved a record $14.9 billion of orders, resulting in a book-to-bill of 1.1x and a record RPO of $32.4 billion. Notably, this marks the sixth consecutive year of IT RPO growth.

Our fourth quarter results reflect outstanding performance in IET with revenue of $3.81 billion exceeding the high end of our guidance range due to strong project execution and favorable project timing. EBITDA increased 19% year-over-year to a record of $761 million resulting in significant margin expansion of 160 basis points to 20%. This exceptional performance was driven by strong backlog pricing, productivity gains and continued execution of the Baker Hughes business system reinforcing the operating leverage in the segment.

For the full year, IET revenue increased 10% to $13.4 billion, while EBITDA rose 21% to $2.5 billion with margins increasing 170 basis points to 18.5%, historical highs for all 3. This meaningful margin improvement was driven by strength across both Industrial Solutions and gas tech equipment. In 2025, the recently divested PSI business contributed $374 million of revenue and $48 million of EBITDA.

Turning to OFSE on Slide 13. We delivered another strong quarter of orders with SSPS bookings of $1.1 billion. This was led by continued strength in subsea project bookings where we captured approximately 25% of the global subsea tree market in 2025. As a result, SSPS orders increased by 13% year-over-year to $3.5 billion in 2025, and with a strong book-to-bill of 1.1x, driving increased visibility and reflecting broadening customer penetration.

Our fourth quarter OFSE performance reflected ongoing macro-related headwinds while continuing to demonstrate solid execution and cost discipline. Revenue totaled $3.57 billion, and the segment delivered EBITDA of $647 million resulting in 40 basis points of sequential margin declined to 18.1%, with all metrics effectively in line with the midpoint of our guidance range. Results were impacted by seasonal declines in the North Sea and Asia Pacific continued softness in Mexico and weaker year end product sales as customers remain cautious with capital deployment.

These pressures were partially offset by improving activity in Sub-Saharan Africa, Brazil and Saudi Arabia reflecting pockets of resilience across our international portfolio. For the full year, revenue fell 8% to $14.3 billion. while EBITDA of $2.62 billion resulted in resilient margins of 18.3%, effectively flat year-over-year despite the meaningful top line decline. This margin resilience reflects continued cost discipline and structural actions to remove duplication across the segment, preserving profitability through cycle downturns.

In 2025, SPC contributed $627 million of revenue and $137 million of EBITDA. These results will be deconsolidated in 2026 with our 35% minority ownership accounted for as an equity investment. Next, I would like to provide an update on our outlook for the first quarter and full year 2026.

The detailed guidance can be found on Slide 14 for both the ranges and midpoints are presented. For clarity, I'll focus on the midpoint of our guidance figures. Please note, these figures exclude the recently divested PSI business and account for the deconsolidation of SPC results as both transactions were completed on January 1. Although all references to organic metrics exclude the results of businesses that have been divested, deconsolidated or acquired since the beginning of 2025. Specifically, the results of PSI and SPC as well as the recently acquired Continental Disc Corporation business are excluded from organic references provided below. This approach ensures that organic metrics accurately reflect the company's ongoing operations and provide a clear comparison by excluding the impact of such transactions.

Following the closing of the Chart acquisition, full year guidance will be updated to reflect our outlook for the combined business for the remainder of the year. Starting with full year guidance, we anticipate company revenue of $27.25 billion and adjusted EBITDA of $4.85 billion, implying organic adjusted EBITDA growth rate in the mid-single-digit range. Free cash flow conversion is expected to approach 50% and underscoring our progress to drive more durable free cash flow through cycles. The effective tax rate is projected to fall within the range of 22% to 26%, and we continue to pursue initiatives aimed at further optimizing our tax rate beyond 2026.

In IET, we expect orders to remain at robust levels through this year, supported by continued momentum in LNG, a stronger year of FPSO and gas infrastructure awards and sustained strength for Power Systems. Against this favorable backdrop, we project $13.5 billion to $15.5 billion of IET orders in 2026, which is flat at the midpoint on an organic basis and would mark the fourth consecutive year with at least $13 billion in orders. We also remain confident in achieving our 3-year horizon 2 target of more than $40 billion in IET orders.

Importantly, these anticipated orders will provide significant backlog visibility for our equipment businesses while also underpinning years, if not decades, of high-margin services growth. This outlook reinforces the durability and long-term value creation that is embedded within the company. Supported by record backlog levels, we expect full year IET revenue of $13.5 billion reflecting steady organic growth. Additionally, we project EBITDA of $2.7 billion, positioning IET to achieve its 20% margin target this year. This margin outlook is supported by ongoing productivity improvements, disciplined cost management in industrial products and the conversion of higher-margin backlog within Gas Tech equipment.

For OFSE, we anticipate revenue to be slightly lower year-over-year, but flat on an organic basis. This stability is primarily driven by robust growth in our SSPS business which is anticipated to offset slight declines within the OFSE portfolio. Based on our current outlook, we expect $13.75 billion in revenue and EBITDA of $2.475 billion. When adjusted for the impact of the SPC transaction, this guidance implies relatively flat organic margins year-over-year. This resilient margin outlook is underpinned by ongoing productivity enhancements and continued efforts to rightsize our cost structure, which deliver quick cash paybacks. These cost actions are expected to offset higher tariff-related costs, unfavorable product mix. and pricing variability across different markets.

Notably, our disciplined approach to cost optimization is fully aligned with our ongoing comprehensive review with each initiative prioritized to drive structural margin improvement and enhance long-term competitiveness. Now turning to first quarter guidance. We anticipate total company revenues of $6.4 billion and adjusted EBITDA of $1.06 billion.

For IET, we expect results to demonstrate strong year-over-year EBITDA growth led by gas technology. Overall, we expect IET EBITDA of $600 million. The major factors driving our guidance ranges for IET will be the pace of backlog conversion GTE, the impact of any supply chain tightness, foreign exchange rates and trade policy. For OFSE, we anticipate results to reflect typical seasonality. Accordingly, EBITDA is expected to be $540 million for the quarter. Factors driving our guidance ranges for OFSE include execution of our SSPS backlog, near-term activity levels, trade policy, foreign exchange rates and pricing across more transactional markets.

In summary, we are extremely pleased with the company's operational performance in 2025. IET once again delivered record results, while OFSE margins demonstrated exceptional resilience despite a challenging macro environment. Together, these results clearly demonstrate that the Baker Hughes business system is driving execution, productivity and profitability across the organization. We remain firmly committed to structurally improving free cash flow and margins while also capitalizing on market opportunities through our differentiated solutions portfolio with line of sight to our 20% company adjusted EBITDA margin target by 2028. All of this is focused on delivering sustained long-term value for our shareholders.

I'll turn the call back to Lorenzo.

Thank you, Ahmed. To close, we delivered an exceptionally strong quarter and an outstanding year in 2025, highlighted by record performance in IET, resilient margins in OFSE, record free cash flow and consistent execution across the company.

Looking ahead to 2026, we expect organic adjusted EBITDA to grow in the mid-single-digit range led by another year of solid margin expansion. These achievements reflect the significant progress we are making towards structurally improving margins strengthening the durability of our cash flow and driving operating leverage through the Baker Hughes business system. Further, the outlook for global energy infrastructure investment remains positive, particularly in key areas such as gas, LNG, power generation and industrial energy systems.

Rapidly increasing demand from digitization and electrification is reinforcing the need for a reliable, scalable and lower carbon energy solutions. Baker Hughes is uniquely positioned to capitalize on these market dynamics, providing differentiated power systems and energy infrastructure solutions that meet the evolving needs of customers.

Against this favorable market backdrop, we remain confident in achieving our 3-year IET orders target of at least $40 billion. As part of our comprehensive review, we have initiated further cost-out programs across the company that will result in quick paybacks and drive further margin expansion through 2026 and beyond. We have also made meaningful progress enhancing our portfolio demonstrated by the 3 recently closed transactions and the pending chart acquisition.

As we move forward, our primary focus is on closing the Chart transaction and ensuring a seamless integration process. We continue to make substantial progress in integration planning for the Chart transaction and are increasingly confident in our ability to achieve the $325 million cost synergy target. Our commercial synergy initiatives are also moving forward with the potential to generate incremental value over time.

As the company moves into horizon 2, these portfolio actions are positioning Baker Hughes to evolve into a stronger, more industrialized energy solutions company. This evolution is underpinned by an increasingly OpEx levered business mix and a differentiated life cycle portfolio, which are driving reduced cyclicality and enhance cash flow durability.

Accordingly, we remain confident in our ability to continue driving returns and margins higher for the company with a path to achieving 20% company adjusted EBITDA margin by 2028. In closing, I would like to thank the entire Baker Hughes team for consistently delivering outstanding results. As we look to the future, we are energized by the opportunities that lie ahead and remain committed to our customers and employees with a disciplined focus on creating long-term sustainable value for our shareholders. With that, I'll turn the call back over to Chase.

Operator, we can now open up for questions.

[Operator Instructions] Our first question comes from Arun Jayaram from JPMorgan Chase.

Your prepared remarks underscored Bakers Power Systems capabilities across a broad range of end markets. You mentioned you booked $2.5 billion of power system orders in 2025. I know the business has been a strategic focus, thinking back to the brush acquisition and your organic growth opportunities from the NovaLT gas turbine line. Can you elaborate on your strategy for further enhancing your current capabilities or sustaining growth from Power Systems on a go-forward basis?

Definitely, Arun, and thank you very much. And let me just start by reiterating that we believe that we're in a global power demand multiyear growth cycle. In fact, a demand decade, as we said last week, and we're very much in the early stages of that trend worldwide and in the United States. If you look at current projections indicate that power demand will double by 2040 driven by the factors such as data centers, digital infrastructure, artificial intelligence, widespread adoption of EVs, also the transition of industrial bosses from fuel-based to electric power solutions, HVAC cooling across the board, a huge increase in demand. And this really is a critical need that then manifest itself for reliable and scalable energy systems. And we think that, in particular, on AI infrastructure, we expect to see a doubling in the investment and it's going to reach $1 trillion by the end of this decade, which presents a substantial opportunity for Baker Hughes. As you saw from the prepared pages, we've identified a market opportunity of $100 billion annually for Power Systems by 2030. And we've got a range of solutions available and also in development. And in 2025, Power Systems orders totaled $2.5 billion, with $1 billion directly linked to data center applications. So you look at also what we laid out we now see data center orders to total $3 billion between 2025 and 2027. And it represents over 150% growth compared to last year's [indiscernible] systems orders which is a clear indication of deceleration that we're seeing and also the customer adoption. So there's a large broad addressable market that is significant. And it goes beyond just the NovaLT, it really focuses on core capabilities around power generation, grid stability and energy management. And so as you look at some of the other things that are taking place, we also secured orders of 1.3 gigawatts for aero-derivative gas turbines within the oil and gas, including upstream gas infrastructure refining, which demonstrates, again, the aspects of good prospects for distributed power solutions in our core market. Also, Geothermal, as you look at the order with fervor, 300 megawatts organic ranking cycle, unique position with ourselves as being the [indiscernible] subsurface and surface power generation capabilities, the 40 brush generators for gas-fired utility scale power plants and collectively delivering approximately 7 gigawatts of reliable power. [indiscernible] condenses technology that address the multibillion-dollar market that is projected to grow as renewable energy integration increases. And so we're seeing lots of new opportunities as well as energy storage being able to leverage our turbo expander and generate a portfolio as we look to see more integrated power solutions, as you also saw in the [indiscernible] project in Kazakhstan. And not to forget also in the nuclear space where we provide steam turbine generators to support more modular reactive projects. And on the overlay, the Cordant digital hardware and software solutions and the aftermarket service business. So you've got a lot of range of applications, end markets. And as we look to Chart, that's going to further strengthen the power portfolio by adding thermal management capabilities and deliver integrated tri-generation power solutions. So very excited. And I think in summary, you're looking at a multiyear cycle. It's driving long-term growth, operational resilience low carbon readiness, and we've got a versatile portfolio that's going to add significantly as growth for Baker Hughes going forward.

Our next question comes from Scott Gruber from Citigroup.

You offered a robust -- you offered a very robust $14.5 billion IET order intake guide for '26. Can you walk through some of the moving pieces within that guide, which segments are seeing some growth, which may be down some? It sounds like LNG will be stable. But what are the moving pieces? And then inbound exceeded your initial expectations last year, what could drive upside this year, would that most likely come from the power vertical.

Yes, definitely, Scott. And again, I think as you look at the 2026 order outlook, it reflects the underlying strength that I mentioned previously as well across the broad and versatile IET portfolio. And it's really a strong start to achieving the 40-plus billion target for Horizon 2 between 2026 to 2028. And I think if you take a step back and just reflect on the prior few years of Horizon 1, that order strength has been highlighted as we've gone through the years of 23, 24 and 25. As you look at LNG being strong in '23, then in '24 gas infrastructure and last year, Power Systems. And since 2023, our non-LNG equipment orders have delivered a compounded annual growth rate of over 20% and really represent about 85% of the total IET orders for both 2024 and '25, which again further demonstrates the breadth and diversification of our offerings.

Looking at 2026, again, it's going to be the aspect of strong pipelines in Power Systems. We see our $2.5 billion orders from last year as a foundation for further growth, also taking up our data center intake and as you see from the free data center order outlook, going to $3 billion, reflecting a healthy and growing pipeline. Gas Infrastructure, as you continue to see the growth in gas, we see continued increase in natural gas production to meet the global energy demand. As you look at new energy, we set a record in 2025 with $2 billion in orders and expect this trajectory to continue led by CCUS, Flex fuel power and geothermal solutions and we've got a forecast for $2.4 billion to $2.6 billion and excited about geothermal. As you heard from the further example in '25 with our technology that we feel is very well positioned as well as then the legacy geothermal as well. And as we go forward, strength in really being able to seamlessly integrate surface expertise with subsurface power generation and the top side as well. As we look at 2026, again, feel good about that. And overall, another robust year, and there's potential to continue to have some upside. We've given our order guidance at the midpoint. There's a number of projects that, again, will materialize in '26, '27 and feeling good about that $40-plus billion over the 3-year order target.

Next question comes from [indiscernible] from Bank of America.

[indiscernible] you don't mind, I want to pivot to the margin side of things better clearly, it's very resilient margins, especially on the OFSE side of things. Ahmed I think if I got you right, you were talking about practically flat margins [indiscernible] consolidation, that's better than what I was thinking that despite all the headwinds between mix and pricing and tariffs, if you don't mind just stepping through that and how it's cost out, helping that? And if you don't mind, just the moving pieces on the IET margin outlook as well, please?

Yes, for sure, [indiscernible]. Look, I find this always easier to build it up by segment. So starting with IT. The team has done a great job on the margin front, and we expect this trajectory to continue into 2026. So achieving 20% margin in 2026 would represent about 150 basis points year-over-year increase. And for context, of course, this is 500 basis points improvement since 2023. And that really has been driven by the success of both our commercial and operational efforts. And as we continue to scale our business system across IET. So just breaking it down in terms of how we expect to drive towards that 20%, it's a few key drivers. First, I would say, is just the continued conversion of our higher-margin gas tech equipment backlog. So that's going to be a foundational component. Growth in Gas Tech Services, we expect to outpace the broader segment. And then Cordant you saw the robust order momentum will enter the year with higher margin backlog and that business can drive quite a bit of operating leverage. And look, we're also going to continue to optimize cost in IET in areas where we know margins have lagged. So there's opportunity there. And then just to round out this piece, the net impact of PSI and [indiscernible], they're just very modestly accretive to margins in 2026. So with that context, I feel with the strong backlog visibility and the continued productivity actions we're going to drive, we're confident in achieving the 20% for IET in '26. So that's IET. So when you look at OFSE, the '26 outlook we gave really reflects a theme that you've seen, which is a resilient margin profile despite the headwinds on a macro scale. So at the midpoint of our '26 guidance and when you compare that actually to peak '24 results, our 2026 outlook actually implies only about 50 basis points of margin decline on roughly 10% decline in revenue, and that's on an organic basis. So we've been able to achieve that through what you've seen us systematically do around cost actions, quick cash paybacks and structural changes to how we operate, which has resulted in that durability.

So for '26, the modest year-over-year decline with organic margins expected to be flat. The major components that says, first, increased tariff costs, as you mentioned, impacting margins. That's going to be an annualized impact carrying from '25 into '26. The second is a slight change in revenue mix with SSPS growing organically, while our higher-margin OFSE business is projected to decline slightly. And the last thing I'd say is what I mentioned around overall market pricing variability in different markets, and that will have a modest impact. And just to round out, similar to PSI and CDC and IET for SBC, the deconsolidation will be modestly dilutive to OFSE margins in '26. So all of this, what we're doing for OFSE specifically is just to address the headwinds, just ongoing productivity supply chain optimization, that's going to be very key. And just those overall efforts, all with the line and of sight to quick cash paybacks. So that will help us position OFSE in a very strong manner as market conditions improve later this year or into '27. So to round out total company, our guns implies nearly 18% in 2026, which then implies 200 basis points improvement in achieving the 20% target by 2028. And we're confident in the strategy to reach this milestone, and that's driven by performance across both segments. So hopefully, that gives a bit of color [indiscernible]

Our next question comes from James West from Melius Research.

So I was wondering if you could provide an update on the progress your comprehensive strategic evaluation and beyond the targeted cost-out initiatives that you mentioned, are there additional aspects of the evaluation you can discuss kind of at this time? And then maybe additionally, can you elaborate on what investors, and we should expect from Baker Hughes in the near future regarding this now?

Yes, James, I want to emphasize, our comprehensive evaluation is a disciplined ongoing process, really designed to ensure Baker Hughes continues to create sustainable long-term value creation for shareholders. and the evaluation represents strategic, operational and financial assessment through which we are considering a broad range of strategic options. The comprehensive evaluation remains closely aligned with our key execution priorities. These include the closure and integration of Chart, driving operational performance improvements, optimizing our portfolio and disciplined capital allocation. and these strategic priorities, combined with the evolving market conditions and the broader strategic landscape help shape the Board's perspective of the company's long-term direction and the available strategic options as we continue to advance our comprehensive review. Our immediate focus is on completing the pending Chat acquisition and subsequently ensuring a disciplined value-creative integration. And in summary, I think our ongoing comprehensive evaluation is focused really to position Baker Hughes for stronger returns, sustainable growth and the creation of long-term value for our shareholders. And as we progress the evaluation we'll provide timely updates.

Our next question comes from Marc Bianchi from TD Cowen.

Could you describe your opportunity in Venezuela?

Yes, definitely. And obviously, a lot happening in Venezuela at the start of the year with some of the political changes and the opportunity for incremental production out of the country. Unlocking that is going to require a new investment in the country's oil and gas sector. And we're taking a prudent long-term view as we continue to evaluate opportunities and also the activity we have in the market. To give you a historical context because Venezuela is not new to us. And as you look at Baker Hughes, both from the oilfield services and equipment as well as the industrial energy technology segment side, we've generated in the past in 2012 as a reference point, $0.5 billion of revenue in Venezuela, and we've had a large presence in the country. We're one of the only American service companies that's maintained the ongoing presence in Venezuela supporting the licensed operators with activities as they've gone forward. And we've got a large technology base and the largest installed base of oilfield power generation and more than 1,200 oil production systems as well as flexible pipe and other energy infrastructure. And as you think about Venezuela's production decline and aging infrastructure, we expect moderate production increases will require substantial investment in well integrity, off-grid power generation, equipment replacement, upgrades and services. And there's a significant ramp in oil production would provide opportunities across Baker Hughes Enterprise on the oilfield services as well as the industrial energy technology standpoint. And as we go forward, we're obviously working with the authorities. Main consideration is the safety and being able to ensure the safetiness of our employees and the operating conditions and having also the clarity on legal and regulatory framework as we go in for the long-term aspects and the incremental opportunity of revenue is significant, and we'll be obviously programmatic as we go back, and there's a lot of work in progress, and we'll evaluate as we get clearer line of sight and we look forward to the continued conversations as the opportunity emerges, and we see the activity increase.

Our next question comes from David Anderson from Barclays.

A lot to digest today, Lorenzo, I wanted to focus on the NovaLT, if we could. You've now doubled your 3-year data center order target to $3 billion. Does this also mean you've expanded NovaLT capacity as well? I think it was about a year ago, you announced the doubling of the initial capacity. So are you sold out for '27 deliveries? And is this further capacity expansion? Is this related to that 1 gigawatt for the slot reservation for a new data center that you showed in the presentation this morning.

Dave, yes, it's -- I'll give some color on this. So as you said, we are on track to double our Nova capacity by the first half of '27. And the way to think about it is really as you include those planned capacity additions, our Nova slots are effectively full through 2028, which reflects, obviously, that strong and diversified demand you've seen across multiple end markets, including behind-the-meter power applications. So that incremental capacity will come online in the first half of '27 and it will support the 2 gigawatts of Nova orders that we booked to backlog during '25. But going forward, we continue to monitor the market closely through our dynamic planning process. So you can be sure that any decision to further expand Nova capacity beyond the current doubling will be based on a disciplined assessment that we would carry out in medium- to long-term supply and demand fundamentals. And of course, guided by very clear return thresholds. So to sum it up, really, our current plan NovaLT capacity is fully committed through '28, but we are prepared to respond quickly if market conditions and customer demand warranted.

That was our last question. I will hand you back to Mr. Lorenzo Simonelli, Chairman and Chief Executive Officer to conclude the call.

Thank you to everyone for taking the time to join our earnings call today, and I look forward to speaking with you all again soon. Operator, you may now close out the call.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may all disconnect. Have a great day.

Good day, ladies and gentlemen, and welcome to the Baker Hughes Company Third Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to introduce your host for today's conference, Mr. Chase Mulvehill, Vice President of Investor Relations. Sir, you may begin.

Thank you. Good morning, everyone, and welcome to Baker Hughes Third Quarter Earnings Conference Call. Here with me are our Chairman and CEO, Lorenzo Simonelli; and our CFO, Ahmed Mohgal. The earnings release we issued yesterday evening can be found on our website at bakerhughes.com. We will also be using a presentation with our prepared remarks during this webcast which can be found on our investor website.

As a reminder, we will provide forward-looking statements during this conference call. These statements are not guarantees of future performance and involve a number of risks and assumptions. Please review our SEC filings and website for the factors that could cause actual results to differ materially. Reconciliations of adjusted EBITDA and certain GAAP to non-GAAP measures can be found in our earnings release.

With that, I'll turn the call over to Lorenzo.

Thank you, Chase. Good morning, everyone, and thanks for joining us. First, I'd like to provide a quick outline for today's call. I will begin by discussing our strong third quarter results. Next, I will highlight key awards announced during the quarter and provide some thoughts on the broader macro environment. Following this, I will share an update on the current progress in the LNG sector. I will then hand it over to Ahmed, who will present an overview of our financial results, followed by an update on our continued focus on portfolio management, including the Chart Industries acquisition. To conclude, I will summarize the main points before we open the line for questions.

Let us now turn to the key highlights on Slide 4. We continue to execute at a high level, delivering another quarter of strong results. Adjusted EBITDA rose to $1.24 billion, above the midpoint of our guidance range. This performance reflects continued momentum from our business system deployment, positive trends in gas technology and strong outperformance in U.S. land, where our leverage to production is a clear advantage.

Oilfield Services and Equipment margins softened in response to the broader macro environment while Industrial and Energy Technology reported improved results, contributing to a 20 basis point year-over-year increase and consolidated adjusted EBITDA margins to 17.7%. This margin progression highlights the resilience of our portfolio and the foundation we have built through disciplined execution.

Given the strong operational performance year-to-date, we now expect full year adjusted EBITDA for the total company to exceed $4.7 billion.

Spanning to orders. IT continues to build strong momentum, achieving $4.1 billion during the quarter, driven by LNG equipment, record Cordant solutions orders and ongoing strength in gas infrastructure and power generation. As a result, IT backlog grew 3% sequentially, reaching a new record of $32.1 billion, further reinforcing the durability and visibility of our growth outlook.

Through the first three quarters, IT orders totaled nearly $11 billion, including $1.6 billion from new energy already reaching the high end of the $1.4 billion to $1.6 billion guidance range. With good visibility into fourth quarter awards, we now expect full year IT orders to exceed our prior midpoint.

Looking ahead, we are targeting at least $40 billion of IT orders over the next three years. This outlook is supported by the breadth and versatility of our technology portfolio which continues to generate a robust pipeline across an expanding range of end markets. We expect growth to be led by gas infrastructure, power generation and new energy markets while LNG equipment orders are expected to remain consistent with our solid performance over the past 2 years.

In OFSE, Subsea surface and Pressure Systems delivered a record quarter with $1.2 billion in orders driven by major contract wins in Turkey and Brazil.

Turning to Slide 5. As I highlighted, we made strong progress on IT orders year-to-date, reflecting continued momentum across LNG, power generation and new energy markets. With strong visibility into our current pipeline, we expect this strength to carry into 2026.

In LNG, we secured over $800 million in equipment orders this quarter, including Trains 3 and 4 of Sempra's Port Arthur Phase 2 and Train 4 of next decades, Rio Grande LNG. At Rio Grande, our Cordant asset health digital solution is being deployed on the first three trains. These awards reflect continued investment in large-scale LNG infrastructure and demonstrate our ability to deliver value by integrating equipment and digital capabilities to reduce downtime and boost availability and production.

In power generation, we continue to experience strengthening demand for distributed power, cogeneration and geothermal solutions throughout the oil and gas industrial, data center and geothermal markets. Notably, we secured a significant award from Dynamis for mobile power generation for oil and gas operations in North America, supplying more than 1 gigawatt of aeroderivative gas turbines to meet rising energy needs across upstream and downstream markets.

We also made meaningful progress in geothermal power, securing a contract to design and deliver equipment for five organic rank and cycle power plants for Fervo's Cape Station project in Utah. This site will generate 300 megawatts of clean, reliable power enough to supply approximately 180,000 homes. This builds on our earlier collaboration with Fervo where OFSE provided subsurface drilling and production technologies. Together, these wins demonstrate the growing relevance of our integrated portfolio for scalable, low-carbon energy solutions.

We also signed a collaboration agreement with controlled thermal resources for the 500-megawatt health kitchen geothermal project in California. As part of this broader trend, we are seeing continued momentum in data center power demand. Year-to-date, we have now booked more than $700 million in power generation equipment orders for data center applications, led by our NovaLT technology. We remain confident in achieving $1.5 billion of data center orders ahead of our original 3-year time line, underscoring the increasing relevance of our power solutions in this fast-growing market.

On aftermarket services, we secured a long-term service contract with BP for its Tangguh LNG facility in Indonesia and extended our agreement with Pembina pipeline to support upgrades for the Alliance pipeline system in North America. These awards reinforce the convertibility of our installed base into aftermarket and service opportunities, reflecting the resilience of our life cycle model.

In offshore, a market we continue to see as a compelling long-term growth opportunity IET secured an award to supply power generation and compression equipment for an FPSO in South America. This award further demonstrates our ability to deliver integrated solutions for critical energy infrastructure. SSPS delivered a record order quarter driven by a significant award for subsea trees in Turkey. We will supply Turkish Petroleum with integrated subsea production and intelligent completion system for the third phase of the Sakarya gas field.

In Offshore Brazil, we also announced the frame agreement with Petrobras for up to 50 subsea trees, marking our return to the subsea tree market following an extended absence.

In flexible pipe systems, we booked an additional 66 kilometers of risers and flow lines for hydrocarbon production, CO2 injection and gas lift, again, highlighting our technical leadership in complex offshore developments. We will also provide an all-electric integrated completion systems for the Buzios field in Brazil, enabling more precise subsurface control, increased operational efficiency and enhanced reliability. Petrobras also extended contracts for our Blue Marlin and Blue Orca stimulation vessels.

In Saudi Arabia, we won a major multiyear award from Aramco to expand coiled tubing drilling operations. including six new units and extensions for four existing ones, supporting both reentry and greenfield projects across the Kingdom.

For Production Solutions, we signed a 5-year extension to provide hydrocarbon and water treatment products and services across Valero's North America and U.K. refineries. We also continued to see strong demand in Mexico for our downstream chemical solutions as we help PEMEX manage crude quality challenges. These awards highlight our ability to serve downstream markets as well as upstream and midstream.

In ammonia, we booked a major order from Technip Energies for the Blue Point #1 project in Louisiana. This facility is set to become the world's largest low-carbon ammonia plant with a capacity of 1.4 MTPA. We will supply critical compression equipment for ammonia production and CO2 transportation along with steam turbines and generators for power solutions. Overall, we continue to see strong momentum across an increasingly diverse opportunity set, supported by the breadth and depth of our technology portfolio.

Now turning to the macro on Slide 6. The macro environment has remained relatively resilient throughout 2025, and despite geopolitical and policy-related headwinds. A key factor contributing to this resilience is the powerful new growth dynamic related to the rapid deployment of generative AI. This wave of investment is unlocking new growth vectors across a wide range of industries and serving as a broad stimulus for the global economy with recent estimates indicating that AI-driven investments account for approximately 30% to 40% of U.S. GDP growth this year.

Globally, McKinsey projects over $1.5 trillion in data center infrastructure investments over the next three years, a major opportunity for Baker Hughes. We are seeing a clear acceleration in project activity and commitments from leading AI companies with our Power Solutions portfolio well positioned to meet this demand for resilient energy-efficient infrastructure.

Now turning to oil. The market continues to navigate a range of cross currents. On one hand, there are concerns around softer demand and rising OPEC+ reduction. On the other, persistent geopolitical risks in the Middle East and Russia continue to support commodity prices. Despite the accelerated return of OPEC+ supply, Oil prices in the third quarter remained somewhat resilient. While it is possible some OPEC+ nations do not have the capacity to fully meet their production quotas, the near-term potential for oversupply continues to weigh on sentiment, keeping operators cautious amid the risk of short-term pricing pressure.

As we shared last quarter, we continue to expect oil-related upstream investment to remain subdued until the market fully absorbs this incremental OPEC+ supply. Against this backdrop, our outlook for 2025 is unchanged, maintaining expectations for a high single-digit decline in global upstream spending.

Looking ahead to 2026, early indicators point to another year of subdued activity, possibly leading to another year of global upstream spending decline. Longer term, the outlook is more positive, especially internationally and offshore, where substantial investment will be required to sustain production growth in response to rising demand. We also expect continued growth in OpEx-driven upstream investment as operators focus on enhancing recovery rates and extending the life of existing fields.

On natural gas, we continue to see growing divergence between oil and natural gas fundamentals. It's abundance, low-cost reliability and lower emissions set natural gas apart from other fossil fuels. That structural advantage is increasingly reflected in both policy and capital allocation. By 2040, we expect natural gas demand to grow by over 20% with global LNG increasing by at least 75%. This growth outlook creates a favorable environment for Baker Hughes.

LNG demand continues to demonstrate solid growth increasing by 6% this year, largely driven by a strong storage injection season in Europe, although this was partially offset by softer demand in China. This demand is driving record LNG contracting activity, which is essential for future project FIDs. According to Wood Mackenzie, 84 MTPA of long-term LNG offtake contracts were signed in the first nine months of the year, surpassing last year's total of 81 MTPA. Over the past two years, nearly 75 MTPA of LNG projects have taken FID with an additional 25 MTPA needed to reach our 3-year target of 100 MTPA. This would increase the global installed base to our long-held target of 800 MTPA by 2030. Beyond this, we see continued growth in the installed base, which I'll address shortly.

In summary, we are seeing strong momentum in our key end markets, especially natural gas and AI-driven power despite persistent headwinds in global trade policy and oil. Our diverse portfolio positions us to manage volatility and we remain confident in our ability to continue executing against our long-term strategy.

Turning to Slide 7. Let me take a few minutes to share our updated perspective on global LNG capacity expansion beyond our long-held target of 800 MTPA by 2030. That milestone is now largely supported by projects that have already reached FID, but are not yet commissioned. Looking beyond 2030, we now expect global LNG installed capacity to increase to approximately 950 MTPA by 2035. To achieve this level of capacity, an additional 175 MTPA of projects would need to reach FID by 2031.

Our positive long-term outlook is anchored in a simple reality. The world needs more energy. This requirement is being amplified by the exponential growth in AI-driven power demand. Natural gas is well suited to meet this demand, offering abundance, affordability and lower emissions than coal without the intermittency issues associated with renewable sources.

In many emerging markets, natural gas accounts for less than 5% of the power mix compared to over 40% in the U.S. This disparity presents substantial potential for natural gas to displace coal and support the transition to a lower carbon economy, especially in regions with high energy requirements that demands reliable and affordable power solutions. Nonetheless, periods of market volatility may occur due to the nonlinear nature of supply growth. Historically, declines in spot prices have encouraged new buyers to enter the market, thereby spurring the next wave of demand and supporting LNG's sustained long-term growth trajectory.

Turning to our technology portfolio. This remains a core differentiator for Baker Hughes. Our best-in-class liquefaction solutions pair advanced compression technology with the industry's broadest selection of drivers including heavy-duty and aeroderivative gas turbines and electric motors. We consistently raised the bar for efficiency, throughput and uptime, helping customers achieve superior LNG project economics. The LM9000 aeroderivative gas turbine exemplifies this, delivering 44% simple cycle efficiency and setting new benchmarks in performance and reliability for large-scale energy infrastructure projects. We expect that the integration of Chart will further enhance the value we bring to customers, enabling greater optimization across the LNG value chain. This allows for more efficient project design, improve and better life cycle economics which we expect will result in superior outcomes for our customers.

Importantly, an increasing installed base supports structural growth over the next decade in our Gastech services business, a key driver of long-term growth and earnings durability for Baker Hughes going forward. The service agreements are critical to ensuring the performance, reliability and emissions performance of LNG facilities over their full life cycle. Overall, we see sustained LNG growth well beyond 2030, driven by rising global energy demand, the push for decarbonization and infrastructure expansion in emerging markets. Baker Hughes is well positioned to capitalize on this trend, leveraging deep market expertise, innovative technology and reliable execution to support our customers with solutions that improve performance reduce emissions and enhance project economics.

Now let me summarize the key points before handing it over to Ahmed. The first quarter was marked by strong execution and meaningful strategic progress. Operationally, we continue to form at a high level. IET delivered another quarter of strong order momentum, further demonstrating the breadth and versatility of our portfolio. At the same time, our business system continues to drive consistent performance across the company. The announced acquisition of Chart represents a significant milestone in our journey to become a leading energy and industrial technology company. We see substantial opportunity in combining our portfolios, and we expect that the acquisition will enrich our differentiated technology offerings and enhance the value we deliver to customers across critical, high-growth markets.

As we announced earlier this month, we are conducting a comprehensive evaluation of our capital allocation focus, business, cost structure and operations in connection with the pending acquisition of Chart. This evaluation reflects the disciplined actions we have consistently taken over the years to establish a proven track record of driving strong performance and represents a natural progression in our ongoing value creation strategy. We have made substantial progress in driving operational improvements, advancing our portfolio and delivering leading shareholder returns and we are confident that we have the right strategy to build on this momentum and continue creating long-term value for shareholders.

Lastly, I want to take this opportunity to extend my sincere congratulations to Ganesh Ramaswamy as he embarks on his next chapter as a CEO. During the past three years, Ganesh has been an exceptional leader at Baker Hughes, successfully implementing our business system and leading the organization with purpose. To maintain continuity and sustained progress within IET, Maria Claudia Borras, a seasoned and highly respected executive at Baker Hughes will step in as Interim EVP of IET.

With that, I'll turn the call over to Ahmed.

Thanks, Lorenzo. Starting on Slide 9. As Lorenzo highlighted, we delivered another quarter of strong orders with total company bookings of $8.2 billion, including $4.1 billion from IET. Adjusted EBITDA increased by 2% year-over-year to $1.024 billion based on revenue growth of 1% as margins increased by 20 basis points to 17.7%. This performance continues to reflect the benefits of structural cost improvements and continued deployment of our business system, driving greater productivity, stronger operating leverage and more durable earnings. GAAP diluted earnings per share were $0.61. Excluding adjusting items, earnings per share were $0.68.

We generated free cash flow of $699 million. For the full year, we expect free cash flow conversion of 45% to 50%, with a typical strong performance expected in the fourth quarter.

Turning to capital allocation on Slide 10. Our balance sheet remains in a very strong position. We ended the quarter with cash of $2.7 billion and net debt to adjusted EBITDA ratio of 0.7x and liquidity of $5.7 billion. During the quarter, we returned $227 million to shareholders through dividends. Our near-term priority is to maintain the strength of our balance sheet in preparation for the closing of the Chart acquisition.

On portfolio management actions, I'm pleased to report that we closed the acquisition of Continental Disc Corporation on August 7, the sale of precision sensors and instrumentation and the creation of the surface pressure control JV with Cactus are progressing as expected with closing anticipated early next year. When these two divestitures close, they will reduce annual EBITDA by approximately $150 million and generate around $1.4 billion in gross cash proceeds.

Turning to the Chart acquisition. We were pleased to receive shareholder approval on October 6. We're currently working in a number of countries to achieve the customary approvals and continue to expect the deal to close in mid-2026. As stated in the Chart acquisition announcement, our objective is to achieve a net debt to adjusted EBITDA ratio of 1 to 1.5x within 24 months following the close of the deal. This reduction will be accomplished through a combination of existing cash balances, ongoing free cash flow generation and proceeds from continued portfolio management initiatives, which are anticipated to yield $1 billion of incremental proceeds.

We have formed an integration management office and commenced integration planning with the team at Chart. In the near term, the focus is on harmonizing systems and processes, supply chain, commercial and operations structured across 14 dedicated work streams. This disciplined and targeted approach is designed to enable a seamless integration and position us to realize the full $325 million in anticipated cost synergies.

Our early collaborations have demonstrated that both organizations possess aligned cultural values, prioritizing the customer at the core of all activities. The integration planning team is directed by the principle of making decisions that support the future enterprise and prioritize value creation while also acknowledging the strengths and capabilities of the legacy businesses.

In addition to the significant cost synergies, we're excited about the commercial opportunities enabled by the combined product and technology portfolios. The combination expands Baker Hughes capabilities in key growth markets such as LNG, data centers, gas infrastructure, hydrogen and CCUS while also enhancing our ability to deliver differentiated value-added solutions to customers.

Let's now move to our segment results, starting with IET on Slide 11. During the quarter, we secured IET orders totaling $4.1 billion, including more than $800 million of LNG equipment and a second consecutive record for Cordant Solutions. With a book-to-bill of 1.2x for the quarter, IET achieved another record RPO of $32.1 billion. This RPO level and a structurally expanding installed base provides strong revenue visibility for 2026 and beyond. IET revenue increased by 15% year-over-year to $3.4 billion, led by double-digit growth in Gas Technology Services, Gas Technology Equipment and Industrial Solutions. Segment EBITDA increased 20% year-over-year to $635 million as margins expanded by 90 basis points to 18.8%. This strong performance was led by record GTE margins and the highest Cordant Solution margins in the past four years.

Turning to OFSE on Slide 12. OFSE revenue this quarter was $3.6 billion, up 1% sequentially. Well construction led growth with a 4% increase driven by drilling services. OFSE delivered EBITDA of $671 million, slightly above the guidance midpoint. EBITDA margins declined by 30 basis points sequentially to 18.5% as cost inflation and business mix were largely offset by cost-out initiatives and overall productivity improvements.

In International, revenue declined 1% sequentially, where declines in Saudi Arabia, Argentina and the North Sea were largely offset by growth in Asia Pacific and Middle East, excluding Saudi Arabia. In the Kingdom, we see the potential for measured rig additions during 2026. In North America, revenue was up 6% sequentially. Onshore revenues increased slightly compared to the second quarter significantly outperforming the 6% decline in North America land rig activity due to our strong weighting towards production-related businesses.

In SSPS, we continue to see positive momentum offshore, where we booked record orders led by significant subsea tree awards in Turkey and Brazil.

Moving to Slide 13. I want to provide an update on our outlook as well as the ongoing impacts of the trade policy changes. Starting with trade policy, the net tariff impact to EBITDA remained near prior quarter levels. We now project this net impact will be at the low end of our $100 million to $200 million range. We continue to execute several mitigation actions to minimize the financial impact and these measures will continue to play a critical role in managing ongoing exposure. Note that this assumes no further trade policy escalation, including retaliatory tariffs and continued success of our mitigation actions across both segments. We are also monitoring the evolution of U.S.-China trade policies, particularly with the 90-day pause potentially ending on November 10.

Next, I would like to update you on our outlook. The ranges for revenue, EBITDA and depreciation and amortization are shown on this slide, and I'll focus on the midpoint of our guidance ranges. For the fourth quarter, we anticipate total company adjusted EBITDA of approximately $1.255 billion, primarily driven by sustained growth and margin expansion within IET. Specifically, IET's fourth quarter performance is expected to reflect ongoing momentum supported by strong revenue conversion from the segment's record backlog and continuous productivity improvements through our business system. As a result, we project IET EBITDA of $680 million, implying more than 100 basis points of the year-over-year margin increase.

For OFSE, we anticipate fourth quarter EBITDA of $650 million. This projection reflects the potential for tempered year-end product sales across offshore and international markets as well as anticipated E&P budget constraints affecting U.S. land.

Now turning to our full year guidance. We have updated the ranges to include actual year-to-date results and the fourth quarter guidance. Accordingly, we are raising the midpoint of total company adjusted EBITDA to $4.74 billion. For IET, we are raising the guidance range for both revenue and EBITDA, increasing the midpoint for revenue to $13.05 billion from $12.9 billion and EBITDA to $2.4 billion from $2.35 billion.

Additionally, we're increasing the midpoint of the IET orders guidance range by $500 million to $14 billion, reflecting robust year-to-date results and anticipated incremental LNG and power generation orders in the fourth quarter. The major factors driving our guidance ranges for IET will be the pace of backlog conversion in GTE, the impact of any aeroderivative supply chain tightness in gas technology, foreign exchange rates and trade policy.

For OFSE, we're increasing the midpoint of revenue by $150 million to $14.35 billion and holding the EBITDA midpoint relatively unchanged at $2.62 billion. Factors driving our guidance ranges for OFSE include execution of our SSPS backlog, the impact on near-term activity levels in North America and international markets, trade policy, foreign exchange rates and pricing across more transactional markets.

Looking ahead to 2026, we remain focused on delivering profitable growth alongside continued margin expansion. In IET, we anticipate continued EBITDA growth even with the PSI divestiture taken into account. This positive outlook is supported by a record backlog and another year of strong margin improvement. We remain firmly committed to achieving 20% IET margins next year.

In OFSE, we expect operator activity to remain subdued throughout much of 2026, suggesting a modest reduction in global upstream spending due to softening oil fundamentals. Taking into consideration the deconsolidation of SPC's results, we anticipate positive SSPS momentum into 2026 driven by strong backlog levels. Against this backdrop, we will continue to prioritize margin resilience and closing the gap with peers.

Before turning the call back to Lorenzo, I also wanted to briefly highlight the key financial commitments of our Horizon Two strategy, which we laid out in September at the Barclays conference. We are targeting total company margins of 20% by 2028, representing a substantial increase from our 2025 implied margin guidance. Over the next three years, we also aim to secure at least $40 billion in IET orders which highlights our strong market visibility and robust technology portfolio. Lastly, we remain committed to achieving at least 50% free cash flow conversion by 2028. These targets do not factor in the expected accretive benefits from churn.

In closing, we are proud of our strong third quarter operational results, which further demonstrate our commitment to delivering long-term value for our shareholders. Looking ahead, we remain focused on driving sustainable improvements in both financial performance and operational efficiency, ensuring that our actions consistently translate into attractive returns and ongoing value creation for our shareholders.

With that, I'll turn the call back to Lorenzo.

Thank you, Ahmed. Our strong third quarter performance represents clear evidence of the consistent execution and operational discipline embedded across the organization. We have fundamentally changed the way we operate. And today, Baker Hughes is in its strongest position since the merger nearly a decade ago. Through Horizon One, we have delivered substantial operational improvement, expanding adjusted EBITDA margins by 320 basis points, while achieving tremendous commercial success.

Looking ahead to Horizon Two, our focus remains on continued margin expansion, targeting a 20% margin for total company adjusted EBITDA by 2028. As we pursue our Horizon Two targets, it is important to recognize the broader context in which we operate.

Baker Hughes sits at the convergence of the energy and industrial ecosystems at a time when their interdependence has never been more critical. The rise of AI is a transformative force driving both productivity and energy consumption. Combined with the rising energy demand in emerging economies, this reinforces our conviction that natural gas will play a central role in the global energy mix going forward. This is the age of gas, and Baker Hughes is well positioned to benefit. The Chart acquisition further expands this runway and is expected to enhance both our revenue growth profile and long-term margin expansion opportunity. We have outlined the significant commercial opportunities ahead as well as the levers to continue driving margin expansion and ultimately delivering stronger shareholder returns and meaningful sustained value for our customers and shareholders.

As we look to the future, we are encouraged by the breadth of the opportunity in front of us with our disciplined strategy, expanding technology portfolio and teams fully aligned we believe Baker Hughes is well positioned to deliver long-term value at the intersection of energy and industrial markets.

To conclude, I want to thank the entire Baker Hughes team for once again delivering outstanding results. Your passion, discipline and pursuit of excellence continue to push the company forward.

With that, I'll hand it back to Chase.

Operator, we can now open for questions.

[Operator Instructions] Our first question comes from David Anderson from Barclays.

So power has been a huge theme over the last quarter. It kind of seems to be ramping up in the last month or so. I was wondering if you could please talk about some of the various opportunities you're seeing today and over the next several years in power generation. Obviously, the data center demand for your NovaLT is getting a lot of attention. But the dynamics order today shows how distributed power is also a growing in store in the oil patch. Then you mentioned the geothermal opportunities and then also offshore. I was wondering if you could kind of put that all together for us and talk about kind of the size and the duration of these opportunities, but also what else is out there in terms of end markets for power generation.

Yes, Dave, definitely. And it's an exciting time when you think about power generation at the broad side of what's happening in the world. And really, it's a demand growth across power generation solutions, and it's definitely beyond just the novelties for data center applications.

When you think of Baker Hughes, we've got an equipment offering that includes generators, synchronized condensers, electric motors and geothermal solutions that really serve across power and industrial and oil and gas markets. And in addition, obviously, we've got the aeroderivatives and heavy-duty gas turbines that are available for the oil and gas power applications. And as you mentioned, we booked a significant order from Dynamis this quarter. So if you think about this award, and this quarter, we booked $800 million of power generation-related orders this quarter. And looking ahead, the pipeline is very strong.

And I think it's important to note that it's not just data center, but it's really across oil and gas and industrial markets. And when you think about it, it's accelerating across the oil and gas sector. When you look at some of the basins, specifically U.S. shale basins, electrification, grid constraints are driving a steep change in the need for distributed power demand and you saw that example by the Dynamis Award, and we see that continuing also in the downstream markets. And as you look at data centers, we continue to see strong momentum.

Year-to-date, we've booked approximately 1.2 gigawatts of data center power solutions. We remain confident that we'll achieve the $1.5 billion of data center orders ahead of the original 3-year time line that we mentioned. And you mentioned that as well, geothermal power generation and very pleased with the relationship that we have with Fervo and others and the award for the organic ranking cycle that we announced 300 megawatts of power and that's enough to power 180,000 homes. And as we look forward, there's continued opportunities as well with our OFSE business and the relationship we have with Fervo on the subsurface drilling production technologies, gas decline and really an integrated solution that we can offer that leverages both OFSE and IET capabilities.

So as we think about it, in summary, there's going to be strong performance going forward on the IET side as well as the integrated solutions. The power generation business is going to be continuing to be a key contributor and really allows us to show the diversification of the solutions that we have across the total portfolio. And importantly, this continues to expand our installed base. And as you know, that turns into services business and calories as well with a long margin durability and reoccurring revenue for Baker Hughes going forward. So exciting times as the world continues to need more energy.

Our next question comes from the line of Arun Jayaram from JPMorgan.

My question is wondering if you could talk a little bit about some of the key financial targets in Horizon Two and kind of give us -- Lorenzo, I meant some of the building blocks you see that are necessary to get to the 20% corporate adjusted EBITDA target by 2028 and maybe some thoughts on achieving $40 billion of IET orders over this time horizon.

Yes. Sure, Arun. And let me start off with maybe the order side of the $40 billion, and then I'll pass it over to Ahmed. I think he can cover the margin progression and -- as you highlighted, we're on pace to, again, book just over $40 billion of IET orders during Horizon One, and we're extremely confident in our ability to deliver at least that level over Horizon Two, which is what we stated as the goal going forward out to 2028. And importantly, it's -- you got to remember that does not include the Chart acquisition, obviously, at this stage.

And what's giving us confidence is a really strong visibility to the project activity, the pipeline that we see and the versatile technology portfolio we have across multiple areas of LNG, power generation, industrial and new energy.

So if you take them one by one, if you think about LNG, we estimate 25 MTPA of FIDs that are going to take place during the course of the next 15 months to really reach our 3-year target of 100 MTPA. And that will take us to the 800 MTPA by -- that we announced for 2030. And then as we look going forward, there's going to be more FIDs taking place. And as you saw from the prepared remarks, installed capacity rising to 950 MTPA by 2035.

And so as we look at the LNG space, continued order momentum going out in the next few years. And that provides with it also the opportunity for strong upgrades and service activity across our installed base as well.

If you look at gas infrastructure, again, durable long cycle opportunities. As you think about natural gas and you think about gas being a prominent energy mix in the future, you're going to need more gas infrastructure as you think about the elements of being able to get the gas from out of the ground and the compression and the pipelines. We see a growing opportunity for that gas infrastructure going forward.

On power generation, I mentioned it before, again, the step function change in demand for distributed power cogeneration and also geothermal solutions that we mentioned previously also to Dave. And if you look at another theme of data centers, again, emerging as one of the key new end markets, and we've secured several awards for our NovaLTs and we expect $1.5 billion target to be achieved ahead of schedule.

And let's not forget new energy. And as you look at this year already, we booked $1.6 billion of orders already at the high end of our 2025 guidance, and we expect this momentum to continue across hydrogen, geothermal and carbon capture and sequestration going forward.

And lastly, digital. You're applying productivity and efficiency across all of this and our Cordant solutions and the capabilities we have around iCenter and really tracking over 2,000 turbomachinery assets across the globe continuing to be an opportunity as we go forward in enriching the installed base. So if you look at those factors, and it gives us a lot of confidence that the $40-plus billion of IET orders in Horizon Two out to 2028.

And with that, I will hand it over to Ahmed to go through the margin.

Yes. Thanks, Lorenzo. So look, Arun, as we look at the construct to that margin target and looking at '25, our guidance implies EBITDA margins slightly below 17.5% for the total company. So total 20% company margins represents about 250 basis points of margin improvement over those next three years.

So just as a reminder, that 20% margin target does not include the expected accretion from the pending Chart acquisition. And when we step back and look at it to achieve this margin target, there are two broad buckets at the overall company level. And then maybe I'll give some color on the segment dynamics. So at the total level, continuous improvement, we continue to do that through the Baker Hughes business system. And that will always remain a cornerstone of how we execute our strategy, consistent execution, cost control and leverage and process discipline.

The other piece to that, and we haven't talked about this much, but AI, I think when we look at it, it allows us to unlock new levels of efficiency and productivity. And we see that as a good tailwind over the next few years. And that goes all the way from enabling functions as well as optimizing supply chain, engineering, logistics and so forth. So this is a really exciting area for us.

And then you've heard us talk about portfolio optimization, and that will remain a key lever. So over Horizon One and specifically, when you look at this year, we've made meaningful progress, and we intend to build on that momentum as we enter the horizon Two until the next three years or so. And in Horizon Two specifically, we're targeting at least $1 billion in proceeds from noncore asset sales going through the structure that we laid out in terms of how we assess that with a focus on reducing that exposure to more cyclical OFSE markets and shifting that increasing our presence in more industrial-like higher-margin areas.

So that's at the overall company level. And then when you look at the segments, some color on that. For IET, first and foremost, our near-term focus is to ensure that we hit the 20% IET margins next year, so 2026. And then beyond that, we see further upside given the structural growth of the installed base that you're seeing with the book-to-bills of IET over the last few years, and the strong services pull-through that will allow for as well as the strong margin rates that are sitting in backlog, and we continue to drive that through the book-to-bills.

And then in OFSE, Just to round it out, while it's a more challenging upstream market, our priority is to make sure we preserve the margin rates in the near term. as we continue to work the cost out actions, and we've been doing that over the last few years and continue to do that this year. And the focus will be continue to close the margin gap with the peers in this area. And so once -- the other thing I'd say is once Chart is closed and integrated, we expect it to be accretive to that 20% margin target. So hopefully, that gives you a little bit of color on the building blocks to the margin target.

Our next question comes from the line of Stephen Gengaro with Stifel.

So you have the Chart merger pending, and you've done a tremendous amount over the last five years, really reshaping the portfolio. And then in early October, you had a press release out and you mentioned this earlier about performing a comprehensive evaluation of capital allocation, the business costs and operations in general. Can you talk a bit more about what this entails and what we should expect to hear from Baker over the next couple of quarters?

Yes, Stephen, and thanks for the question. We've been focused on enhancing shareholder value and accelerating our transformation into a differentiated energy and industrial technology company. The pending acquisition of Chart represents a major strategic milestone in that journey. And with the shareholder approval now in hand, this is the right time to evaluate additional value creation opportunities and importantly, like you said, this approach is not new to us. Over the last several years, we've consistently been taking action to drive value for our shareholders and the -- this disciplined approach has translated into tangible results during Horizon One, with EBITDA margins up over 300 basis points, while EBITDA has increased by approximately 60% which has helped us to drive significant outperformance for our shares. So we think there's still meaningful upside ahead and we'll continue the evaluation as we've been, which reflects the ongoing disciplined approach to unlocking additional value creation opportunities.

And as you think about what's next, ourselves with the Board will continue to explore all the path to drive shareholder value, carrying out the -- as previously announced, comprehensive evaluation of our capital allocation focused business cost structure and operations. And I think importantly, we want investors to know that we're not resting on our laurels of recent outsized returns. We believe that there's substantial value to be recognized in the near, intermediate and long term for Baker Hughes shareholders. And we won't speculate today, but we'll keep working through the evaluation and make sure that we continue to increase shareholder value.

Our next question comes from Scott Gruber from Citigroup.

It's been a couple of months since the Chart acquisition announcement. You mentioned the integration planning underway. But can you provide some more color on what you can do now through the early close period to really accelerate the time to full synergy capture and accelerate the timing to full integration of Chart into IET?

Definitely. And Scott, let me start by reiterating why we continue to be very confident in the strategic and industrial logic of the acquisition. And we believe that this combination is going to significantly enhance the value we can deliver to customers. It really aligns with the IET segment, adding key thermal management and air and gas handling solutions to our portfolio. The combination also expands IET's capabilities in key growth markets, unlocking commercial synergies by offering customers value-added solutions. The breadth and diversity of the combined portfolio is going to allow us to go aftermarket potential. And again, the aftermarket service opportunity is significant also with digital opportunities. And so I feel very good about the combined portfolio being more industrial and less cyclical positioning the company to be able to deliver more resilient and consistent long-term performance. And that's going to provide significant revenue synergies as we go forward in the future.

And I'll let Ahmed speak to some of the progress to date in setting up the integration team.

Yes. Scott, as we look at the integration itself, the focus, as you said, is really the progress we can make before deal close. So we formed the integration management offices and the teams have a very strong operating rhythm. What we've seen very clearly are the cultures are very closely aligned customer at the core of all activities, which allows us to really drive some of that commercial synergy work. So in the near term, across those 14 work streams that are dedicated individuals across the board. They're focused on systems integration architecture, all sorts of systems, supply chain, commercial go-to-market and operations. So a lot of work there. And as we progress, we're keeping a very clean sort of view on that swift integration and making sure that we can realize the full $325 million in anticipated cost synergies.

And just as a reminder, for the integration itself, it's now going to be led by Jim Apostolides, who's our Chief Infrastructure and Performance Officer. And he's got 25 years of operational and multi-industry leadership experience. And then specifically, when it comes to integration work at both GE prior to Baker Hughes, and at Baker Hughes. He's led many complex projects in the past and led those post-acquisition leadership teams. And so as an example, the GE separation across the enterprise that he was involved in. So he's been already working closely with the integration team given that many of the areas in the interim are, of course, focused on areas that fall under his supply chain scope. So we're really pleased on the momentum we're driving there.

And with respect to timing, obviously, we mentioned the shareholder vote and the approval from Chart shareholders and we remain focused on all customary approvals that are in the queue now. So from a timing perspective, we feel good about expecting to close the deal in mid-2026.

Our next question comes from the line of James West with Melius Research.

So I wanted to dig in on the OFSE business and particularly the margin because you guys significantly outperformed peer group on the third quarter. You've given guidance for 4Q for a little bit more degradation, but not a lot, which is differentiated. And so I'd love to hear about the moving pieces on the margin, what you're doing to kind of address and kind of maintain high margin rate. And then -- and if you could also expand on maybe next year as you think about -- you've given kind of the -- your guidance on what you think exploration and production spending will be for next year, down slightly what do you expect for the margin to do in that segment as we go through the year?

Yes, James, I'll take that. So look, we're pleased with how the OFSE team has performed given these market conditions and the resilience that they've been able to drive. So maybe what I'll do is I'll give an overall and then go a little bit in 3Q, 4Q and then a look forward into '26.

So at the midpoint of our '25 guidance, OFSE margins, we're expecting them to be down 10 basis points despite an 8% decline in revenue. So that just shows the resilience of the work the team has been doing on cost-out initiatives that they started late last year and the continued simplification that Amerino has been driving as part of the overall OFSE organization. So that's what's really helped deliver that year-over-year margin outperformance relative to the peers in this area.

And then when I look at the third quarter specifically, that modest margin decline was really driven fundamentally by business mix and a little bit of cost inflation coming through, but the team was able to offset most of that by cost-out initiatives and overall productivity that they're driving through the fields and the shops. So that again goes back to the resilience.

The fourth quarter, as you mentioned, the midpoint of our guide points to both modest revenue and margin declines. And that's really built up through, I would say, a couple of things. One is typical seasonality in the Eastern Hemisphere and the other thing is tempered year-end product sales across both offshore and international markets. And then lastly, what we see as some E&P budget constraints affecting U.S. land specifically.

So that wraps up the year. And then when you look into '26, as we mentioned, we expect operator activity to remain subdued throughout most of the year, and that would suggest a modest reduction in global upstream spending due to what we see as a softening of oil fundamentals. But within SSPS, as an example, our strong backlog levels, we expect to drive positive momentum into 2026, excluding the effects of, of course, the SPC deconsolidation that will happen at the beginning of the year.

So stepping back, when I look at this against this macro backdrop, we're going to continue to emphasize what we've been doing, which is cost efficiency, pricing discipline and upselling opportunities and ultimately prioritizing margin quality over volume. So that is the work that's ongoing to make sure we close the gap with the peers in this area. So hopefully, it gives you some color, James.

Our next question comes from the line from Marc Bianchi with TD Cowen.

I wanted to ask about NovaLT, you had a really good first half year for NovaLT, but it seems like 3Q didn't have much. What are you expecting for NovaLT in 4Q and into 2026? And what's the lead time look like for customers placing those orders?

Yes. Marc, I'll take this one. So as we've noted, third quarter year-to-date, we've seen a sharp increase in orders for our NovaLT turbines this year. And that's across not only data centers but also traditional and emerging industrial markets. So the diversity of this industrial gas turbine is one that's really strong. So in total, when I step back and look at it, we probably expect to book over $1 billion of NovaLT orders in '25 with oil and gas applications being roughly 1/3 in data centers and broader industrial making up the difference. And of course, that's a record orders year for Novas by a wide margin and the pipeline we see is quite strong. So as we highlighted, the demand for power gen applications is really broad, and we expect it to be quite strong going forward.

So in terms of capacity and how we're supporting this growth, we're -- we've been significantly increasing our manufacturing capacity. And we continue to make targeted investment in enhancing the actual performance of the industrial gas turbine in Nova, including expanding its power range and reducing startup time. So there's a piece around the actual product efficiency but also overall capacity. So we're seeing strong demand for delivery slots well into '28 and beyond. And so the durability and resilience of the market is quite strong as we can see from the backlog as well as demand signals we're looking at.

And then, of course, the NovaLT that allows us to drive substantial potential for aftermarket services growth, given its industrial gas turbine. As I mentioned, new capacity going in, both on the production side but also supplying spares. And as we expand that installed base, that's going to be a key area. So that recurring revenue opportunity, that new unit pipeline is one that we're very excited about. And we see quite a lot of potential in this specific area. So hopefully, Mark, that helps you a little bit.

That was our last question. I will hand you back to Mr. Lorenzo Simonelli, Chairman and Chief Executive Officer, to conclude the call.

Thank you to everyone for taking the time to join our earnings call today, and I look forward to speaking with you all again soon. Operator, you may now close out the call.

Ladies and gentlemen, thank you for participating in conference. This concludes the program. You may all disconnect.

So the word transformational gets thrown around a lot. But my 25 years of covering the sector, no other company has gone through a transformation quite like Baker Hughes. Since the GE Oil & Gas merger in 2017, we've seen Baker Hughes reshape its portfolio around gas infrastructure, deemphasizing upstream with a shift towards production in what I consider to be the hardest feat, creating an entirely new culture around execution, consistency and accountability.

Man behind it all, Mr. Lorenzo Simonelli, who is going to give a presentation, and I'll ask a few questions at the end. So please introduce. Please welcome Mr. Simonelli. Thank you.

Good morning. I'd like to extend my appreciation to Barclays and Dave Anderson for inviting Baker Hughes to speak at this year's event. It's always a privilege to be part of this conference and share the company's story with investors. Today, I'll provide an update to our Three Horizon Strategy. This framework serves as a guide for Baker Hughes transformation in a more differentiated energy and industrial technology company, one designed to deliver sustained growth and more durable earnings over time.

I will begin with an overview of the significant accomplishments achieved in horizon one, elements of which were first introduced at this conference in 2022. Thanks Dave. I will then outline the strategic vision for horizons two and Three, including the financial commitments we are targeting over the next 3 years. Finally, I will discuss the positive impact of our recently announced chart acquisition and how it accelerates our strategic progress.

Before I begin, as it's customary, please note the disclosure around forward-looking statements on the second slide. As always, you can refer to our latest SEC filings for further details.

Let me start on Slide 4 with a high-level overview of the company. Baker Hughes is one of the world's leading energy and industrial companies. focused on solving our customers' most complex challenges. Through our OFSE and IET segments we operate across critical parts of the energy and industrial ecosystem. Markets that are becoming increasingly interconnected as we enter into a new era of rapid power demand and the transformative impact of AI. With our broad technology portfolio we are delivering differentiated solutions that deliver better customer outcomes across the full life cycle of a project.

Our OFSE portfolio is a global leader in production solutions with leading franchises in artificial lift and production chemicals. Coupled with our Leucipa digital application, our mature asset solutions are well positioned to capture the anticipated increase and OpEx-led investments in the years ahead. Over 70% of the OFSE revenue is generated internationally, supported by a strong presence in all major basins worldwide. Importantly, offshore continues to be a major contributor, generating approximately 40% of segment revenue and supporting both near-term growth and long-term earnings visibility.

Our IET segment operates at the intersection of energy and industrial markets with leading compression technology and the broadest range of drivers in the industry. We are uniquely positioned to provide mission-critical equipment and aftermarket services across LNG, gas infrastructure, data centers, CCUS, hydrogen, geothermal and clean power, or secular growing markets. Also, by leveraging our expertise across various molecules we are enabling customers decarbonization and positioning Baker Hughes to benefit from the expanding opportunities in new energy.

Our latest growth area is power generation where our NovaLT industrial gas turbines are supporting the rapid deployment of distributed power solutions, increasingly being used to meet the rising demands of data centers. These secular tailwinds across multiple markets are accelerating growth in our installed base and driving recurring service revenue, strengthening the durability of Baker Hughes earnings and cash flow profile.

Turning to the next slide. Building on our differentiated, more industrial-like portfolio and compelling commercial opportunities we have delivered sustained operational and financial improvement over the past 5 years. During this period, we have nearly doubled EBITDA supported by the faster-growing IET segment which is expected to account for 48% of total revenues this year. Since the start of this transformation, we have delivered almost 600 basis points of margin expansion while strengthening our revenue mix, reducing our relative exposure to the more cyclical upstream market.

Let me walk through how we see our strategy evolving across our three horizons, each shaped by changing market dynamics. Cutting across all horizons are three priorities: continuous operational improvement, commercial success and portfolio optimization, all with the goal of generating differentiated growth and returns for shareholders. horizon one, which comes to a close this year, has been about repositioning the company for success after the full separation from GE and following the COVID-driven downturn.

During this period, we restructured from 4 segments to 2 creating OFSE and IET. We deployed the Baker Hughes business system driving over 300 basis points of margin expansion and booked over $40 billion of IET orders, including $3.8 billion in new energy. We also announced the transformational chart acquisition and advanced several targeted portfolio and technology investments. As a result, Baker Hughes has never been stronger with enhanced resilience and a business model that continues to deliver through varying external market challenges.

Horizon two, covering 2026 through 2028, marks the next phase of our journey, a period where we will scale profitability, deepen our industrial footprint and position Baker Hughes for more durable growth. Our goals are clear, achieve 20% IET margins in 2026, close the OFSE margin gap with peers and continued scaling the Baker Hughes business system. We will also leverage AI and digital technologies to drive efficiency and strengthen our solutions offering, delivering enhanced outcomes for customers. Finally, we are committed to delivering on the target we set for the chart acquisition and subsequent deleveraging.

Lastly, horizon three advances our evolution into a differentiated energy and industrial company with industry-leading margins, driven by further expansion of digital and aftermarket recurring revenue. We will also continue our portfolio optimization efforts to broaden our solutions offering, creating clear differentiation and enhanced customer value. With stronger growth, higher profitability and increased free cash flow, we will reinvest in targeted growth areas while continuing to return substantial capital, compounding value for shareholders over time.

Before we move on to focus on the path forward in horizon two and three, I wanted to spend a moment to emphasize the progress we have made as we close out horizon one in both IET and OFSE. Notably, we have delivered solid margin improvement in both segments despite several challenging macro events. In OFSE, we have meaningfully closed the margin gap with our peers, driving margins higher by more than 300 basis points in horizon one. This improvement reflects simplification of our operating structure and solid commercial success.

IET margins have continued to expand despite a less favorable mix with almost 70% of Gas Tech revenue coming from equipment this year. Even so, we expect IET margins to be above 18% in 2025. And also more than 300 basis points higher since the start of horizon one despite significant mix headwinds over this period.

On the next slide, I wanted to highlight the Baker Hughes business system now in its third year. This disciplined operating model rooted in Lean and Kaizen principles, is driving performance management, strategy deployment and continuous improvement across the enterprise. It equips us to simplify workflows, eliminate waste and improve execution, directly supporting progress towards our margin targets. The system has been instrumental in driving productivity, efficiency and strategic breakthroughs while enabling us to deliver differentiated products and services that create greater value for customers and shareholders. Its impact is clear.

In IET, Gas Technology Equipment margins are up more than 9 percentage points since the start of horizon one with unit production from our existing footprint rising by 40%. In OFSE, the deployment of these principles has supported more than a 13 percentage point improvement in SSPS margin since 2022, aided by restructuring capacity optimization and a stronger market backdrop.

As we move into horizon two, the business system will remain central to our strategy. further streamlining our structure, simplifying processes and embedding greater operational rigor to accelerate decision-making and enhance customer outcomes. Just as importantly, it will be a key enabler in integrating recent acquisitions, including Chart, allowing us to capture cost and commercial synergies and more quickly and effectively.

Let me turn the focus now on how we are creating new opportunities through our commercial excellence platform. To further accelerate demand generation and capture enterprise-wide opportunities, we launched the growth and experienced team led by Maria Claudia Borras. By harnessing the full breadth of our portfolio, GX is designed to unlock larger, more integrated solutions for customers. And as energy and industrial markets become increasingly interconnected. This capability is critical to driving our next phase of growth. It is also a powerful differentiator and will be a critical enabler of revenue synergies as we integrate charts solutions and capabilities into the Baker Hughes portfolio.

What is often underappreciated is the unique role Baker Hughes plays across the full life cycle of customer projects. We don't just sell equipment. We partner with customers. from solution design and permitting through world-class execution in the build phase and into long-term operations. This life cycle approach creates durable multi-project relationships expands our installed base and drive higher-margin recurring revenue growth.

Here, on the next page, we highlight a strong example of leveraging our new commercial platform. Our GX team worked hand-in-hand with frontier infrastructure to design an integrated solution that addresses two critical needs, reliable power for their data centers and carbon capture solutions for their storage projects. This is a clear demonstration of Baker Hughes' enterprise solutions in action by bringing together capabilities from both IET and OFSE, we are able to create differentiated value for customers, expand our commercial opportunities and strengthen our position across multiple high-growth markets.

Turning now to the portfolio. Since the merger in 2017, Baker Hughes has remained focused on shaping the portfolio to drive sustainable, long-term growth while enhancing the durability of our earnings and free cash flow. We have established clear strategic and financial criteria that prioritize strategic fit, accretive margins and returns and life cycle-based business models. We are executing this framework with discipline sharpening our focus on strategic growth in critical applications across industrial markets, gas and energy infrastructure, new energy and OpEx-driven upstream activity.

The Chart acquisition directly supports this strategy by broadening our exposure across many of these core structural growth markets. Importantly, our ability to integrate acquisitions is enabled by the Baker Hughes business system, which provides the structure, rigor and repeatability to execute with speed, accelerate synergy capture and drive faster value creation.

Turning the page, I'd like to highlight the progress we've made on portfolio optimization. The Baker Hughes portfolio optimization has always been about shaping the company for higher profitability and returns as well as more durable long-term growth. Since the merger in 2017, we have generated more than $2.5 billion in cash proceeds from a series of strategic actions, including the $1.5 billion expected from the PSI and SPC transactions announced in the second quarter.

We also announced the acquisitions of Chart and CDC in 2025. CDC is a leader in safety critical pressure management solutions that complement our valves and gears portfolio. We have approximately 80% recurring revenue and accretive margins. CDC fully meets both our financial and strategic objectives. Other notable investments along the way include Quest Integrity which expanded our inspection capabilities into unpiggable pipes, Brush Electric Motors, which broadens IET's driver and power generation offering and Altus Intervention which strengthened our mature asset solutions portfolio. These moves helped to reshape Baker Hughes in a more balanced, more resilient and higher return company.

Turning to the next slide. I wanted to outline the key objectives and financial commitments of our horizon two strategy which centers on accelerating operational improvement, delivering continued commercial success and advancing portfolio optimization. Let's first discuss operational improvement. Our immediate focus is in driving IET margins to 20% by 2026 and closing the OFSE margin gap with peers. Beyond that, we are targeting total Baker Hughes margins of 20% by 2028, an increase of nearly 300 basis points from our 2025 implied guidance for the company.

These targets do not yet reflect the contribution from Chart, which we expect will be accretive to our 2028 financial commitments. Key operational initiatives include expanding deployment of the Baker Hughes business system, leveraging AI and digital technologies to drive efficiencies and integrating recent acquisitions. This includes delivering at least $325 million of cost synergies from integration of Chart.

Turning to commercial success. We are targeting at least $40 billion of IET orders over the next 3 years, underscoring our strong visibility and the depth of our technology portfolio. Tailwinds include LNG, gas infrastructure, FPSO, distributed power solutions and new energy opportunities. Chart will further expand our order pipeline and accelerate revenue growth, helped by significant commercial synergy opportunities. The growth and experienced team will play a key role in driving enterprise-wide demand generation and broader adoption of our digital solutions.

Lastly, on portfolio optimization. Our near-term focus is to raise at least $1 billion from noncore asset sales. which will help us achieve our leverage target of less than 1.5x within 24 months of closing Chart. At the same time, we will continue to increase our exposure to industrial markets while reducing our exposure to more cyclical drilling and completion upstream markets. This will further enhance the durability of our earnings and cash flow that will drive additional value for our shareholders. Taken together, these objectives set Baker Hughes on our path to drive greater shareholder value throughout horizon two.

Turning page and touching on the Chart acquisition. The Chart acquisition accelerates our horizon two strategic vision. This transaction transforms IET by significantly expanding our capabilities to serve a broader range of energy and industrial applications. Together, we will sharpen our focus on the most attractive and resilient markets, combining highly complementary product and technology portfolios to deliver more value-added solutions for customers. This not only expands our total addressable market in both existing and new segments, but also deepens our penetration across multiple value chains with enhanced solutions.

We also see meaningful opportunity to accelerate aftermarket growth, increasing attachment rates across Chart's installed base and deploying our digital capabilities including AI-enabled Cordant solutions and iCenter to deepen digital penetration across their serviceable installed base and unlock additional higher-margin recurring revenue streams. Overall, adding Chart to the Baker Hughes portfolio strengthens our growth runway and supports higher margin across the combined IET portfolio. We are confident in achieving at least $325 million in cost synergies and are equally excited about deploying the Baker Hughes business system across Chart, which will further enhance what is already a solid margin profile.

Turning page and on to horizon three. We highlight Baker Hughes' continued evolution into a differentiated energy and industrial company. Over time, we have steadily shifted our revenue mix towards IET, aligning with major energy and industrial trends to deliver more balanced growth and greater earnings durability. The Chart acquisition accelerates the shift and positions IET to represent the majority of our revenue mix for the first time. As we progress through horizon two and into horizon three, we will continue to drive Baker Hughes' portfolio weighting beyond the 55% IET revenue mix. We will reach post close of Chart.

Our longterm vision is clear, to be the energy and industrial technology company of choice with industry-leading margins and integrated solutions that generate significant recurring revenue across multiple mission-critical value chains. Through growth, margin expansion and stronger free cash flow, we will create durable value while returning meaningful capital to shareholders.

To close, I want to reiterate why Baker Hughes represents one of the most compelling investment opportunities in the energy and industrial sectors. Through horizon one, we delivered significant operational improvement, expanding EBITDA margins by over 300 basis points, while achieving tremendous commercial success. We have fundamentally changed the way we operate and today, Baker Hughes is in the strongest position since the merger nearly a decade ago.

As we move into horizon two, Baker Hughes is uniquely positioned at the intersection of the energy and industrial ecosystems at a time when their interdependence has never been greater. The advent of AI is a game changer, driving both productivity and energy consumption. Combined with the rising demand in emerging economies, this reinforces our conviction that natural gas will play a central role in the energy mix going forward. This is the age of gas, and Baker Hughes is uniquely positioned to benefit.

The Chart acquisition further strengthens this runway, enhancing both our revenue growth profile and margin expansion opportunity into the back half of the decade and beyond. We have outlined the significant commercial opportunities ahead as well as the levers to continue driving margin expansion and ultimately, stronger shareholder returns.

With that, I want to thank Dave and the Barclays team once again for the opportunity to share the Baker Hughes story. With that, I'll turn it back to you, Dave, for questions.

Thank you, Lorenzo. So we only have a couple of minutes here. So maybe just focus on that first number, the $40 billion over the next 3 years. So you're essentially saying orders are going to stay relatively flat over the next 3 years. Help me understand the components. What's going up, what's going down? How do you -- where is LNG filling in that? Are you expecting another capacity expansion data centers. Just if you can sort of quickly go through how those different components...

Definitely. And hopefully, it was reflected in the presentation that we have a number of end markets that see growth and have tailwind over the course of the next few years and the next decade. And we do see an increasing usage of LNG. We do not think that the cycle is over. We see LNG continuing to grow in the 2030s. Likewise, with the increasing demand of data centers there is tailwind in the application of distributed power generation.

Also, as we look at the continued gas infrastructure, if you think about the growth in LNG and also the growth in energy requirements, you need gas infrastructure. So we have a number of end markets that have positive tailwinds, which allow us to see that visibility longer term and feel confident about the $40 billion of IET orders going forward.

So the other 40 number I want to ask about is the 40% increase in capacity and GTE with the same footprint. First of all, how did you get there? How does -- Ganesh, he is a big part of that? How did you get there? And secondarily, does that continue to increase in that part of the 20% margin target?

Again, we benefited from a great infrastructure that we've had within the company and then also the application of the business system. And as you said, with the work that's been conducted by Ganesh and the team being able to do more with the footprint that we have and also managing the economies of scale and being able to be more efficient.

And we are CapEx light on the industrial side, and we don't see that changing as we go forward. and we still have the opportunity to gain more productivity and efficiency. And at this stage, unless there's a significant further increase in volume requirement, we think we can manage it within the envelope that we have with the continued progress and the benefits of the business system being applied.

And presumably, that's one of the big attractive points of Chart is similarly like that. Is that the expectation as well to get them more efficient? Is that one of the big drivers for this deal?

Definitely, we see that there's, again, an opportunity to improve the margin outlook also at Chart. And again, applied the business system with regards to the repeatability, the predictability. And it's from an operational perspective, the consistency and managing the supply chain, managing the rooftops and being able to optimize and being predictable as we go forward.

And that's one of the opportunities a lot of commercial opportunities as well as was mentioned, from the synergy perspective, but we feel very confident on the cost synergies of the $325 million that we stated.

Well, I could keep you up here for another hour, but I'm not allowed to. So thank you very much for your time.

Thank you very much.

Ladies and gentlemen, thank you for standing by. My name is Margo, and I'll be your conference operator today. I would like to welcome everyone to the conference call to discuss Baker Hughes acquisition of Chart Industries. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Chase Mulvehill, Vice President of Investor Relations. Sir, you may begin.

Good morning, everyone, and thank you for joining our conference call to discuss this morning's announcement that we've entered into an agreement to acquire Chart Industries. Joining me today are Chairman and CEO Lorenzo Simonelli; Executive Vice President of Industrial & Energy Technology, Ganesh Maswani; our CFO, Ahmed Moghal; and Jill Evanko, President and CEO of Chart Industries. We will also be using a presentation with our prepared remarks during this webcast, which can be found on our investor website. After the prepared remarks, we'll open up for Q&A. I would like to remind everyone that this will include forward-looking statements. Any forward-looking statements that we make today are based on assumptions as of this date, and we undertake no obligation to update these statements as a result of new information or future events. I would refer you to our SEC filings for a full review of all of those risks. With that, I will turn the call over to Lorenzo.

Thanks, Chase. Good morning, everyone, and thank you all for joining us. We're excited to be with everyone today to announce our acquisition of Chart Industries. This acquisition is a strong strategic fit and accelerates our vision to become a leading energy and industrial solutions provider. This transaction will transform our Industrial & Energy Technology segment by expanding our capability to serve a broader range of energy and industrial applications.

Together, we will sharpen our focus on the most attractive and resilient markets, combining our highly complementary product and technology portfolios to deliver value-added solutions for our customers. We also see meaningful opportunity to accelerate aftermarket growth by increasing attachment rates across Chart's installed base, extending our broad geographic footprint and strong customer relationships.

In addition, we will deploy our digital capabilities, including our AI-enabled Cordant solutions and iCenter to deepen digital penetration across their serviceable installed base and unlock higher-margin recurring revenue streams. Finally, we expect this combination to deliver strong earnings accretion and returns while enhancing the overall growth and margin profile of Baker Hughes.

Turning to Slide 5. I'd like to walk you through a summary of the transaction details. The transaction consideration is $210 per share in cash, which is equivalent to an enterprise value of $13.6 billion dollars. This values Chart at approximately 9x estimated 2025 consensus EBITDA on a fully synergized basis. Chart will become part of our IET segment, where our established business system provides the structure, discipline and repeatability needed to integrate with speed and precision. This gives us confidence in delivering $325 million in annualized cost synergies as well as capturing the full strategic and financial benefits of the transaction.

We are making this acquisition from a position of strength, taking advantage of our strong balance sheet, cash generation and divestiture proceeds to advance our portfolio goals. We remain committed to maintaining our single A credit rating and will later take you through our plans to deleverage over the next 24 months. The transaction is accretive across all key metrics, and we expect to deliver double-digit EPS accretion in the first full calendar year after closing the transaction. It meets every element of our disciplined acquisition criteria, both strategically and financially.

Turning to Slide 6. I'll provide a quick overview of Chart and why we believe it is a highly attractive addition to our portfolio. Chart is a global leader in process technologies and equipment for gas and liquid molecule handling across a broad range of industrial and energy end markets, including LNG, data centers, power, metals and mining and low-carbon solutions. With only 30% of revenues tied to oil and gas, Chart is predominantly exposed to high-growth industrial and sustainability-linked markets, supporting a more balanced portfolio aligned with long-term secular growth trends.

Chart is a leader in heat exchangers, small-scale compression and cryogenic equipment. Its global scale enables them to support large and complex energy and industrial projects, while also significantly enhancing the aftermarket and life cycle value of its offerings. Chart also has a strong financial profile, with $4.2 billion in revenue in 2024, a 3-year organic revenue CAGR of 14% and a 24% EBITDA margin.

On Slide 7, you can see how this transaction represents a natural step in Baker Hughes' ongoing strategic portfolio transformation. Over the past 5 years, we have doubled our EBITDA, supported by an increasing contribution from our faster-growing IET segment, which now accounts for 48% of total revenues, up from 37%. When we began this journey, the company had a lower margin profile and greater exposure to upstream oil and gas spending. Fast forward 5 years, and today, we have fundamentally improved how we operate, driving a 600 basis point margin expansion while shifting toward a more balanced and resilient revenue mix, with less relative exposure to the more cyclical upstream market.

As part of the broader business transformation, we implemented a robust business system during this period, that has enhanced productivity and accelerates our progress to be a leaner, more efficient company. This disciplined operating model provides the structure and rigor to successfully integrate acquisitions of all sizes, including larger strategic transactions like this one. This transaction marks another important step in our strategic journey, realigning the portfolio to deliver customer value and strengthen returns, profitability and growth, while shifting our mix towards the IET segment.

As a result, it enhances earnings durability and expands our presence in high-growth markets. With the addition of Chart, we will be well positioned for the next phase of value creation, powered by a more strategically aligned portfolio and a foundation built for long-term sustainable growth.

With that, I will turn the call over to Ganesh, who will explain how Chart aligns strategically with our IET segment.

Thank you, Lorenzo. Let us begin on Slide 9. Lorenzo provided an update on the progress achieved during Horizon 1. The IET segment has reported growth, margin expansion and implementation of our business system, which is now in its third year of operation.

The acquisition of Chart is a strong strategic fit with our IET segment. It will accelerate our shift towards industrial markets, double our presence to non-oil and gas segments, and reduce our exposure to the more cyclical upstream markets. The combination also expands IET's capabilities in key growth markets such as LNG, data centers, gas infrastructure, hydrogen and CCUS by expanding our total addressable market and unlocking commercial synergies by offering customers value-added solutions.

The breadth and diversity of the combined portfolio will allow us to unlock significant aftermarket potential, driven by higher attachment rates and enhanced penetration of our digital offerings across the total installed base. This is not just about alignment, it's about accelerated value creation. The combined portfolio will be more industrial and less cyclical, positioning the company to deliver more resilient and consistent long-term performance.

Turning to Slide 10. We expect to significantly increase IET's total serviceable addressable market by creating new opportunities. We are broadening our reach beyond our core markets which currently include upstream oil and gas, infrastructure and LNG as well as new energy and distributed power generation. Chart increases our exposure to general industrial and metals and mining sectors where they hold a historic presence.

Additionally, there are new and highly promising growth opportunities in emerging areas such as space, water treatment and nuclear technologies. Together, we will be able to serve a significantly broader portion of the market and more effectively deliver value for customers.

Turning to Slide 11. We are not just about expanding into new markets. We are also deepening our presence within high-growth sectors through the combination of complementary technologies across energy and industrial value chains. Baker Hughes provides differentiated solutions for rotating equipment, flow control, digital and decarbonization. Chart complements this through its capabilities in air and gas handling, thermal management and process technologies, effectively addressing gaps across core value chains. As a result, we are better positioned to meet a diverse set of customer needs with tailored solutions that reflect long-term industry trends and shifting market demands thereby enhancing our presence in high-growth sectors such as LNG, data centers and power generation.

Next, on to Slide 12, we focus on one of the most compelling opportunities enabled by this combination, data centers. Data centers are a rapidly expanding vertical in the global economy and an area where this combination allows us to better serve our customers. Data centers consume significant amounts of energy. In order to maintain competitiveness in the sector, it is essential to ensure both a reliable and resilient power supply as well as effective thermal management systems capable of addressing the substantial heat output from high-performance computing operations. This is exactly where Baker Hughes and Chart come together in a differentiated way. Baker Hughes provides turbines that deliver distributed power generation, while Chart supplies industrial chillers that help reject the heat from advanced compute environments, especially GPUs operating above 200 degrees Celsius.

In addition, Chart brings cryogenic tanks for on-site storage. This is not only a complete solution. It's a more efficient one. We can significantly lower energy intensity across the system by utilizing waste heat from turbine exhaust and chip-level thermal loads. This combination positions us to deliver differentiated high-efficiency infrastructure solutions for one of the fastest-growing and most energy-intensive sectors of the economy. Beyond its significant growth potential, it positions us to play an expanded role in shaping what we believe will be one of the most transformative markets of the next decade.

Now turning to Slide 13. I would like to talk about the significant aftermarket opportunity where we see a clear path to unlocking additional value. By 2030, Baker Hughes' installed base is expanding by 20%, while Chart's installed base is increasing by 35%. This alone will drive accelerated installed base growth for Baker Hughes. There are also several complementary elements that position us to accelerate this growth profile for our aftermarket business. First, we can extend our expansive service footprint and strong customer intimacy in regions like the Middle East and Asia Pacific, where Chart has a large installed base, but limited aftermarket service coverage. Second, we see the same opportunity to deploy Baker Hughes' service capabilities into underserved end markets such as metals and mining.

Third, by integrating Baker Hughes' global service network and AI-driven platforms with Chart's digital tools, we can transform the customer experience across the full life cycle of the combined installed base. For example, platforms like Baker Hughes' iCenter and Chart's Uptime enable proactive diagnostics and real-time asset monitoring, leading to smarter operations, increase uptime and lower total cost of ownership. Together, we can transition from reactive service to predictive performance. In short, this combination unlocks significant aftermarket growth potential, further enhancing both the durability and quality of Baker Hughes' earnings.

Now I would like to turn the call over to Ahmed, who will go through the financial details of the transaction.

Thank you, Ganesh. I'll start by reviewing in more detail the key financial components of the transaction on Slide 15. As Lorenzo already noted, the transaction consideration is $210 per share in cash, representing an enterprise value of $13.6 billion and approximately 9x 2025 fully synergized EBITDA. There is no financing condition associated with this transaction, and we have obtained fully committed bridge financing, which we expect to replace through permanent debt issuance and cash on our balance sheet prior to close. We are committed to maintaining our single A credit rating and project that our net leverage will be 2.25x at closing with a detailed plan to deleverage to 1x to 1.5x within 24 months following deal close. We have high confidence in achieving $325 million in annualized cost synergies over 3 years. We'll go into more details on how we plan to do that in a few moments.

We see the acquisition as accretive to margins and cash flow with double-digit EPS accretion in the first full calendar year and double-digit return on invested capital by the fifth year post close. We expect the transaction to close in mid-2026, subject to approval from regulatory authorities and Chart shareholders as well as other customary conditions.

On Slide 16, you'll see how this transaction closely aligns with our established strategic and financial acquisition criteria. From a strategic perspective, the acquisition expands our offerings in core customer sectors while broadening our exposure to high-growth markets and strategic industrial segments like metals and mining. The acquisition of Chart contributes to expanding our recurring revenue base by increasing participation across the life cycle. The acquisition is highly synergistic, leveraging our business system, commercial platforms, supply chain and IT systems to drive accelerated value creation. It also enhances the resilience of our earnings, broadening our exposure to secular growth markets across industrial and energy sectors, making us stronger through economic cycles. The transaction also meets our financial criteria, including margin accretion, revenue growth acceleration, free cash flow expansion and exceeds our returns threshold.

Moving to Slide 17. We see a clear path to significant value creation for our customers and shareholders through the cost and commercial revenue synergies. We have high confidence in our ability to achieve run rate cost synergies totaling approximately $325 million through SG&A optimization, supply chain efficiencies and facility optimization across the combined company. We also see meaningful commercial synergies. This includes opportunities for expanded market coverage and broader product offering as well as higher attachment rates and enhanced digital penetration on Chart's installed base. Alongside this, we're also strengthening our ability to address complex customer challenges through a more comprehensive set of capabilities.

On Slide 18, we highlight our defined path to reduce leverage to 1x to 1.5x within the first 24 months post close. This will be driven by free cash flow generation as well as proceeds from continued portfolio optimization actions including the $1 billion of net proceeds expected from the recently announced transactions. The combined company will have access to a $3 billion revolving credit facility and about $3 billion in cash on our balance sheet on a combined company basis at close.

On Slide 19, you can see we are refining our capital allocation framework until we hit our targeted leverage ratio of 1x to 1.5x. We will continue investing in R&D across the combined portfolio as technology innovation remains central to the value proposition of both companies. We are committed to maintaining our dividend and we'll retain flexibility on buybacks as we focus on reducing leverage. We're also targeting approximately $1 billion in additional proceeds from portfolio optimization, which is incremental to the $1 billion of net proceeds already noted. After achieving our target leverage, we will resume returning 60% to 80% of free cash flow to shareholders.

With that, let me now hand the call back over to Lorenzo.

Thank you, Ahmed. As we close out Horizon 1, an important period defined by significant operational improvement, we are excited with the addition of Chart to our portfolio as we enter Horizon 2. Chart's complementary product and aftermarket service offerings help accelerate our portfolio transformation and significantly enhance our growth opportunities across both Horizons 2 and 3. The enhanced industrial scale and product depth that Chart provides also helps Baker Hughes unlock additional portfolio high-grading opportunities across both the IET and OFSE segments. We expect this next phase of portfolio optimization to further enhance our margin profile, while also deepening the connectivity between OFSE and IET. As we enter Horizon 2, we remain committed to operational execution, while pursuing the expanded set of growth opportunities enabled by Chart. We will also remain disciplined in our approach to inorganic activity as we continue building the premier energy and industrial technology company.

In summary, the Chart acquisition transforms our IET segment and advances our strategy to build a leading energy and industrial company. It sharpens our focus on the most attractive and resilient energy and industrial markets, expands our capabilities through a highly complementary product and technology portfolio and enhances our ability to deliver more differentiated solutions. It also strengthens our aftermarket services business, a key driver of recurring high-margin revenue and is expected to deliver strong earnings accretion and returns. Overall, the transaction supports stronger growth and margin expansion that will further enhance the durability of Baker Hughes' earnings and cash flow.

To employees of Chart, we are excited to welcome you to Baker Hughes. We have long admired your work, having collaborated on many successful projects to help take energy forward, and I believe that we can only be more successful together. Today's announcement is a testament to the hard work and accomplishments of our 57,000 global Baker Hughes employees. We have undergone significant change to differentiate ourselves, transform the core and consistently achieve the financial results that have enabled this acquisition. Thank you for your dedication. Together, we are building a stronger future for Baker Hughes.

With that, I will turn the call over to Jill Evanko, President and CEO of Chart Industries to provide further perspective on this important milestone.

Thank you, Lorenzo. Let me begin by sharing why I'm genuinely excited about this combination. At Chart, we have long been committed to innovation as a catalyst for a better tomorrow, offering one of the most comprehensive portfolios in industrial gas and energy. Today marks a pivotal moment in our journey. The combination with Baker Hughes presents a highly attractive opportunity to build a truly differentiated energy and industrial company.

To our shareholders, on behalf of our Board and leadership team, I want to sincerely thank you for your continued trust and support. We believe this transaction represents a compelling outcome, delivering immediate and attractive value while aligning our business with a partner that shares our strategic vision and commitment to long-term value creation.

To our customers, the strong partnerships we have built will continue to thrive. Together, Chart and Baker Hughes will offer a broader suite of products and solutions and open new avenues for collaboration, innovation and growth. And to our committed, motivated team members, I want to close with a heartfelt message. As we have always said, people truly make the difference. I'm confident that this talented group of professionals will continue to drive meaningful change, advance our progress in the energy sector and benefit from expanded opportunities through Baker Hughes' global reach. Thank you for bringing us to this momentous occasion.

With that, I will turn back the call to Chase.

Operator, we can now open up for questions.

[Operator Instructions] We'll take our first question from David Anderson with Barclays.

Lorenzo, it's certainly been a busy year for the Baker Hughes team. Over the last several years and even this year, you've been shifting the Baker portfolio more into industrial energy. So I totally understand the logic of acquiring Chart from that standpoint. But I guess, my question is why -- why now? Was it Chart finally getting past the major acquisition of its own in integrating Howden? Or is this more to do with what you see on Horizon 2 and 3 and where you can accelerate growth from certain end markets?

Yes, Dave, thanks for the question. And I think a couple of elements here on why Chart. And I think, as you said, Chart has got a strong strategic fit. It accelerates our vision to become a leading energy and industrial solutions provider. When you look at the combined portfolio, we'll be more industrial and less cyclical positions the company to deliver more resilient and consistent long-term performance. And it really accelerates our shift towards the industrial markets, doubling our exposure to non-oil and gas markets. And as we look at Chart, we've been working alongside them for a number of years across many infrastructure projects.

And it will align strategically with our IET segment, adding key thermal management, air and gas handling solutions into our portfolio. So the combination really expands IET's capabilities in key growth markets such as LNG, data centers, gas infrastructure, hydrogen and CCUS and really increases our addressable market, while also unlocking commercial synergies and value-added customer solutions and the breadth and depth of the combined portfolio is going to also allow us to unlock a significant aftermarket potential.

As we look at the products and services, highly complementary, and it also aligns with our strategy to provide life cycle solutions to our customers across the most critical applications. So I think it really positions Baker Hughes to be a technology leader. And to the aspect of why now, I think as you look at Baker Hughes over the last few years, we've really created a foundation of execution, operational excellence and that's a platform that allows us to acquire and integrate Chart Industries. We've got a strong balance sheet, and we've got the conviction on the strategic fit and the opportunity to create value. And also Chart itself has continued to improve performance, has integrated Howden, and we see this as the launch pad for going forward. So really right time, and the right company, the right strategic fit.

That makes a lot of sense, Lorenzo. But with apologies to Jill, I think it's fair to say that execution has been a bit of a soft spot in Chart in recent years. Things were definitely starting to turn the corner. But I was wondering if you could talk about some of the opportunities to improve on the operational side. You obviously have quite a bit of experience with the GE-Baker Hughes merger. So I was just hoping to get some early thoughts on how you plan to approach that. You just sort of described how you have this kind of better platform. Could you just expand a little bit on that on how you pull that in, how you improve operationally there?

Yes, Dave, I'm very pleased with the fact that we've created a foundation, and I'm going to let Ganesh talk to the business system that IET has in place. The success that also IET has had over the course of the last 3 years on improving its margin rate. And again, towards that goal that we set out of 20% EBITDA that's achieved in 2026. So Ganesh, over to you.

Thank you, Lorenzo. So Dave, thanks for the question. So as we have shared with you in our most recent earnings call, our business system is now in its third year of operation. And what we have done over this time period is to expand our operational capabilities in a systematic and structured way, which has resulted in executing segment performance with speed and consistency. So what we plan to do is to operate Chart as a stand-alone business unit within the IET segment, maintaining its own P&L, leadership team and commercial focus to minimize any disruption in customer relationships and performance accountability.

So what we will do is by embedding our business system that we have evolved over the last 3 years now, we will be extracting the synergies and as the synergies are extracted and operating disciplines are properly embedded through the principles of the business system, we will evaluate the further structural integration as appropriate. So overall, we feel very confident that -- with the systematic and structured capabilities that we have built so far, we feel very confident that we can expand and extend that to Chart and leverage the synergies and also realize the performance aspirations that we are looking for from this transaction.

And next, we'll go to Arun Jayaram with JPMorgan.

I was wondering if we could start with commercial synergy opportunities. I know the market is maybe reticent to give credit for commercial synergy capture on day 1, but Lorenzo, Ahmed, I was wondering if you could talk about opportunities, maybe tangible opportunities and maybe some blue sky thoughts on commercial synergies?

Arun, I will take that on behalf of Lorenzo, Ahmed here. So we see Chart offering a very strong strategic fit with IET. As we said earlier, it accelerates IET's shift towards industrial markets, it doubles our presence in non-oil and gas markets. It not only expands our addressable market, both in terms of the markets we currently participate in, but also -- as well as new markets such as metals and mining that we talked about. But in addition to the market expansion, we also see the opportunity to deepen market presence in areas like data centers that I shared with you earlier. There are example -- similar examples in new energy, LNG, water treatment, nuclear and CCUS, by offering enhanced value propositions by utilizing our combined capabilities. Now to be clear, the financial metrics that we measure today do not include any revenue synergies, but we are really looking forward to extracting these revenue synergies over time that we talked about.

Okay. And my follow-up is on the cost synergy front, you've outlined $325 million of synergies by year -- in 3 years, SG&A, supply chain and facility optimization. Can you talk about just your confidence to achieve this and maybe some upside potential from what you see today?

Yes, Arun, it's Ahmed. So I'd say, look, first and foremost, we're really confident in the $325 million of cost synergies that we've identified through our team. And so as you look at the linearity of that, as we laid out, we expect to achieve just under $100 million by the end of year 1 and then $200 million by end of year 2 and run rating to close to $325 million by the out year. So as you break it down between the 3 elements, we think about it as SG&A optimization, which is about 50% of that target. This is simplistically, if you know Ganesh laid out, just going out and executing IET business system to Chart efficiency gains looking at redundant corporate and stand-alone public company costs.

So everything that you would expect us to go out and achieve fairly efficiently, we will do that. So the other piece is around supply chain. This is on the basis of our very strong global supply chain footprint combined with Chart. So this would be in areas you think about the procurement of raw engineered components, commodities, looking at transportation and freight alongside an efficient manufacturing footprint.

And then from a facility optimization standpoint, which makes up the balance of that, this is really looking at optimizing our manufacturing footprint locations where there are multiple Baker Hughes and Chart facilities around the world, and also making sure we can utilize that as we go into some of those new locations and end markets and penetration that Ganesh highlighted. So overall, we feel very confident on delivering this, especially through the rigor of the business system that, as Ganesh talked about, is in year 3 of operation.

And we'll next go to Scott Gruber with Citigroup.

Congrats everybody on the deal. I wanted to ask about the $1 billion of future portfolio optimization actions. Is that largely comprised of 1 or 2 larger transactions or a series of smaller transactions? And do you think the divestitures will be more focused on the OFSE side versus the IET side or spread across both segments?

Yes, Scott, I hope you're well. And again, as you look at the $1 billion, I think before we get into that, it's important to remember that we've continuously looked at Baker Hughes from a portfolio perspective of seeing how we transform and how we continue to evolve in high-grading the portfolio. We've been doing that since 2017 with puts and takes, and you can look at the acquisitions that we've made of Quest Integrity, BRUSH, also Altus as well as the dispositions that we've made. And most recently, as you saw also the transactions that we announced in the second quarter.

And we'll continuously keep on looking at the way in which we high grade the portfolio. The 2 segments are comprised of 30-plus businesses, all competing for capital. And what we're remaining focused on is making sure we've got the resources in the strong margin profile areas where the recurring revenue potential, long-term growth opportunities and make sure that we retain the most competitive portfolio as we go forward. And that's something that we do on a continuous basis and will continue. And it's really not OFSE or IET, it's total Baker Hughes and the process that we undertake all the time.

I appreciate the color. And then just a quick clarification question on the integration strategy. Ganesh mentioned Chart operating as a stand-alone within IET and then you apply your business systems and extract the synergies. Is that strategy just kind of a lower risk strategy for the initial integration down the road? Do you eventually pursue a full integration? Just some additional color there would be great.

Yes, Scott. The -- again, as I said earlier, we will run Chart as a stand-alone business unit within IET, while we systematically extract the synergies that we are referring to in a predictable manner. And post -- as we go through this over the next 2-plus years, as synergies are extracted and the operating disciplines are properly embedded through our business system, we will then evaluate further structural integration as appropriate. So anything we do will be gradual and harmonized. And this approach, to be very clear, does not conflict with the execution of those synergies.

And next, we'll go to Saurabh Pant with Bank of America.

Lorenzo, maybe Jill you may [indiscernible] chip in as well and maybe Ganesh, you as well, right? I want to just touch on the aftermarket side of things a little bit. And Lorenzo, you've been clear in your strategy, right, that you want more life cycle revenue, you want more aftermarket businesses, right? So this acquisition definitely checks that box. But if we look at Slide 13 in your deck, you're talking about mid-single digit on the Baker side. I think Jill has talked about high single digit, close to 10%, right? So if we look at that mid-single digit plus plus, right, I know you've got some drivers on the right. But maybe help us walk through that, which of those drivers are going to be most significant, which are the low-hanging fruits? And how should we think about that aftermarket business progression?

Sure, Saurabh, good to hear from you. So look, as we mentioned, the Baker installed base, it's going to grow by 20% by the end of the decade. We have clear line of sight. The Chart installed base is going to grow by 35% during the same time period. So we see an accretive impact coming from the expansion of the installed base just from the math, as you can see. Now we -- in terms of how the combined capabilities are coming together, there is a tremendous potential here to increase value in aftermarket services by boosting our service attach rates and enhancing our customer experience through multiple areas.

So number one, serving underserved geographies, for example, the Chart installed base in Middle East and Asia Pacific, by expanding the Baker infrastructure, the IET infrastructure there. And also in end markets such as metals and mining, there is a need for -- there is an opportunity for expanding IET service infrastructure in those end markets. And then digital solutions that Lorenzo mentioned earlier in his opening remarks on expanding the potential of Cordant solutions, our iCenter capabilities, along with Chart's Uptime digital tools, bringing all of these together would enhance complementing value propositions for our customers, and that's the basis for expanding attach rates into the numbers -- into the ranges that we are referring to on Slide 13.

Got it. That's [ combination ]. And then maybe I've got a quick follow-up, Ahmed, for you on the capital allocation framework. Now you are rightly allocating more cash to deleveraging. But on buybacks, Ahmed, you talked about being flexible in buybacks, but how should we think about buybacks from now until you get to your leverage target of 1.0x to 1.5x?

Yes, Saurabh, look, as you rightly said, and we've highlighted, our immediate priority is going to be to delever the balance sheet. We're committed to maintaining our single A credit rating and maintaining the strength of the balance sheet that's allowed us to get to this point. So as you saw, we have a pretty detailed plan to take leverage down within the next 24 months post close from that leverage of 2.25x to 1x to 1.5x. So the first priority for us is going to be making sure we maintain the dividend and continue that organic technology investment. Whether it's aftermarket or pure R&D, we want to make sure that continues at a good pace, and we reinvest into the business. So that organic combination with the dividend is very critical for us.

And as for buybacks, we'll remain flexible until the leverage is reduced to that target range. And from an earnings accretion standpoint, from this deal, we feel like this is the right area to allocate capital and delever as we go through it. So the other piece, of course, is going to be making sure that that deleveraging is supported by that portfolio optimization that we laid out, the $1 billion of incremental optimization that we'll continue to drive. So once we reach that target range of 1x to 1.5x of leverage, we'll resume returning to that 60% to 80% of free cash flow to shareholders, which we've laid out before through a combination of dividends, which, of course, we also want to grow alongside the earnings power of the company, and then we'll continue also on the buyback strategy to make sure we are within that 60% to 80%.

And next, we'll go to Stephen Gengaro with Stifel.

I think the first thing, Lorenzo, if you might be able to address. When we look at the mix shift, and based on my math, IET becomes close to 2/3 of EBITDA maybe next year, can you just touch on sort of your thoughts around the long-term plans for the legacy Baker Hughes oil service businesses?

Yes, definitely, Stephen. And we're creating an energy and industrial technology company, and we stated that for some time across the 3 horizons that we've laid out as our strategy. And we firmly believe that Baker Hughes is stronger together as one company. As you think about it from a portfolio standpoint, the franchise has the breadth to reach and address the needs of the constantly evolving energy ecosystem and the customer base. If you consider key themes in the industry today, such as decarbonization, digitization, electrification, we are now very well positioned to provide holistic solutions in the areas across OFSE, IET and Chart Industries helps add to that.

And as we've spoken about before, we see increasing opportunities for synergies across the 2 segments. And we've got a long pipeline of enterprise-wide opportunities, which continues to grow as also the energy ecosystem continues to grow around the macro themes. A good example is we've provided in the past the subsurface CCUS as well as the NovaLT IET gas turbines, hydrogen ready that we're providing to Frontier for data center solutions, which we spoke about during our earnings as well as then other areas like CCUS, geothermal, mining.

And as we think about the breadth of also Chart Industries and industrial energy technology, we'll be able to drive additional value for our customers. So I'd remind you, if you think about our top 20 customers, 70% of our revenues are generated across both segments from those top 20 customers. And OFSE remains a key part of our equity story. So we don't think separation now or in the future is beneficial to drive shareholder value accretion given the dissynergies and growing commercial opportunities to drive value through the commercial alignment across the total enterprise and the 2 segments.

Great. And just as a follow-up, when we think about what's embedded in your IET segment and the technology at Chart Industries, have you thought much about sort of the technology innovations that could stem from putting those 2 businesses and capabilities together?

Steve, this is Ganesh. Let me answer that. So we -- as you know, we see technology innovation as a critical element in enhancing customer value proposition, and we have a history of doing that at Baker Hughes. And then we've shared earlier, there are several examples where the combined capabilities, technological capabilities in both the Baker's side and the Chart's side can come together and enhance value propositions. So we talked about the data center example earlier, where Baker's rotating equipment capabilities and Chart's thermal management capabilities can deliver outcomes with vastly improved efficiencies for our customers. And there are similar examples across other areas, metals and mining for example, nuclear, CCUS, gas infrastructure, water treatment, LNG, where the combination of capabilities across both of the companies will lead to enhanced value proposition in terms of performance, in terms of efficiency and also in terms of customer outcomes, most importantly. So we are very excited by that.

This concludes our question-and-answer portion. I would now like to turn the call back over to Lorenzo Simonelli for closing remarks. Please go ahead.

Thank you very much. I know it's a busy day. So thanks to all for joining us. We're really excited about today's announcement, which marks an important step forward in Baker Hughes' strategy. We're confident this transaction strengthens our long-term positioning, enhances value creation and drive sustainable earnings growth. We look forward to sharing more details and working closely with our customers, employees and shareholders as we move toward closing. Operator, you may now close out the call.

Thank you. And this does conclude today's conference. We appreciate your participation. You may have a wonderful day.

Good day, ladies and gentlemen, and welcome to the Baker Hughes Company Second Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference, Mr. Chase Mulvehill, Vice President of Investor Relations. Sir, you may begin.

Thank you. Good morning, everyone, and welcome to Baker Hughes second quarter earnings conference call. Here with me are our Chairman and CEO, Lorenzo Simonelli; and our CFO, Ahmed Moghal.

The earnings release we issued yesterday evening can be found on our website at bakerhughes.com. We will also be using a presentation with our prepared remarks during this webcast, which can be found on our investor website.

As a reminder, we will provide forward-looking statements during this conference call. These statements are not guarantees of future performance and involve a number of risks and assumptions. Please review our SEC filings and website for the factors that could cause actual results to differ materially. Reconciliation of adjusted EBITDA and certain GAAP to non-GAAP measures can be found in our earnings release.

With that, I'll turn the call over to Lorenzo.

Thank you, Chase. Good morning, everyone, and thanks for joining us. First, I'd like to provide a quick outline for today's call. I will begin by discussing our strong second quarter results and recently announced transactions. I will then highlight key awards and technology developments announced during the quarter and provide some thoughts on the macro backdrop. After this, I will share an update on the exciting progress we are making in the distributed power space. We have a particular focus on data centers. Ahmed will then cover our financial performance, followed by an overview of our portfolio optimization strategy and our outlook. Finally, I'll provide a quick recap before opening the line for questions.

Let's now turn to the key highlights on Slide 4. We delivered another strong set of results, maintaining the trend of meeting or exceeding the midpoint of our EBITDA guidance for the tenth consecutive quarter. Adjusted EBITDA rose to $1.21 billion reflecting a 170 basis point year-over-year improvement in margins. This was driven by the impact of structural cost actions and stronger operational execution. We continue to make clear progress in scaling our business system, a standardized platform that enables consistent strategy execution and delivers differentiated outcomes. These efforts are driving structural margin improvement, strengthening the resilience of our earnings and laying the foundation for long-term value creation.

This performance reflects strong execution across both segments amid ongoing macro and industry-related headwinds. Oilfield Services and Equipment delivered 90 basis points of sequential margin improvement driven by stronger international and Subsea and Surface Pressure Systems revenue as well as meaningful progress on cost-out initiatives. In Industrial and Energy Technology margins expanded by 190 basis points year-over-year, supported by the continued deployment of our business system, which is enhancing operational discipline and execution.

IT orders continued to demonstrate strong momentum, totaling $3.5 billion in the quarter. Notably, this was achieved with no material LNG equipment orders, once again highlighting the strength and versatility of our technology portfolio as we further expand across energy and industrial end markets.

This diversification is reflected in the growing demand for our data center solutions. During the quarter, we booked more than $550 million in power generation equipment orders for data centers. In addition, we experienced another strong quarter for gas tech services, upgrades and transactional bookings as customers focus on improving performance and extending the life of equipment. IT backlog grew 3% sequentially, reaching a new record of $31.3 billion, reinforcing the durability of our growth outlook.

Following a strong first half and a positive outlook for the second half awards, we are confident in achieving IT's full year order guidance range of $12.5 billion to $14.5 billion. Looking beyond this year, we see continued momentum for Power Solutions, sustained growth in new energy and a robust pipeline of LNG and gas infrastructure opportunities, all of which support a constructive outlook for orders.

During the quarter, we generated free cash flow of $239 million and returned a total of $423 million to shareholders, including $196 million in share repurchases.

Turning to Slide 5. We also announced 3 strategic transactions in the quarter, to advance our portfolio optimization strategy, reinforcing efforts to enhance the durability of earnings and cash flow while creating long-term value for shareholders.

First, regarding divestitures. We entered into an agreement to establish a joint venture with Cactus, contributing surface pressure control in exchange for approximately $345 million, while maintaining a minority ownership stake. Additionally, we announced the sale of precision sensors and instrumentation to Crane Company for approximately $1.15 billion. These proceeds will provide the company with increased flexibility to reinvest in higher growth, higher return opportunities, supporting further margin expansion and enhancing overall returns.

Next, from a strategic acquisition perspective, we signed an agreement to purchase Continental Disc Corporation, a leading provider of pressure management solutions for approximately $540 million. CDC represents a high-quality bolt-on acquisition within IT, adding a highly complementary offering to our existing valves portfolio that expands our presence in the pressure and flow control market and brings margin-accretive life cycle-based revenue.

As we advance our portfolio optimization initiatives, we remain focused on executing a strategic and disciplined capital allocation approach to maximize long-term shareholder value. Overall, we made strong progress on multiple fronts during the quarter, and each of these actions support our commitment to profitable growth, continuous margin expansion and improving quality of earnings.

Turning to Slide 6. We continue to build strong commercial momentum across new and existing markets with growing synergy opportunities across our portfolio that enhance how we deliver value to customers while expanding our market presence. During the quarter, IT secured 2 significant data center awards. First, we received our largest data center award to date for 30 NovaLT gas turbines. These units will deliver almost 500 megawatts of power to data centers in the United States and operate on a blend of natural gas and hydrogen, supporting both reliability and lower carbon operations.

Second, we received an order for 16 NovaLT gas turbine representing up to 270 megawatts of power for deployment of Frontier's data centers in Wyoming and Texas. This award is the first phase of the previously announced enterprise-wide agreement with Frontier to advance power solutions and large-scale carbon capture and storage. These awards reflect the accelerating long-term demand for distributed, lower carbon power in support of digital infrastructure. This trend is also unlocking greater commercial synergies across our power and decarbonization portfolios, reinforcing the potential for sustained data center and new energy growth.

In total, ID booked 69 NovaLT units this quarter with more than 70% allocated to data center projects. Year-to-date, we have secured almost 1.2 gigawatts of NovaLT capacity for data center applications, highlighting our expanding role in enabling the growth of digital infrastructure through flexible, lower carbon power solutions.

We are also expanding our pipeline of future digital infrastructure opportunities. At the recent Saudi U.S. Investment Forum, we signed an MOU with Data Vault for data center projects globally, which includes plans to power data centers in the Kingdom with our NovaLT turbines using hydrogen from Neon.

Beyond data centers, we continue to see strong demand in gas infrastructure. In Saudi Arabia, we secured an award for 4 NovaLT turbines to support Aramco's Master gas system free pipeline. Also, in Climate Technology Solutions, we signed a framework agreement with Inger to supply 16 reciprocating compressor packages, supporting an increase in biogas production while driving emissions reduction for gas infrastructure in Denmark.

In GTS, we secured more than $350 million in contractual service agreements during the quarter, strengthening our backlog of recurring revenue. Key awards included a new maintenance agreement with Petrobel to improve uptime and reliability of critical turbomachinery equipment and a renewal of a multiyear service contract with Oman LNG, featuring remote monitoring and diagnostic services delivered through our iCenter.

In New Energy, we continue to build momentum internationally, where we have historically seen the greatest concentration of orders. During the quarter, CTS secured one of the largest CCS orders to date, providing compression technology for a large CCS hub in the Middle East.

In geothermal, we successfully drilled Lower Saxony first productive deep exploration well in Germany. This project highlights the strength of our integrated well construction and production solutions capabilities supported by advanced digital solutions that optimize performance.

In OFSE, we maintained strong momentum in production and mature asset solutions, booking several meaningful awards. Notably, we signed a significant master services agreement with Aramco for installation and maintenance of electric submersible pumps across the Kingdom. We also received 2 large multiyear contracts to help optimize production, throughput and reliability for 2 major operators in offshore Angola and the U.S. Gulf Coast, leveraging our chemicals, artificial lift and digital solutions.

In Norway, Equinor awarded us a contract to industrialize offshore plug and abandonment operations in the Oseberg East field, which followed the announcement of a new multiyear framework agreement for integrated wealth services. OFSE also secured a multiyear contract to provide drag-reducing chemicals to be deployed on 2 major offshore pipeline systems operated by Genesis Energy. To support this agreement, we will expand our chemicals manufacturing footprint and deploy Lucepa, our digitally automated fuel production solution. Also for Lacepa, we received an award from Repsol for next-generation AI capabilities and entered into a new agreement with ENI to deploy Lucipa for ESP optimization and AI-driven predictive analytics in the Middle East.

Continuing on digital. Cordant Solutions secured a notable contract with a large NOC to deploy asset performance management for several compressor stations in the Middle East. Cordant Solutions was also awarded a contract with Nova Chemicals to optimize maintenance and maximize production across multiple petrochemical facilities, leveraging APM's asset strategy and asset health digital offerings.

Overall, it was another strong quarter, both from a commercial and technology engagement perspective. We are building strong order and technology pipelines that extend beyond our traditional oil and gas markets, creating additional life cycle growth opportunities that further enhance our earnings and cash flow durability.

Turning to the macro on Slide 7. Amid continued macro uncertainty, I want to take a moment to reaffirm the strong long-term fundamentals underpinning our business. Global energy demand continues to grow, supported by durable secular macro trends that are shaping the future of the energy landscape. Population growth, particularly in emerging markets, is driving baseline demand for energy across residential, mobility and infrastructure. At the same time, continued economic development and industrialization are expanding energy needs across critical sectors such as manufacturing, transportation and technology.

Urbanization and the global push for electrification are accelerating the build-out of modern energy systems. This includes both expanding access to reliable electricity and supporting new demand drivers like data centers and industrial decarbonization. Amid this backdrop, there is a global push for lower carbon solutions as countries advance their emission reduction goals. In response, we are seeing increased investment in clean power CCUS, emissions abatement, geothermal and hydrogen. These markets require scalable, flexible and efficient energy solutions. Capabilities that are core to make use and essential to enabling a lower carbon economy.

Consistent with this trend, we booked $1 billion in new energy orders during the quarter, bringing year-to-date bookings to $1.25 billion, already matching our total for last year. As a result, we now anticipate exceeding the high end of our $1.4 billion to $1.6 billion order range for this year. This performance reflects increasing global demand for lower carbon solutions and reinforces our confidence in achieving our $6 billion to $7 billion order target by 2030.

Collectively, these macro trends support a strong long-term outlook for the global energy and industrial landscape as customers increasingly prioritize efficiency, reliability and sustainability. It is an environment aligned with our strengths and one that positions us to capitalize on the significant opportunities ahead.

Now turning to natural gas. We continue to see growing divergence between oil and natural gas fundamentals. It's abundance, low-cost reliability and lower emissions set natural gas apart from other fossil fuels. This year is increasingly being validated across policy and market dynamics. While we expect significant growth from renewables, scaling these technologies at pace required to meet growing energy needs remains a challenge, particularly in light of supply chain constraints, permitting delays, cost inflation and less favorable policy support. These challenges further reinforce the positive long-term outlook for natural gas.

By 2040, we expect natural gas demand to grow by over 20% with global LNG increasing by at least 75%. This growth outlook creates a favorable environment for Baker Hughes. We are already seeing strong momentum, booking $2.9 billion in gas infrastructure equipment orders over the past 6 quarters, a trend we expect to continue as countries turn to natural gas to support power generation and industrial development.

In LNG, approximately 60 MTPA of additional FIDs are needed over the next 18 months to reach our 3-year target of 100 MTPA, which would bring the global installed base to our long-held target of 800 MTPA by 2030. Beyond this, we see continued growth in the installed base as energy demand and emission reduction efforts convert.

This year, LNG demand continues to grow rapidly, up 5% year-over-year as softness in China is more than offset by strength in Europe. This increase in demand is driving sustained momentum in LNG contracting activity. For example, with Mackenzie reports 49 MTPA of long-term LNG offtake contracts have been signed in the first half of the year, positioning 2025 to exceed the record 81 MTPA signed last year.

Now turning to our markets. This year has been marked by heightened volatility, with Brent prices ranging from a lower $60 per barrel in early May to a high of $77 per barrel in June, with continued volatility into July. The market continues to navigate cross currents, balancing weakening demand and rising OPEC+ production against persistent geopolitical risk in both the Middle East and Russia. As we look into the second half of the year, we expect continued volatility as OPEC+ accelerates the return of its 2.2 million barrels per day of idled production into what we anticipate will be a soft market. Ultimately, until all excess OPEC+ barrels are absorbed by the market, we anticipate oil-related upstream spending will remain subdued.

On global upstream spending, we maintain our outlook for a high single-digit decline this year. In International, we now expect spending to decline toward the high end of our mid- to high single-digit range, given downward pressure in key countries such as Saudi Arabia and Mexico. In North America, we still project spending to decline in the low double digits. These forecasts assume current oil prices hold and no further trade policy escalation. Any meaningful deterioration in EVA could present incremental downside.

Longer term, we expect oil demand to grow beyond 2030. To meet that demand, significant investments will be required. In addition, we anticipate growing customer focus on mitigating reservoir decline and optimizing production efficiency. This underscores our strategic focus on mature asset solutions in OFSE. These technologies will improve production reliability, boost field performance and expand our presence in more durable OpEx-led production market, increasing the resilience of our revenue base.

Turning to Slide 8. I wanted to take a few minutes to discuss the opportunity we see in distributed power solutions for data center market and beyond. Distributed power represents a compelling growth vector for Baker Hughes, drawing on multiple parts of our enterprise, from industrial gas turbines and electric motors to geothermal and CCS technologies. This opportunity broadens our market exposure to digital infrastructure and reinforces the stability of our earnings and cash flow through life cycle-driven equipment and service revenue.

According to IEA, the global energy consumption from data centers is expected to more than double, reaching 945 terawatt hours by 2030. In the U.S., electricity demand for data processing alone is projected to surpass the combined power needs of all energy-intensive manufacturing sectors, including aluminum, steel, cement and chemicals. To support this surge in power requirements, gas turbine manufacturers are experiencing robust order activity across both utility scale and sub utility-scale power applications.

Our portfolio is well suited for the sub-utility scale behind the meter solutions, providing advanced technology and shorter deployment time lines with our hydrogen-ready NovaLT 12 and 16-megawatt turbines as well as brush electric generators. To meet rising demand, we continue to make targeted organic investments to enhance our NovaLT capabilities, including initiatives to increase power range and reduce start-up times. In addition, activities are underway to significantly increase our manufacturing capacity by 2027, capitalizing on strong order visibility.

In the utility scale space, our geothermal solutions offer customers reliable and scalable baseload power, supported by IET's organic ranking cycle, Steam Tubin Technologies, and OFE's subsurface expertise. More broadly, we are seeing expanded market opportunities to deploy advanced and enhanced geothermal technologies to deliver dispatchable, low carbon power to data centers. Additionally, we are collaborating on the development of the utility and industrial scale Net power solutions, further expanding our power range in enabling near 0 emissions power generation.

The growing frequency of grid disruptions is prompting industries with critical operations to seek more reliable on-site power solutions. This shift is especially evident in sectors like energy, health care, data centers, airports and other mission-critical infrastructure, where our distributed power offerings are well positioned to meet this emerging need for behind the meter power.

Building on the momentum from our recent data center-related awards totaling more than $650 million year-to-date, we are making strong progress towards our 3-year target of $1.5 billion. The pace of recent awards positions us to meet or exceed this target earlier than planned. Importantly, this excludes the substantial recurring revenue opportunity tied to aftermarket services, which typically generate 1 to 2x the original equipment value over a 20-year period.

In summary, the surging momentum in data center development is reinforcing IT's fundamental demand drivers, while also increasing the pipeline of enterprise-wide opportunities. We are expanding into attractive high-growth markets beyond our traditional oil and gas space, creating new avenues for growth while further strengthening the durability of our earnings and cash flow.

To conclude, it was another strong quarter for the company with significant progress on several fronts despite the challenges presented by the external environment. Our focus remains on the areas within our control. Most notably, the continued deployment of our business system across the enterprise, which is driving productivity and accelerating our efforts to be a leaner, more efficient company.

Baker Hughes is well positioned to deliver sustainable growth and create long-term shareholder value. We are excited about the future as we advance into the next phase of our journey.

With that, I'll turn the call over to Ahmed.

Thanks, Lorenzo. I'll begin with a review of our consolidated results and segment performance. I will then outline our portfolio optimization strategy and conclude with a summary of our outlook before turning it back to Lorenzo for final remarks.

Starting on Slide 10. As Lorenzo highlighted, we delivered another strong quarter of orders with total company bookings of $7 billion, including $3.5 billion from IET. This performance demonstrates continued customer confidence in our diversified portfolio and underscores the strength and breadth of our market-leading technologies and solutions.

Adjusted EBITDA increased by 7% year-over-year to $1.21 billion despite lower revenue, driven by strong margin expansion across both segments. This performance reflects the benefits of structural cost improvements and continued deployment of our business system, which is driving greater productivity, stronger operating leverage and more durable earnings.

GAAP diluted earnings per share were $0.71. Excluding adjusting items, earnings per share were $0.63, up 11% year-over-year. We generated free cash flow of $239 million. For the full year, we maintained our free cash flow conversion target of 45% to 50%, with a typical stronger performance expected in the second half of the year.

Turning to capital allocation on Slide 11. Our balance sheet remains in a very strong position. We ended the quarter with cash of $3.1 billion and net debt-to-EBITDA ratio of 0.6x and liquidity of $6.1 billion. We also returned $423 million to shareholders. This included $227 million of dividends and $196 million in share repurchases. We remain committed to returning 60% to 80% of free cash flow to shareholders.

The portfolio optimization actions announced in the second quarter are expected to generate about $1 billion in net proceeds upon closure of these transactions, further strengthening our balance sheet and increasing flexibility for organic investments, shareholder returns and value accretive acquisitions.

I will now highlight the results for both segments, starting with IET on Slide 12. During the quarter, we secured IET orders totaling $3.5 billion, including record bookings for both CTS and Cordant Solutions as well as a 28% year-over-year increase in GTS, driven by another strong quarter of upgrades and transactional orders. This brings our year-to-date total to $6.7 billion, which includes $1.9 billion in GTS, $1.4 billion for LNG and gas infrastructure and more than $650 million for data center power solutions.

These commercial achievements further underscore the versatility of our technology portfolio and our strategic positioning to benefit from multiple secular growth trends across the energy and industrial sectors. With a book-to-bill of 1.1x for the quarter, IET achieved another record RPO of $31.3 billion. This RPO level and a structurally expanding installed base provides strong revenue visibility in the years ahead. IET revenue increased by 5% year-over-year to $3.3 billion, led by a 9% increase in GTS and 22% increase in CTS, partially offset by the expected softness in Industrial Tech. Segment EBITDA growth significantly outpaced segment revenue, increasing 18% year-over-year as margins expanded by 190 basis points to 17.8% despite some tariff-related headwinds. This performance was driven by record Gastech equipment margins and strong execution in Cordant Solutions partially offset by CTS.

These results clearly highlight the benefit of our business system implementation. Now in its third year, this disciplined operating model is focused on performance management, strategy deployment and continuous improvement. Rooted in Lean and Kaizen principles, it is equipping teams across the enterprise with tools to simplify workflows, eliminate waste and improve execution, ultimately supporting progress towards our 20% EBITDA margin target.

Turning to OFSE on Slide 13. OFSE revenue in the quarter was $3.6 billion, up 3% sequentially. In international markets, revenue increased 4% sequentially, led by Europe and Middle East, excluding Saudi Arabia, where activity continued to trend lower. We also saw solid growth in Latin America, driven by Mexico. While upstream activity in Mexico remains subdued, we experienced strong growth in chemicals as refiners work to address rising crude quality challenges.

In North America, revenue was up 1% sequentially. North America land revenues remained stable compared to the first quarter, outperforming the 3% decline in U.S. onshore rig activity due to our strong weighting towards production-related work. Driven by disciplined execution and a continued focus on cost efficiencies, OFSE delivered EBITDA of $677 million, exceeding the midpoint of our guidance range despite a challenging market. Importantly, EBITDA margins expanded 90 basis points sequentially to 18.7%.

Turning to Slide 14. I'd like to take a few minutes to highlight the progress we've made on portfolio optimization and how we are advancing the strategic priority as we transition from Horizon One, a period defined by significant operational improvement, into Horizon Two, which will be characterized by continued execution discipline and an increased focus on strategic growth particularly in industrial, new energy markets and mature asset solutions.

We have remained focused on reshaping the portfolio to drive higher profitability and position Baker Hughes for more durable long-term growth. Including the $1.5 billion of expected proceeds from the PSI and SPC transactions, we will have generated over $2.5 billion in cash from a series of strategic actions since the merger in 2017. Our divested businesses will now be with owners where they are a stronger strategic fit, while enabling Baker Hughes to further streamline its portfolio and concentrate on higher-margin recurring revenue opportunities. These transactions have unlocked significant value, strengthened our balance sheet and enhanced our strategic focus and flexibility.

We have also been disciplined in how we've redeployed this capital. Including the acquisition of CDC, we have reinvested approximately $1.8 billion to expand our industrial presence and align with long-term growth trends. Other notable investments include brush electric motors, which expanded IET's driver and power generation offerings and Altus intervention, which strengthened our capabilities within mature asset solutions. We have also made early stage investments in decarbonization technologies that once commercialized, could drive meaningful long-term growth.

The combination of the PSI divestiture and CDC acquisition is a clear example of our portfolio strategy in action. We are monetizing noncore assets and unlocking significant value while reinvesting into higher-margin, recurring revenue businesses at attractive multiples that enhance returns. Collectively, these actions advance our strategy to reshape the portfolio for more resilient earnings and cash flows. They demonstrate our disciplined approach, prioritizing strategic fit, exposure to growth markets, accretive margins and returns and life cycle-based business models. Looking ahead, we will continue to invest in opportunities that strengthen our industrial footprint and unlock meaningful synergies.

Our ability to integrate acquisitions effectively is enabled by the strength of our business system. It provides the structure, discipline and repeatability to execute with speed and consistency, accelerating synergy capture and driving faster value creation. With a net leverage ratio of 0.6x EBITDA, we have ample capacity to pursue value-accretive opportunities, including high-return organic investments, disciplined M&A and continued capital return to shareholders. This financial flexibility enables us to allocate capital with precision and purpose with a clear focus on actions to accelerate revenue growth, enhance margins, improve returns and strengthen our long-term position. Our ultimate objective remains the same, to maximize long-term shareholder value and position Baker Hughes for sustainable differentiated growth.

Turning to Slide 15. I want to provide an update on the dynamic trade policy environment and our outlook. In the second quarter, we estimate that the increase in tariff rates negatively impacted our EBITDA by approximately $15 million. We executed a series of mitigation initiatives that help limit the financial impact and these actions will continue to play a critical role in managing ongoing exposure.

Since our trade policy update on our previous earnings call, there have been several changes, both implemented and proposed relative to the tariff rates assumed in our original analysis. At a high level, our updated analysis suggests that these developments largely offset each other. As a result, we are maintaining the previously communicated estimate of $100 million to $200 million net EBITDA impact for the year. Note that this assumes recently announced tariffs are implemented as planned, no further trade policy escalation, including retaliatory tariffs and continued success of our mitigation actions across both segments.

We are tracking the risk for retaliatory tariffs in key regions. While not currently reflected in our net tariff impact estimate, we remain prepared to implement additional mitigation initiatives to limit where possible, any further impact on our global operations and financial performance. Beyond the direct impact of ongoing trade policy shifts, we continue to monitor potential secondary effects such as more cautious customer behavior and signs of broader economic weakness.

Next, I would like to update you on our outlook. The details of our third quarter and full year 2025 guidance are also found on Slide 15. The ranges for revenue, EBITDA and depreciation and amortization are shown on this slide, and I will focus on the midpoint of our guidance. While there's still volatility around trade policy developments, we have been successfully executing our mitigation plans and our underlying business continues to perform well. In light of these factors and consistent with our commitment to transparency, we are reestablishing full year guidance for both segments and the company overall.

For the third quarter, we expect total company EBITDA of approximately $1.185 billion at the midpoint of our guidance range, led by continued strong growth in IET and resilient margins in OFSE. For IET, we expect third quarter results to benefit from continued productivity gains supported by the enhanced implementation of our business system as well as strong revenue conversion from the segment's record backlog. Overall, we anticipate IET EBITDA of $600 million at the midpoint of our guidance range. For OFSE, we expect third quarter EBITDA of $665 million at the midpoint of our guidance range which represents flat sequential margins on a slight revenue decline.

Now turning to our full year guidance. We see continued strength in IET fundamentals, while OFSE remains challenged by subdued market conditions. Taking this into account, we expect total company EBITDA of $4.675 billion at the midpoint of our guidance range. In IET, we maintained the midpoint of our orders guidance range of $13.5 billion given our solid first half orders performance and positive outlook for the second half, particularly in LNG. Also, we are raising the guidance range for both revenue and EBITDA, increasing the midpoint for revenue to $12.9 billion from $12.75 billion and EBITDA to $2.35 billion from $2.3 billion.

The major factors driving our third quarter and full year guidance ranges for IET will be the pace of backlog conversion in GTE. The impact of any aeroderivative supply chain tightness in Gas Tech, foreign exchange rates, trade policy and operational execution in Industrial Tech and CTS.

For OFSE, we are reestablishing full year guidance with midpoints of $14.2 billion for revenue and $2.625 billion for EBITDA, implying margin improvement despite lower revenue, driven by strong execution of our structural cost-out program and reinforcing the durability of our margins. Factors driving our third quarter and full year guidance range for OFSE include execution of our SSPS backlog, the impact on near-term activity levels in North America and international markets, trade policy and pricing across more transactional markets.

We remain confident in our ability to deliver solid performance in 2025 with continued growth in IET helping to offset softness in more market sensitive areas of OFSE, underscoring the strength of our portfolio and the benefits of our strategic diversification.

In summary, we are pleased with the company's operational performance during the second quarter. OFSE delivered strong margin performance despite softness in the upstream market, while IET margins continued to progress towards our 20% target. We remain focused on elements within our control, streamlining operations and driving efficiencies that will benefit us well beyond the cycle.

With that, I'll turn the call back over to Lorenzo.

Thank you, Ahmed. Our strong second quarter results clearly demonstrate the continued progress we are making in transforming our operations and streamlining the organization, even in a challenging and uncertain market environment.

As you can see illustrated on Slide 17, we have evolved into a much more profitable energy and industrial technology company. At the midpoint of our 2025 guidance, Baker Hughes EBITDA margin will have increased by almost 600 basis points over the past 5 years. Additionally, EBITDA has more than doubled over the same period. The magnitude of this improvement speaks to the substantial progress we've made and reinforces our confidence in the strategic vision we set out when we formed the company.

We are entering Horizon Two from a position of strength, with a clear path to drive further growth and enhanced margins, underscoring our commitment to delivering long-term value for our shareholders. Our business system is a critical enabler for continued success, driving operational discipline, improving productivity and accelerating the consistency of execution.

We are now complementing our operational efforts with additional portfolio optimization actions. These transactions announced in the second quarter serve as a clear blueprint for our strategy, unlocking value from noncore businesses and recycling that capital into higher-margin opportunities aligned with our financial and strategic frameworks.

In addition to our operational and portfolio progress, our complementary and versatile technology portfolio supports our strong position in key growth markets, including natural gas, new energy and mature basins. This enables us to capitalize on emerging secular trends, driving sustained order momentum into Horizon Two and beyond.

The opportunities emerging within these growth markets are fostering enhanced commercial integration throughout the company. By leveraging our enterprise-wide customer relationships, cross-segment sales channels and integrated offerings, we will be able to drive incremental growth and capture a greater share of our addressable market.

To conclude, thank you to the entire Baker Hughes team for yet again delivering outstanding results. As we continue our journey to take Baker Hughes and Energy forward, we remain committed to our customers, shareholders and employees.

With that, I'll turn the call back over to Chase.

Operator, we can now open up for questions.

[Operator Instructions] First question coming from the line of Scott Gruber with Citi Group.

So the margin performance across both segments was impressive and the outlook in OFS was better than we expected given the backdrop. Can you just unpack the drivers of the margin performance a bit more? And as we start to think about '26, your confidence level in hitting the 20% mark in IET? And then thinking about OFS, given your internal drivers, do you think you can grind those margins a bit higher in the soft market? Or is kind of flat assumption a good starting point for us?

Yes, Scott. Look, obviously, we're pleased with the way the teams have executed in the first half and also in the second quarter, with that progress and continuous improvement despite the external headwinds. So I think it's helpful as we think about it by segment. So in OFSE, the EBITDA margins, as we pointed out, expanded by around 90 basis points sequentially to 18.7%, and that was on the back of sequential stronger revenue, as well as the progress we've made on cost efficiency. So by cost efficiency, really, we're looking at a few things. We continue to streamline our cost structure, so rightsizing and making sure we understand the current activity levels. And simple things like removing duplication across the segment, which we've been doing for over a year. So I think that's one piece on cost. But then also on price, we remain disciplined. So

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Ladies and gentlemen, please standby. Our speaker lines are having technical difficulties.

sorry, so that's -- so sorry, we may have lost you for a second. But I was on IET EBITDA margin. So we -- the margins expanded by 190 basis points, close to 18% despite some tariff-related headwinds. And that impacted margins to be clear by around 40 basis points in IET. So the drivers of the performance are record margins in GTE. Cordant Solutions also contributed to solid performance, and that's underpinned by our business system, which we've had in place for coming into its third year. And I'd point out also OFSE and IET continue to work together to implement the best practices on business system across the company.

So lastly, I'd say going forward, as we look at additional efficiency opportunities, we see it there in IET, we're confident on the 20% margin target. In OFSE, similarly, we are closing the margin gap to our peers. And we're focused on margins and not market share. So overall, a pretty strong setup and the way the teams have been executing to make sure we have continuous improvement.

Scott, I'm not sure how much cut out there. But really, as you look at it from a trajectory of going forward, again, as Ahmed said, margin accretion is the name of the game. It's what we've stated with regards to the progression going forward. Great progress across both segments, even with some of the headwinds we see in the marketplace, in particular, OFSE and the performance that they've been able to demonstrate. And as we go forward, we aim to continue that margin progression into '26.

And our next question coming from the line of David Anderson with Barclays.

I was wondering if you could just expand a little bit more on the IET order performance this quarter. Gas Tech Equipment was a bit light but services was surprisingly strong. I was just wondering how you think these components should trend the rest of the year? And maybe what gets you to the high end of that order guide that you had reiterated? And also while we're here, if you could provide some insight to how these orders are starting to shape up for 2026, particularly with the data center orders on Page 2, what looks to be far exceeding your prior targets there?

Dave, I'm very pleased with the order progress made in IET and you saw bookings of $3.5 billion of orders in the quarter, taking the year-to-date to $6.7 billion. So we're trending towards -- our midpoint of the full year guidance is again stated is $13.5 billion. And this is as a result of strength and the strong visibility on orders and the back half of the year. We're confident in achieving that and continue to see strength in the overall market. As you look at orders to date, it's been driven by non-LNG markets, gas infrastructure, data centers, GTS upgrades and Cordant Solutions. So if you look into the second half, we do anticipate strengthening LNG orders and a number of the projects that we've mentioned in the past coming through and that we've been working on.

So -- as we look at the strength of our orders in the first half, touching on data centers, it's quickly emerging as a strong growth area. We've received several awards for our NovaLT turbines. Year-to-date, we booked over 70 LT -- NovaLT turbines for the data center market, providing 1.2 gigawatts of power. Notably, the award includes our largest single order to date of 30 NovaLTs for a customer in the U.S. data center projects and 16 NovaLTs for frontier infrastructure projects. So both great examples of the increasing connectivity between the surging digital infrastructure demand and also the increasing need for lower carbon solutions.

As we look forward, we continue to see opportunities to leverage our hydrogen-ready capabilities on the NovaLT turbines as well as providing CCS solutions such as the Frontier projects. And as we look at New Energy, again, these orders, as you look at our second quarter new energy orders over $1 billion, which was a new record, and we're positioned to meet or exceed the target as we go forward for the year. So as you think about data centers, in particular, we stated free order target of $1.5 billion. We do anticipate being able to meet that earlier than planned on the back strength that we see within the marketplace.

Outside of some of the equipment side, as you mentioned, Gas Tech Services, we booked several CSA agreements totaling more than $350 million. Also experienced a strong quarter for both transactional and upgrade orders, extending the life of the equipment that we have out there installed. And year-to-date, we booked $1.9 billion of GTS orders, which is up 28% versus last year. And also upgrades very strong with orders up 165% for the same period, and transactional orders increased by 20%. So very strong performance by the services side on the Gas Technology. And also on the digital Cordant Solutions, achieving record orders. As you look at Cordant orders, up 16% year-over-year. Record software orders, which rose by 56%, and we see a long runway for continuous growth within Cordant as customers continue to increase the adoption. And our large installed base that we've got as an opportunity as well as balance of plant to go after from third-party equipment and we keep on gaining traction on our i-Center. Major milestone in the quarter is over 2,000 critical turbomachinery assets now connected. So looking at the second half, again, feel good about that midpoint of the range. We expect LNG orders to strengthen. The projects are there. We see further strength in GTS orders. And also, as we look to the second half opportunities in the FPSO market that will start to materialize. And for 2026, we see secular tailwinds across many of the end markets continue to strengthen. So we expect solid momentum across and we expect '26 IET orders to be consistent with 2025 levels. So in summary, feeling a bit about the start to the year, feeling good about the second half and also the visibility we have into 2026 and beyond.

Our next question coming from the line of Arun Jayaram with JPMorgan.

You guys have had a called a more muscular approach to the portfolio more recently with the 3 transactions announced in June. I was wondering, perhaps for Ahmed, if you could discuss perhaps the net impact from these 3 transactions as we think about sharpening our pencil on 2026 perhaps top line or EBITDA thoughts. And maybe thoughts, Lorenzo, on further portfolio moves. And do you expect some of these moves to be focused in IET, OFSE or both?

Yes. Arun, it's Ahmed. Look, I think on the impact, the first thing I'd highlight is that these transactions, we've never intended them to drive progress towards OFSE and IET, 20% margin target. So that's an important point. And so when you take the 3 transactions in aggregate that we announced in the second quarter, there is going to be a very modest benefit to both segment margins. And then when you roll that forward in terms of when we expect things to growth and so forth and you look at the net EBITDA impact from these 3 transactions in 2026, we expect that to be just over $100 million.

And Arun, adding to the aspect of going forward, first of all, we're very pleased with the transactions we announced. Excited about the prospect of welcoming CDC into the family. And also, we exited businesses that are no longer aligned with the strategic priorities or return expectations, then they're going to better owners and better strategic fit for the future. So what we've been able to do is unlock significant value and get some good valuations and redeploy that into accretive assets that come into the portfolio. And as you look at it, that's really what we've highlighted within the prepared remarks about portfolio optimization, continuing to be a key part of our strategy. And we've been doing that since we came together in 2017, and it's fair to assume that we're going to continue doing that as we strengthen the portfolio through additional acquisitions and continue to look at the right divestiture.

If you think about the 2 segments, we have over 30 businesses that are competing for capital. And so we're really concentrating on looking at where the stronger margin profiles are the recurring revenue potential and the long-term growth opportunities across all of the 30 and across the 2 segments, and we do a rigorous assessment of each of the businesses. And it's natural to think that over time, there will be evolution that takes place and certain businesses may no longer align with our strategic priorities.

On the further acquisitions, we'll continue to target opportunities that strengthen our industrial footprint and unlock meaningful synergies. We like businesses that offer margin-accretive life cycle-driven revenue, and are poised to drive IT towards leading margins. In OFSE, we'll continue to focus on strengthening our leading franchise in production solutions and mature asset solutions, and creating our exposure to the more resilient focused end markets. So with a leverage ratio of 0.6x and an additional $1 billion of net proceeds from the transactions that are yet to close, we have ample capacity to pursue value-accretive opportunities to strengthen the portfolio. So overall, the ultimate objective remains maximize shareholder value, maintaining strategic and financial discipline, strengthening the earnings durability and really continuing to position Baker Hughes for sustainable differentiated growth.

Our next question coming from the line of Saurabh Pant with Bank of America.

I have a question on the tariff side of things. I don't know if, Lorenzo, you want to take it or Ahmed, you want to take it. But on the tariff side, your guidance, your outlook of [ $100 million to $200 million ] potential impact is the same as it was from 3 months back, right? And we have probably seen 1,000 headlines come out in the last 3 months. So maybe if you can just walk us through the puts and takes of what has happened over the past 3 months? And what businesses are impacted? And maybe as a follow-up, I think if I heard you correctly, Ahmed, you said $15 million impact in the second quarter, right? So it sounds like you're baking in higher impact in the back half of the year. But if you can just walk us through that, the implied second half expectations, that would be helpful.

Yes. I'll let Ahmed take that one.

Yes, sure. So look, I think -- I'll break it out between obviously what we saw in the second quarter and then how we've underwritten our second half outlook. So maybe starting with the second quarter. The net tariff impact is -- it was approximately about $15 million and -- to EBITDA, and that was primarily U.S., China and Europe. And the split between the 2 segments was predominantly IET. But as you sort of stated, when we look into the second half, we expect that the total net EBITDA impact to at this stage, likely exceed $100 million in the second half with sequential increases in the third quarter and then again in the fourth quarter. And that linearity really is driven by the way the actual inventory rolls through our balance sheet. And also any surcharges that come by through our supply chain partners that actually comes through in the second half.

So -- but to be clear, those type of impacts are clearly reflected in our guidance. But what -- it does not include any potential escalation of trade policies and also assumes that U.S.-China tariffs remain at today's level. So -- as we look at the actual mitigation actions and going forward, in the second quarter, we made significant progress. And then on some of the dynamics that we've seen in the overall environment, we saw positive developments in May with the temporarying of the tariffs between U.S. and China. But then those developments were, I'd say, largely offset by several recent negative tariff-related announcements. So as an example, in early June, the U.S. announced and implemented an increase on steel and aluminum tariffs to 50%. Then in July, the U.S. announced a 50% tariff on copper imports, scheduled to take effect sometime August 1. And then also in July, the U.S. announced increased tariffs on U.S. imports from various countries, including Brazil, Canada, Mexico and the EU and also those were -- are set to take effect on August 1, unless there's a trade deal that's reached beforehand.

So as we take all of these different variables and recognizing their dynamic, we have confidence in our mitigation actions that we put in place immediately. And we have, as you know, a flexible global supply chain. And so we maintain our previously communicated estimate of the $100 million to $200 million net EBITDA impact for the year. But just as a reminder, this does not -- this assumes the recently announced tariffs are implemented as scheduled, but it does not assume any further trade policy escalation, including retaliatory tariffs. So hopefully, it gives you a good framework of how we're underwriting the balance of the year.

And ladies and gentlemen, that was our last question. I will now hand you back to Mr. Lorenzo Simonelli, Chairman and Chief Executive Officer, to conclude the call.

Yes. Thanks to everyone for taking the time to join our earnings call today, and I look forward to speaking with you all again soon. Operator, you may now close out the call.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program, and you may all disconnect.

Good day, and thank you for standing by. Welcome to the Cactus call to discuss the acquisition of controlling interest in Baker Hughes' Surface Pressure Control business. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Alan Boyd, Director of Corporate Development and Investor Relations. Please go ahead.

Thank you, and good morning. We appreciate you joining us on today's call to discuss our acquisition of a majority stake in Baker Hughes Surface Pressure Control business, which we'll abbreviate as SPC today. Our speakers will be Scott Bender, our Chief Executive Officer; and Jay Nutt, our Chief Financial Officer. We're also joined by the rest of the Cactus executive management team.

Please note that any comments we make on today's call regarding projections or expectations for future events are forward-looking statements covered by the Private Securities Litigation Reform Act. Forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control. These risks and uncertainties can cause actual results to differ materially from our current expectations. We advise listeners to review our filings and the risk factors discussed in our filings with the SEC. Any forward-looking statements we make today are only as of today's date, and we undertake no obligation to publicly update or review any forward-looking statements.

In addition, during today's call, we will reference certain non-GAAP financial measures. Reconciliations of non-GAAP measures to the most directly comparable GAAP measures are included at the end of our investor presentation, which has been posted to our website and can be found at www.cactuswhd.com.

With that, I will turn the call over to Scott.

Thanks, Alan, and good morning, everyone. I'm extremely excited to announce our agreement to acquire a majority stake in and assume operational control of the Surface Pressure Control business of Baker Hughes, creating a preeminent global, capital-light, lawful equipment company.

Responsible geographic expansion has been a top priority for Cactus, and we're delighted to kickstart this expansion through the acquisition of an industry-leading wellhead business with which we have significant history and familiarity. For those of you who don't know, Joel Bender is in this room, along with several other current Cactus leaders who manage the Surface Pressure Control business at the Wood Group before it was sold to GE Oil & Gas in 2011 and is now part of Baker Hughes. Because of this, we have a unique understanding and appreciation of the SPC business, including the major markets in which it operates and the primary customers that the business serves.

If you turn to Slide 3 of our announcement presentation, you'll see how SPC meets our required acquisition criteria. Many of these criteria will look familiar to you if you followed our history. In evaluating growth opportunities, we look for businesses similar to Cactus that are capital-light, sold directly to end users and are capable of delivering strong returns and free cash flow. The pure-play wellhead and production tree solutions provider fits that bill and creates a transformed Cactus with global presence.

First, the acquisition immediately establishes a stronghold for us in the Mid East, a premier growth market for Oilfield Services. The SPC business has long-standing relationships with Saudi Arabia and the UAE where it generates the majority of its revenue. From a geographic perspective, the SPC business ideally complements our existing business at Cactus, which is North American-centric.

Next, SPC is an innovative manufacturer of a highly engineered product with a rich history of technological leadership. Like Cactus, SPC manufacturers and sells wellhead solutions and production tree equipment directly to end users. In our opinion, few know the wellhead business better than Cactus and we have a unique head start in understanding the customers and supply chain of the SPC business given our history. This deep industry knowledge and understanding gives us confidence that we'll be able to enhance the performance of this business over time.

Finally, like Cactus, SPC is a capital-light business with a variable cost structure ideally suited for durable performance in our cyclical industry, which enhances the pro forma company's cash flow profile.

The top of Slide 5 -- I'm sorry, of Slide 4 provides an overview of the transaction and the strategic rationale behind it. The acquisition creates a preeminent global and capital-light oilfield equipment company. We immediately established a robust presence in the Mid East to complement the strength of our U.S. business. The acquisition upgrades the stability of our revenue profile and the quality of our customer base by establishing us in the lowest cost oil-producing region on the Mid East. Additionally, expanding our international business at such scale reduces the total impact to our business of ongoing U.S. tariff uncertainty.

Greater revenue, earnings and cash flow visibility are provided by substantial backlog and long-term contracts. The capital-light and variable cost nature of the business enhances our financial profile and are expected to be accretive to various financial metrics.

Finally, we were able to structure the acquisition of our share in the business while maintaining significant financial flexibility and a conservative balance sheet profile.

I'll now turn the call over to Jay Nutt, our CFO, who'll provide a brief overview of the transaction mechanics. Jay?

Thanks, Scott. As seen on the bottom portion of Slide 4, Cactus is forming a joint venture with Baker Hughes whereby we will acquire a 65% controlling stake in the Surface Pressure Control business for approximately $344.5 million. Baker Hughes will retain the remaining 35% of the JV. This initial consideration equates to a total enterprise valuation of $530 million today, and the upfront purchase price for the business represents a multiple of approximately 6.7x 2024 transaction adjusted EBITDA, which excludes the earnings attributed to a 10% external partner within the SPC business in Saudi Arabia, as shown in the appendix of the presentation.

Consideration is to be paid in cash to Baker Hughes, and the transaction is expected to close in the second half of this year, subject to customary closing conditions and regulatory approvals. We're pleased to operate this JV in partnership with Baker Hughes, which provides further security in transitioning global support services from Baker Hughes to Cactus and in maintaining critical customer relationships and contracts post-closing.

Any time after the second anniversary of the closing, Cactus has the right to purchase and Baker Hughes has the right to require Cactus to purchase the remaining 35% interest in the joint venture. The purchase price for the remaining 35% of the business will be based on a 6.0x the most recent trailing 12 months SPC adjusted EBITDA at the time of either party's exercise of the option. The adjusted EBITDA for this exit calculation will be fully consolidated including the 10% Saudi Arabia JV partners' share of earnings.

The total enterprise value utilized to value the remaining 35% will be capped at $660 million if either party exits and the enterprise value will be subject to a floor of $530 million, only if Cactus calls its option on the remaining 35% interest.

The upfront purchase price will be funded with cash on hand and funds from our undrawn $225 million revolving credit facility. Cactus also plans to capitalize the JV balance sheet with $70 million of operating cash at close and Baker Hughes will contribute 35% of that cash, which will be paid back to them over time.

While we believe that it may not be necessary in order to fund the transaction, we may pursue one or more debt financing transactions before closing to preserve maximum liquidity on our existing revolver.

Considering the $348 million of cash on our balance sheet as of March 31, 2025, and our expected cash generation through closing, we anticipate little to no net debt at closing. An important feature of the JV is that Cactus will economically benefit from the full amount of cash flows during the term of the JV and not just our 65% ownership which, combined with the strong cash flow profile of our current Cactus business, suggest rapid deleveraging post close.

Based on our preliminary view of the business, we project to be able to generate approximately $10 million in annual cost synergies within 1 year of closing the transaction. This expectation is relatively modest for now as we acknowledge that we will incur dissynergies in expanding our Cactus corporate infrastructure to support our new employees and operations across the globe. However, we fully anticipate improving the financial returns of the business after sufficient time to fully control and integrate the SPC supply chain.

After closing, we plan to fully consolidate the financial results of SPC into our Pressure Control reporting segment for accounting purposes, subject to final determination by our auditors.

With that, I'll turn the call back over to Scott to take you through some additional operational highlights of SPC.

Thanks, Jay. Slide 5 provides a high-level overview of the Surface Pressure Control. SPC is a pure-play designer, manufacturer and service provider of wellhead and production tree equipment. The SPC customer base is concentrated in the Mid East where it generated approximately 85% of its revenue in 2024. The business also has an established presence in Europe, serving North Sea primarily and Africa, Asia and South America. SPC does not sell into North America or Australia, so there is limited overlap with the existing Cactus Pressure Control business.

In 2024, SPC generated nearly $500 million in revenue and approximately $87 million in adjusted EBITDA, resulting in a 17% adjusted EBITDA margin. Backlog at year-end 2024 was greater than $600 million, and this number represents only firm purchase orders placed into the SPC business for near-term delivery and does not reflect the full order potential for long-term contracts that SPC holds with key customers.

Aftermarket services represented more than 30% of the total revenue last year, representing a strong recurring revenue stream. This high level of backlog and leverage to recurring aftermarket services creates a level of revenue, earnings and cash flow stability within the business that is not generally found in the North American market.

The aftermarket services differ from the service revenue that we report in the U.S. as SPC aftermarket service generally involves selling equipment to upgrade or modify its large installed base of wellheads and trees, which is typically not performed at a scale in the U.S. market. This portion of the business is primarily -- is particularly attractive as it is less tied to new drilling than traditional product sales.

SPC has over 1,100 employees across the globe with its headquarters in Abu Dhabi and 3 primary manufacturing locations. The Suzhou, China and Dammam, Saudi Arabia manufacturing facilities were originally established by the Cactus management team and the new UAE facility is commencing substantial operation in 2025. These facilities are uniquely positioned to serve some of the most important international markets and customers.

On the lower right of the page, you'll see an abbreviated timeline of the SPC business, which traces its roots back over 100 years. GE acquired both the former Vetco Gray and Wood Group Surface Pressure Control business in 2007 and 2011, respectively, and the Surface Wellhead portions of those businesses are largely what makes up SPC today. As a reminder, Joel, Steven and I ran the Wood Group Pressure Control business until it was sold to GE.

In summary, I couldn't design a more complementary business to fit with Cactus' existing portfolio if you gave me a blank sheet of paper. SPC sells the same products with which we are so familiar, new facilities we've managed previously and the most attractive end markets where Cactus does not currently operate.

As seen on Slide 6, approximately 85% of SBC revenue comes from the Mid East. The Mid East has the largest amount of proved reserves and the lowest breakeven cost of any oil supply on the planet. SPC is well established and has strong relationships in the largest markets, including Saudi Arabia, Qatar, Kuwait and the UAE. In addition to selling to the largest NOCs in these countries, SPC has a robust manufacturing presence in the region. Recent capital additions and upgrades to this manufacturing presence support the opportunity to expand penetration in the region.

Slide 7 provides an overview of how this acquisition transforms Cactus from a geographic perspective. Currently, only 5% of our Pressure Control revenue and 6% of our total Cactus revenue comes from markets outside of the U.S. On a pro forma basis, 44% of Pressure Control revenue and 34% of consolidated Cactus revenue will be generated from markets outside of this country.

Slide 6 (sic) [ Slide 8 ] showcases the operational footprint of the business. The headquarters is in Abu Dhabi, with manufacturing in Suzhou, China, Abu Dhabi in the UAE and Dammam, Saudi Arabia. SPC also has service centers strategically positioned near activity centers around the globe and an R&D facility in Houston. We believe this broad footprint and customer reach will accelerate FlexSteel's expansion in these regions.

I'll now turn it back to Jay for the next slide.

Slide 9 highlights the attractive financial profile of both businesses and demonstrates the increased scale achieved by this transformative transaction. Pro forma financials for the acquisition are based on 2024 results, which suggests that SPC would represent approximately 30% of the combined company's revenue. On a pro forma basis, considering SPC's fully consolidated results, Cactus would have $479 million of adjusted EBITDA before consideration of any potential synergies, and the combined company would have had CapEx of only $46 million on an annual basis, representing less than 10% of total adjusted EBITDA and less than 3% of revenues.

On a go-forward basis, our go-forward basis is expected to retain the core capital-light and strong free cash flow generating capability that Cactus currently demonstrates while having truly global reach and scale.

I'll now turn it back over to Scott to close.

Thanks, Jay. I'd like to close by reiterating how pleased we are to announce this acquisition today, which has been the result of a long, patient process to responsibly expand our international presence. This combination is a great fit given the highly complementary nature of these two businesses, and we're excited about our future with the business and the potential to generate significant shareholder value going forward by instilling the Cactus culture of operational and supply chain excellence with a relentless focus on customer execution.

So with that, I'll turn it back over to the operator to take any questions. Operator?

[Operator Instructions] And our first question comes from the line of Arun Jayaram of JPMorgan Securities.

I wanted to see -- I was wondering if you could talk a little bit about why this deal is the right deal for Cactus versus your organic growth efforts that you had been working on, particularly in Saudi? And perhaps just comment, it does look, on the valuation, accretive on a multiple basis, but it is dilutive on a margin basis. So talk us through maybe some of the opportunities to expand the margins here.

Yes. Okay. We like this business, particularly because of what we view as its integration simplicity. So it only has 3 manufacturing facilities. And of course, we share facilities in only Suzhou. It's concentrated in the Mid East. So rather than have a few employees and $5 million or $10 million in revenue across the globe, it's concentrated, which makes it far easier for us to integrate. This is not a large organization.

In terms of margin dilution, that's -- Arun, that's actually one of the more attractive -- let me just leave it this way. That's an attractive aspect of this business. And I'm sure you follow me.

Yes. I understand what you're referring to. Okay. And maybe just for Jay, questions on the put/call feature here and why structure is kind of like this between you and Baker, maybe some thoughts would be helpful.

Look, we think this is going to be likely a long-term partnership, but both sides need some flexibility over time. As you know, Arun, Baker has some objectives about their portfolio, and this helps fit some of their needs with the -- regard to their criteria for restructuring their portfolio. The timing gives us a good runway. As you know, we're a pretty lean organization, and we need time to stand up an organization and the infrastructure to integrate the business and take that over.

So with regard to the put and call, we think it was a good representation of a multiple on the future. You can do the math, the $660 million cap would be 6x $110 million. So we'd be happy if that was the number at any time of exit. And then the floor only comes into effect if we would call the remaining 35% interest.

Our next question comes from the line of Stephen Gengaro of Stifel.

I can't ask you about international growth anymore. So...

Yes. I was hoping you would start with great applause because I've only been asked that question for how many years now guys, 5 years to the point where I was losing credibility when I told to you, we are working on it, working on it. We took our time to tell you what we were going to do. What was right for us, maybe not just a place...

It looks good. So just a follow-up to Arun's question. Can you talk about at a high level sort of the structural differences in the market versus like the U.S. market from a margin perspective, without kind of maybe speaking of specific numbers? Like I imagine there is a gap in a perfect world, but like what are the puts and takes versus U.S. margins we should be thinking about?

Yes. One of the things that I've talked about from the very beginning, and one of the reasons that we exploited the U.S. market with such focus was that the margins, international will struggle to meet the margins that we enjoy domestically. This is a transaction-oriented business and -- or that's more of a project-oriented business.

So the margins -- international margins will always be lower. It's a higher volume, more stable environment, less opportunity for differentiation through quick turnaround. It's just always been the nature of the beast. So do not look -- nobody kick me, do not look for 35% margins internationally because they're not going to happen, but 17% is not going to happen either.

Now where exactly we'll land, I just -- I don't want to speculate right now, but we clearly have confidence that we can apply some of our knowledge and processes to this SPC business to pick these margins up conservatively. You just got to need to be patient. A lot of these contracts are longer term in nature with fixed prices, and we've got to work our way through those too. But in the meantime, we'll be working very hard on costs.

Okay. Great. And the other question I had quickly was when you think about the revenue pull-through opportunity for the Spoolable business. Is that something you think we could start seeing in '26? Like how do you think that plays out from a timing perspective?

Well, since we just made this announcement, it's a little bit difficult for me to -- don't ask me to speculate. I can just tell you that this is -- this will be helpful. So whatever it was going to be in terms of velocity internationally, we will increase the velocity. But Steve, if you want to add anything to that?

No, I think what Scott is saying is true. I mean I think it shows the commitment to the region that we have at Cactus. I've already gotten some notes from over there. And I think that's just a positive. There's no other way to look at it. If you're a customer over there, you see we're putting our money where our mouth is.

I think we'll know a lot more about the interest following this announcement over the next 90 days.

Okay. Great. And congratulations on the deal.

And our next question comes from the line of Scott Gruber with Citigroup.

Congrats on the deal.

Thanks, Scott. Are you clapping, Scott?

Not a problem. Well deserved. I wanted to ask about share. You guys were able to ramp your U.S. business to a dominant position in under a decade. Can you discuss the competitive dynamics of the SPC business in the Middle East? Do you have that familiarity? Roughly, what share does SPC hold today? And is the share capture one of the financial metrics where you see good running room as well?

We have a lot of room to grow in the Mid East. I don't want to talk about market share except to tell you that by far, the market leader in Saudi are our friends at Schlumberger. And the disparity between Schlumberger, FMC and Baker is very significant. And a lot of that has to do with Schlumberger doing the right things at the right time.

So I think there is quite a bit of market share to be gained in Saudi. I think there's market share to be gained in Oman. I think there's market share to be gained throughout the Middle East. There are a couple of countries I'm not particularly keen to gain market share because of the pricing. But Baker has a long way to go. This business has a long way to go in terms of market share.

Got it. And just given the divergent trends in the Middle East today, Saudi market has been shrinking here, but I know Baker has a strong presence with ADNOC. What have you seen from SPC so far this year? Revenues, EBITDA pretty stable? Is it growing some, shrinking some? What have you seen year-to-date?

Yes. Can I -- well, can we comment on that on Q1?

Yes...

I don't know what we put out there.

I don't want to get anyone in trouble, but I was just curious.

Yes, let's put it this way, based upon Q1, relax.

Okay. Okay. Very good. And maybe I'll slip one last one in. Just how are you thinking about the business outside of the Middle East? Is the strategy here also to grow beyond the Middle East and grow that share? Or are you guys going to really focus on kind of having two pillars here, U.S. and Middle East business. Just kind of longer term, how do you think about the portfolio?

Yes. We're going to chase wherever the margin opportunity exists. One of the things that probably -- pardon me, I didn't highlight, is that we have significant capacity, low-cost capacity that's coming on outside of China this year. So we'd be foolish not to pursue opportunities elsewhere. So of course, we're going to pursue opportunities elsewhere.

I'm showing no further questions at this time. I'll now turn it back to Scott Bender, Chairman and CEO, for closing remarks.

All right. I want to thank everybody mostly for your patience and putting up with me and allowing me, at the same time, to do what we normally do, and that's worry an issue to death. And we took our time, and I feel very confident we made the right decision. So we're very excited, and we were very deliberate in going about this acquisition. So I look forward to sharing positive news going forward. Everybody, have a great day. Thanks.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.