We are an energy technology company. We take energy forward, making it safer, cleaner, and more efficient for people and the planet.
Chairman, President, and Chief Executive Officer
2021 has been a year of action, focus, and collaboration for Baker Hughes as we accelerated our company’s strategy and execution. Our portfolio remains essential to meeting the world’s growing energy and industrial needs, and we have sharpened our focus on the increasingly positive opportunities that lie ahead.
Like many companies, we continued to navigate the effects of the COVID-19 pandemic, broader supply chain challenges, and dynamic commodity prices in 2021. At the same time, we remained committed to our strategy and our vision, enabling us to deliver improved performance, stronger returns, and more efficient operations. I am extremely proud of the entire Baker Hughes team for achieving strong results during what was another challenging year.
Turning to the near-term, we see a positive outlook for the oil and gas markets over the next few years. As major economies fully re-open, we expect continued tightness in global commodity markets as hydrocarbon demand increases and oil and gas producers maintain their capital discipline. We believe this will provide an attractive investment environment for our customers and a strong tailwind for many of our product companies.
Looking longer-term, the world faces the dual challenge of meeting increasing energy demand, while simultaneously reducing associated greenhouse gas emissions. While we still believe that hydrocarbons will remain an important part of the energy mix, the energy transition remains crucial for a low to zero carbon world.
Baker Hughes can play a role in addressing this dual challenge through our leading portfolio of technologies and solutions. During 2021, we sharpened our focus on key growth areas, accelerating our partnerships and collaborations with our global customers, and deploying capital to strengthen our position as a leading energy technology company for 2022 and beyond.
Increase in adjusted operating income*
in new energy transition orders
reduction in Scope 1 & 2 GHG emissions**
*Adjusted operating income and free cash flow are non-GAAP measures. Please see the reconciliation in the annual report entitled “Reconciliation of GAAP to non-GAAP Financial Measures.”
**2020 actual compared to 2019 base year
Baker Hughes delivered strong operational results throughout 2021. During the year we grew orders, revenues, margins, and free cash flow when compared to the full year 2020. We booked $21.7 billion of orders, increased our adjusted operating income * by 52%, and generated $1.8 billion in free cash flow * — our strongest free cash flow year as a combined company.
In OFS, we continued to drive digital transformation through remote operations with customers in multiple regions. The business delivered its largest remote operations solution in Baker Hughes’ history, deploying digital technology across Aramco’s entire drilling operation encompassing more than 200 sites. With higher commodity prices compared to 2020, OFS also saw activity levels increase over the course of 2021. Despite global supply chain constraints and weather-related incidents, the business continued to grow margin rates through cost reductions and efficiency initiatives. While we were pleased with the progress in OFS margin rates in 2021, we still have work to do, and remain focused on achieving 20% EBITDA margin rates by the end of 2022.
In OFE, the offshore environment continued to be challenging. The business primarily focused on rightsizing operations and providing differentiated offerings to customers. We completed the merger of the Subsea Drilling Systems product line with Akastor’s MHWirth business to form HMH, a new global offshore drilling equipment company. OFE also generated continued commercial interest in its non-metallic and flexible pipe systems technologies, securing key contracts with customers, including Petrobras.
TPS continued to operate at a high level. TPS provides turbomachinery technologies and solutions for natural gas, LNG, hydrogen, carbon capture, utilization, and storage (CCUS), clean, integrated power, and industrial applications. TPS secured several major LNG orders throughout the year, including Nigeria LNG’s Train 7 and Woodside’s Pluto LNG Train 2 in Australia.
TPS also s ecured the majority of our new energy orders in 2021, including equipment orders for the Santos Moomba CCUS project in Australia, and the Air Products NEOM hydrogen project in Saudi Arabia. Our market outlook on LNG — as well as natural gas — continues to be increasingly positive, and the strength of our broad TPS portfolio provides us with multiple growth opportunities into the future.
In DS, our portfolio offers a broad suite of technologies to drive industrial asset management and emissions management leadership across multiple industries. Operationally, we experienced challenges throughout 2021 as supply chain constraints led to lower revenue conversion.We are implementing changes to improve operating margins and to enable DS to grow and improve returns for shareholders. Despite the headwinds, DS took an important step to strengthen its industrial asset management capabilities with the acquisition of ARMS Reliability to enhance the Bently Nevada product line. DS will also benefit from our recent investment and alliance with Augury, an industrial machine health provider, to extend our reach to balance-of-plant equipment.
In 2021, Baker Hughes remained committed to returning cash to shareholders and maintaining a peer-leading capital allocation strategy. Our strong cash flow profile allowed us to return almost $1.2 billion to shareholders through dividends and stock buybacks in 2021, while simultaneously making multiple acquisitions and investments in the industrial and new energy spaces.
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In 2021, we accelerated our strategy, maintained a strong balance sheet, executed for our customers, and delivered clear value to our stakeholders. I want to thank our customers, employees, and shareholders for their support. Our results and the actions we are taking position us for continued growth in 2022 and beyond, as we help to build a more prosperous and sustainable world. I look forward to another year of taking energy forward.
Chairman, President, and Chief Executive Officer
*Adjusted operating income and free cash flow are non-GAAP measures. Please see the reconciliation in the annual report entitled “Reconciliation of GAAP to non-GAAP Financial Measures.”
Our progress on taking energy forward in 2022
Environmental, social, and governance progress
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