Catalyst Monitor

Research evidence excerpt

Catalyst Monitor

Barclays | US Investment Grade Research

More importantly, we think the Chart acquisition materially changes how investors should think

about Baker Hughes's corporate structure. After management first floated the idea of a

separation between OFSE (Oilfield services and equipment) and IET back in 2021 (Credit

Soundbites from Around the Conference, September 2021), investor concerns largely centered

on the possibility of a separation that could leave bondholders attached to the more cyclical

legacy OFSE business. At the time, the rationale for a review was that IET was not receiving full

valuation credit within a portfolio still largely associated with traditional oilfield services.

As shown in Figure 7 and Figure 8, the addition of Chart moves the pro forma business mix

decisively toward IET, making the business materially different from what it was in 2021 and, in

our view, increasing the likelihood that IET would be the RemainCo in any hypothetical

separation scenario.

FIGURE 7. In 2021, OFSE Was the Larger Segment and More Likely to FIGURE 8. ...but Chart Moves the Pro Forma EBITDA Mix in Favor of

Be the RemainCo in a Hypothetical Separation, in Our View... IET, Making it a More Likely RemainCo

IET OFSE

45% OFSE IET 45%

55% 55%

Note: Baker Hughes historically reported OFSE as Oilfield Services and Oilfield

Equipment. IET was reported as Turbomachinery & Process Solutions and Digital

Solutions.

Source: Company filings, Barclays Research Source: Company filings, Barclays Research

From a valuation perspective, we do not think this is fully reflected in BHI's bonds. If a

separation were pursued, we believe an IET-only Baker Hughes would be most appropriately

compared with diversified industrial issuers such as GE Vernova (GEV), Emerson Electric (EMR),