Date
23 July 2017
The combined company will have roughly US$23 billion in annual revenue and offer oilfield gear for oil producers in 120 countries. Photo: Reuters
The combined company will have roughly US$23 billion in annual revenue and offer oilfield gear for oil producers in 120 countries. Photo: Reuters

GE closes Baker Hughes deal, becomes No. 2 oilfield service firm

General Electric Co. has completed its buyout of Baker Hughes Inc., merging it with its own oil and gas equipment and services operations to create the world’s second-largest oilfield service provider by revenue, Reuters reports.

The new company, to be called “Baker Hughes, a GE company,” will begin trading on Wednesday on the New York Stock Exchange under the stock ticker “BHGE.”

With headquarters in London and Houston, the combined company will have roughly US$23 billion in annual revenue and offer oilfield gear including blowout preventers, pumps, drilling, chemicals, other products and services for oil producers in 120 countries.

For Baker Hughes, the deal helps it grow in size and become an even more important player in the industry after antitrust concerns scuttled a tie-up last year with rival Halliburton Co. The GE deal vaults the merged business past Halliburton to rival only Schlumberger NV for dominance in the global oilfield service market.

For GE, the deal will help it focus more on the oil and gas sector, especially in North America, while shielding the parent company’s earnings from the energy industry’s boom and bust cycles. All of GE’s oil and gas-related businesses will be folded into the new company, which will be 62.5 percent owned by GE. Baker shareholders will own the rest and receive a one-time, US$17.50 dividend.

The deal, when announced last autumn, was predicated on a recovery in the oil price to US$60 per barrel by 2019, an increase that now seems less likely with a glut of crude still circling the globe and keeping prices below US$50.

Still, executives at the new company said the combination should help customers better perform if prices stay lower.

“The crystal ball for all of us is cloudy,” said Lorenzo Simonelli, the company’s chief executive, who will relocate to Houston from London.

“But we know energy requirements are still going to increase, globally. The fundamentals are there for energy.”

Analysts and investors generally praised the deal as data analytics and other high-technology operations grow in demand among oil producers.

– Contact us at english@hkej.com

RA

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