Baker Hughes is combining its subsea services with MHWirth, which is owned by Akastor ASA, to create a joint venture run by Pete Miller, who led NOV during an acquisition-driven growth spurt.
The deal allows the owners of the new 50/50 joint venture to profitably reduce their exposure to the offshore business, which has been slumping for years.
“This transaction is a major step for MHWirth, and the transformation strategy announced in February 2019,” said Kristian M. Røkke, chairman of Akastor, an investment company which has been selling off a portfolio of service providers.
The plan, announced when Miller was hired as MHWirth’s chairman, is to expand the operation and take it public within the next few years. Miller is the chairman and chief executive officer of the venture that will be based in Houston and Kristiansand, Norway.
For Baker Hughes the deal is another step away from simply being an oil services company.
On the face of it, the new joint venture is a pure play offshore service company. It combines topdrives, iron roughnecks, derricks, and mud pumps from MHWirth with the blowout preventers, riser and control systems made by Baker Hughes.
But since the 2014 oil-price crash left behind a global glut of offshore equipment, the business has shifted toward services, with new payment models and an emphasis on performance improvement—often employing advance digital analysis. And the joint venture is looking for business outside the industry such as engineering offshore wind platforms, Miller said.
The new company is a bet on oil prices remaining high enough to revive offshore activity and the increasing pressure to reduce emissions, forcing rig owners to pay for services and hardware that significantly reduce emissions.
While they are waiting, the deal offers an immediate reward. Baker Hughes will be paid $200 million—$120 million in cash—and Akastor will be paid $120 million—$100 million in cash. The new venture will borrow the cash and start with $80 million in working capital available from lenders.
Combined, the two operations would have reported about $713 million in revenues in 2020, down 16% from 2019. That is tiny compared to NOV’s more than $6 billion in revenues last year, but its cash flow per dollar of sales (EBITA as a percentage of revenue) was more than twice as large.
Miller’s job includes looking for acquisitions, but he declined to set any goals.
“I can say there will be opportunities. If there is a compelling opportunity, we will get financing and get it done,” he said. As for the targets of interest, he said, they more likely have to do “more on the digital side, more on the carbon-reduction side.”
