General Electric completed its buyout of Baker Hughes on 3 July, creating the world’s second-largest oilfield service company.
The new company will be called “Baker Hughes, a GE company,” and have headquarters in London and Houston. The firm will have about USD 23 billion in annual revenue, and rivals only Schlumberger for dominance in the global oilfield services market, surpassing Halliburton, which tried to buy Baker in 2014 in a dead that was nixed by regulators.
The combined company will be “the first and only company to bring together industry-leading equipment, services, and digital solutions across the entire spectrum of oil and gas development,” the firm said in a statement. “BHGE provides differentiated services for customers by combining digital solutions and technology from the GE Store with the domain expertise of Baker Hughes and its culture of innovation in the oilfield services sector. No other company brings together capabilities across the full value chain of oil and gas activities—from upstream to midstream to downstream.”
Jeff Immelt, chairman and CEO of GE, said the deal “capitalizes on the current cycle in oil and gas while also strengthening our position for the market recovery.” The oilfield services sector has been decimated by the oil price downturn that begin in 2014, shedding thousands of jobs. Though the market began to recover earlier this year, oil prices have since fallen again under the weight of too much supply.
Most analysts viewed the merger favorably.
“In the last few years, industry has taken great strides to make drilling and well completion more cost-effective and productive, and BHGE will likely move the sector toward embracing Big Data in production optimization,” said Jonathan Garrett, E&P research director for consultancy Wood Mackenzie. “The engineers at GE are top-notch at installing sensors and data gathering equipment in order to allow software to make operations more efficient and predict when certain components need to be serviced or might soon encounter a problem. The ramifications for cost reductions are huge as prevention is cheaper than remedy. Baker Hughes brings deep oilfield expertise as one of the top three in the space.”
The new company will have about 70,000 employees and be led by Lorenzo Simonelli as president and CEO and 14 senior executives, five of whom are legacy Baker Hughes employees.
“We are really filling one of the gaps that GE oil and gas had with oilfield services,” Simonelli told The Wall Street Journal. “It evens out the total exposure in the portfolio.”
The new company plans to cut USD 1.2 billion in expenses by 2020 but declined to say how many employees might be laid off. Baker Hughes shareholders on 30 June overwhelmingly approved the merger.