GE Oil & Gas and Baker Hughes to merge

Automation World has reported that in a merger announced recently, GE Oil & Gas will combine its manufacturing and digital platform with Baker Hughes’ oilfield service offerings and technology to create a new Baker Hughes. Both companies have invested in oil and gas even in the downturn, and have strong, complementary competitive scope across the industry. The combination will create the second-largest player in the oilfield equipment and services industry, providing equipment, technology and services to the oil and gas industry with combined revenue of US$32 billion and operations in more than 120 countries.

The transaction will be executed using a partnership structure, with GE Oil & Gas and Baker Hughes each contributing their operating assets to a newly formed partnership. GE will contribute US$7.4 billion to fund a special dividend to existing Baker Hughes shareholders, who will own 37.5%. GE will have 62.5% ownership.

“Together, Baker Hughes and GE Oil & Gas will create an end-to-end provider of technology, equipment and services across the full spectrum of the oil and gas value chain: upstream, midstream and downstream. That is a truly unique combination,” said Martin Craighead, chairman and CEO for Baker Hughes. “In integrating Baker Hughes’ leading products and services with GE Oil & Gas’ suite of products and manufacturing capabilities, the new company will be able to take more new innovative products, solutions and services to market faster, more efficiently and more cost-effectively.”

Jeff Immelt, GE’s chairman and CEO, will be chairman of the new board. He pointed to the large investments GE has made in digital, including the development of Predix, GE’s operating platform for the Industrial Internet of Things (IIoT). The transaction accelerates GE’s capability to extend that digital framework to the oil and gas industry, he added.

“It has always been our belief that the oil and gas industry would be an early adopter of analytics,” Immelt said. “The combination of the Baker Hughes oilfield services platform with Predix will deliver superior outcomes, and we are well positioned globally to execute for our customers.”

Lorenzo Simonelli, currently president and CEO of GE Oil & Gas, will take over as CEO of the new Baker Hughes. “The new Baker Hughes will be a truly full-stream company from resource extraction to transportation to end use, combining Baker Hughes’ deep industry expertise and history of technology development in oilfield services with GE Oil & Gas manufacturing and aftermarket service excellence strengthened by the unique capabilities of the GE Store,” he said.

In the current environment of prolonged depressed oil prices, customers are shifting to opex-driven investment decisions, Simonelli said. “Ageing fields will require increased maintenance and intervention to sustain production as depletion occurs later in the well life cycle and as operators look to extract more hydrocarbons from existing assets as opposed to developing new fields,” he said.