Houston Chronicle by Sergio Chapa 8/28/2019
Turbines to run liquefied natural gas plants in the Arctic Circle. Lighter and easier-to-assemble equipment to extract oil and natural gas thousands of feet below the ocean’s surface. Drones to detect methane leaks from oil wells and pipelines. Cleaner power to run hydraulic fracturing operations and lower greenhouse emissions.
Some two years after the merger with oil and gas division of General Electric, the Houston oilfield services company Baker Hughes is cutting a different path in the industry, seeking to distinguish itself from its long-time rivals Schlumberger and Halliburton with a renewed focus on cutting technologies, equipment and services.
Baker Hughes exited two years ago the hydraulic fracturing business in North America, where it was distant number three to its main competitors, in favor of what it views as newer and more profitable lines of business such as providing equipment for offshore and liquefied natural gas projects. The strategy appears to have paid off as the company shook off some two years of steep losses that followed the last oil bust and earned a $195 million profit on nearly $23 billion in revenue in 2018.
There are other signs of stabilization. After hitting a low of $19.2 billion during the third quarter of 2016, Baker Hughes’ stock market value climbed to $22.1 billion, surpassing that of its Houston rival Halliburton ($15.3 billion) and second only to Schlumberger ($43.7 billion.)
In many ways, the focus on technology and equipment is a return to Baker Hughes’ roots. Its three predecessor companies — Baker Oil Tools, Hughes Tool Co. and General Electric Co. — were all founded more than a century ago on newer, better technologies that advanced, if not reshaped, their industries.
“This is Baker Hughes homecoming,†said Vikas Mittal, a business professor at Rice University. “They went on some detours for the last five or six years but they’ve back home to where they belong.â€
Change of fortune
The merger with GE Oil & Gas dramatically changed to fortunes of Baker Hughes, which, as the oil bust came to an end, was as distant number three to Schlumberger and Halliburton, with the likelihood that the distance would only become greater. Baker Hughes was largely hobbled during the energy downturn by its merger agreement with Halliburton, which kept it from taking actions — such as selling off unprofitable businesses — that might have helped it come out of the bust in better shape.
Even after receiving a $3.5 billion breakup fee from Halliburton after the merger was scrapped in May 2016, Baker Hughes still sustained steep losses. The merger with GE Oil & Gas put Baker Hughes on par with Halliburton, the long time number two in the industry, in terms of revenue, employment and stock market value.
General Electric holds a majority stake in Baker Hughes, but has reduced its stake significantly from the 62.5 percent it controlled after the merger. GE, which now holds just over 50 percent of Baker Hughes, plans to divest itself of all its shares over time, although the exact time frame remains unclear.
More:
https://www.houstonchronicle.com/business/energy/article/Baker-Hughes-takes-a-different-path-in-struggling-14383115.php
