The future of Houston’s Baker Hughes is again in doubt now that financially struggling General Electric is considering selling its majority stake in the energy services giant.
Baker Hughes just completed its merger into the GE family in July, but now Boston-based GE is under new leadership and going through its worst financial performance in almost a decade. A GE strategic review this week indicated it is seeking possible exit options for Baker Hughes with new GE CEO John Flannery using the phrase “exit optionality.”
Baker Hughes grew in size when it merged with GE’s oil and gas division to create an energy services giant to rival Halliburton for the position as the world’s second-largest services company after Schlumberger. Not coincidentally, the deal came after Halliburton’s planned takeover of Baker Hughes collapsed last year amid antitrust concerns. GE swooped in when that merger fell apart.
Now, GE, which controls more than 62 percent of Baker Hughes, is having its own doubts.
In its strategic review, GE executives said Baker Hughes is operating in a challenging market with great volatility in oil pricing. That’s leading GE to “evaluate alternatives” about its future with Baker Hughes. However, GE did still say the deal for Baker Hughes holds strong long-term value. Flannery said exiting the oil business after creating a company with increased value was always considered an option.
GE shocked Wall Street early this week when it decided to slash in half its dividend payout to investors, triggering its worst single-day stock performance since 2009.
While speaking this week at a energy conference in Abu Dhabi, new Baker Hughes Chairman and CEO Lorenzo Simonelli said “the new normal is continuous disruption” in the energy sector, and that companies must continually innovate and adapt. Simonelli just took over in July after previously heading up GE Oil & Gas.
Baker Hughes carries a Wall Street value of more than $35 billion, ranking it just behind Halliburton.
This first appeared on the Houston Chronicle – an Energy Voice content partner. For more click here.
