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Amid new CEO, Baker Hughes deal, GE continues progress on digital work

Alex Endress, World Oil
6/20/2017

As new players continue to pour into the oilfield services sector, each fighting for a piece of the Big Data pie, one large player that can’t be missed amid the landscape of digital competitors is General Electric.  

Despite the company’s ongoing leadership transition, as Chairman and CEO Jeffery Immelt prepares to hand over the company’s reins to John Flannery in August, GE is working strategically to gather additional market share in the digital space of the upstream oil and gas industry. Under Immelt, GE has refocused, away from its non-core businesses, to concentrate on innovation via new industrial equipment designs, digitally connected systems and computerized processes.

The company has sold many of its financial services and real estate offerings. These are items that hurt the company after the 2008 recession, and were proven to be riskier—for a company the size of GE—as a result of regulation that stemmed from the crisis. Still, criticism from investors regarding the company’s share price put pressure on GE to change its leadership direction, although dialogue coming from the company has indicated it will maintain its focus on becoming a “digital industrial company.”

Now that GE’s $23 billion deal to acquire 62.5% of Baker Hughes has been approved by the U.S. Department of Justice, the company is primed to compete within the digital oil field. As part of the agreement, Immelt will serve as chairman of Baker Hughes, while GE Oil & Gas CEO Lorenzo Simonelli will become CEO of Baker Hughes, and current Baker Hughes CEO Martin Craighead will move to vice chairman. Combining its own oil and gas business with one of the industry’s top oilfield service firms (Baker Hughes), GE will now have comprehensive access to the oilfield equipment on which the company hopes to install its digital systems, sensors and high-powered computers.

Baker Hughes also will benefit from having such digital equipment in-house and ready to go, as opposed to needing to choose from swaths of different competing vendors to work with, in the tech world. The combined service company is now expected to rank behind only Schlumberger, in terms of market value, after the merger is complete.

However, truly forecasting whether or not the merger will succeed for GE depends upon one’s confidence in an eventual recovery for oil prices. Make no mistake, GE is certainly poised to take advantage of such a recovery. If, and when, it takes place, the company founded by Thomas Edison is built to forge a presence as a champion of the digital oil field.

To view the blog from World Oil's sister publication, Hydrocarbon Processing, focused on current events in the downstream oil and gas sector, click here.

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Alex Endress Alex.Endress@worldoil.com

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