Steve Jobs of oilfield services carved Baker Hughes path to GE Deal

By David Wethe on 1/26/2017

HOUSTON (Bloomberg) -- Martin Craighead’s knack for innovation helped turn Baker Hughes into a sort of Apple Inc. for oil services.

Under his tenure as CEO, the company became a coveted asset that rival Halliburton sought to take over in a failed $35-billion deal. And it was technology that led him to favor a partnership with General Electric Co. instead.

Set to become the world’s second-largest oil-services provider after merging with GE Oil & Gas, Baker Hughes will get the chance to combine its digital applications with the industrial giant’s Internet-of-things platform to integrate oil rigs with customers’ software systems in real time. As Baker Hughes reports fourth-quarter results Thursday, investors expect to get further insight into Craighead’s latest feat.

“I was blown away with the complementary benefits from the technology,” Craighead, 57, said last month at his first investor day with GE Oil & Gas executives, following a visit to GE’s global research center in Niskayuna, New York. “I see an opportunity to create a company that frankly has never existed in this industry.”

Steve Jobs Type

A bit of a Steve Jobs type is how Joel Tarver, who was responsible for digital applications at Baker Hughes, remembers the first time he saw Craighead in front of a crowd in 2006. With his close-cropped hair and glasses, and an intensity in his eyes, Craighead rolled out the new “Answers While Drilling” pitch to a company audience—much like the late Apple co-founder’s presentations of iPhones and iPads. It was all about giving customers information at the same time that they were drilling so they didn’t have to stop and do the analysis.

“It was just a very Apple-esque launch of the brand,” said Tarver, who based one of the apps he developed for Baker Hughes on the Candy Crush smartphone game. “It’s just not something the industry was really well known for, to come out and win hearts and minds.”

Years later Craighead made a splash at his first ever analyst day as CEO in a suburb outside Houston. He was offering up a new technology that would aim to take down the most iconic symbol of the industry—the nodding donkey. Electronic dance music beats accompanied lightning fast graphics on a large movie screen as the new Linear Electromagnetic Actuated Pump, or LEAP, was announced.

Track Record

So far, LEAP has failed to displace the traditional pumps in any significant way. The company announced its first field trial of the new technology and has not discussed it further since then.

In the four-plus years that Craighead has run Baker Hughes, the company has surpassed analysts’ annual earnings expectations once, according to data compiled by Bloomberg. For 2016, the only time he beat quarterly estimates was in the third quarter.

Melanie Kania, a spokeswoman for Baker Hughes, declined to comment.

Craighead faced a daunting challenge at the start of 2012, taking over from CEO Chad Deaton. A little more than a year before, Deaton spent $5.5 billion to buy fracing service provider BJ Services Co. just before the market for hydraulic fracturing collapsed from a glut of new gear.

Big Problems

“He took over a very big company with a lot of problems,” David Anderson, an analyst at Barclays Plc, said in a phone interview. “It was very clear he was trying to change the culture. He was trying different things.”

While Craighead had to cut more than 20,000 workers during the industry’s worst financial crisis in a generation, he was still forced to carry extra costs he otherwise would have slashed further. His ability to streamline the company was severely limited while the Halliburton merger process dragged on.

Craighead is credited by analysts for ultimately snagging a $3.5-billion breakup fee from Halliburton that helped Baker Hughes pay down debt and provided cushion during the downturn. By merging the company in which he spent more than three decades with GE’s oilfield business, he’s helping create a service company that’s second only to Schlumberger in market value.

In his spare time, one of Craighead’s favorite things to do is fly fishing, said James Wicklund, an analyst at Credit Suisse in Dallas who has known Craighead for years. “It lets his mind slow down from racing 500 miles an hour thinking of the next new thing.”

But life in the slow lane may not be enough for Craighead, who’ll be vice chairman of the new Baker Hughes once the deal is completed next year.

“He needs to be an operating guy,” Wicklund said. “He’s too energetic to be just a passive board member. That may be his biggest challenge going forward.”

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