BHGE: Discipline through the downturn becomes opportunity for the upturn
FLORENCE -- Entering its annual meeting on Monday, Baker Hughes, a GE company (BHGE), is stressing how its fullstream capabilities provide integrated oilfield products, services and digital solutions to the industry. Even during periods of low oil prices, “our vision that we have for the company is still solid,” said Neil Saunders, president & CEO, oilfield equipment. “The strategy that we launched in 2018 has worked very well for us.”
An evolving industry. As the world continues to seek new ways to supply energy to meet growing demand, oil companies will have to adjust to maintain market share. As of today, energy in the form of fossil fuels, leads the market, relative to energy consumption. However, the industry is keenly aware of a growing demand for natural gas, and even renewable energy. “We fundamentally still believe in hydrocarbons as a source which forms a healthy part of the energy mix, going forward,” said Saunders. “We place some recognition, absolutely, in the idea that by 2030/2040, that mix changes and sees greener energy having a larger percentage.”
50/50/50 in oilfield equipment. BHGE’s strategy to help customers reduce capex and opex is called 50/50/50. These solutions, says the company, “will improve productivity and efficiency, and leverage economies of scale, to deliver a higher industry yield, with lower carbon footprint.”
The first “50” is to reduce total system costs by improving efficiencies, reducing cycle time and improving asset utilization and reliability of equipment delivered, according to the company. In response to this, BHGE has developed Aptara Totex-lite, a subsea system that offers operators more options for their aging infrastructure.
The second “50” refers to improvement in productivity through integrated and differentiated solutions that reduce capex and opex, drive improvements in productivity, and reduce non-productive time. This brings together “the power of the BHGE enterprise,” said Saunders. This has resulted in Subsea Connect, a series of products that can lower subsea project development costs by an average 30%.
The third “50” encompasses BHGE’s fullstream capabilities. Leveraging the scale of its portfolio and driving radical improvements by offering new developed concepts at a project level, the company can develop commercial models by working closely with customers to improve yield. “Our 50/50/50 strategy that we launched last year still feels good,” said Saunders.
Oil prices have affected many parts of the industry. Some companies have downsized, others have consolidated, and still others have held strong with a “lower for longer” mentality. BHGE’s surface business has felt the sting in some areas, but other portions remain virtually untouched. For instance, the company’s large surface wellhead component can be dependent on what’s happening in North America, based on things like shale activity and bottlenecking, and thus be volatile.
In contrast, the longer-cycle businesses, including subsea production, are far more disciplined, from a customer standpoint. These projects haven’t been affected much, even during the low-price period in late 2018. That having been said, the offshore business is having a more challenging time recovering, especially as regards deepwater drilling. “If oil price manages to sustain itself at a much higher level, for a long period of time, that has the potential to make more offshore exploration attractive and have customers pick rigs up,” said Saunders. “And if customers pick rigs up, then my subsea drilling business potentially picks up.”
There is one bright side to the “lower for longer” period in the industry. It has created an opportunity for everyone to think and act more efficiently, and to reconsider traditional ways of solving problems. Now, companies are adapting, for the better. Saunders has a recommendation for customers: “Let’s start planning with more discipline on a much lower threshold.” He goes on to suggest that when oil prices inevitably rise, customers should not relinquish this discipline.
Untapped markets. BHGE has a strong subsea business and could utilize best practices to leverage onshore flexibles. “This could be something that we are interested in,” continued Saunders. He suggested that the level of integration utilized offshore can be used onshore to integrate offerings and optimize capabilities. Conversely, “in terms of keeping things relatively simple and fast, as long as it is safe, there might be learnings for offshore, from onshore.” Other areas of interest as relates to product offerings, include Aptara as a value add in the Gulf of Mexico and Brazil, according to Saunders. Going into deeper water, where there are higher-pressure wells to extract those reserves, may be cost-prohibitive, even with optimization. “But the technology is within in reach,” added Saunders.
20th anniversary. Twenty years ago, the BHGE annual meeting was more of a turbomachinery event, noted Saunders. But over the years, it has evolved to include more GE Oil & Gas businesses and acquisitions, thus bringing a wider breadth of customers to the event, due to “much more balanced content,” said Saunders. In addition, “on the main stage, there was a lot of our content (in the past),” he continued. “That gradually got replaced with more customer content. Customer commentary is much more about the market and what the customer is doing, and less about what we are doing. All of a sudden, when you look at it, you find yourself attending an industry event, not a Baker Hughes event, which is a credit to the event.”
Final thought. “At the heart of everything we do,” offered Saunders, “the one thing that we hold on to dearly is that [we continue to innovate technology, even in the difficult times.] It may make a lot of financial sense to turn the burners down on technology development, through difficult times, but we don’t do that.”
