Baker Hughes’ Winning Tech Bet Leaves Peers to Play Catch-Up
(Bloomberg) -- Baker Hughes Co. is leaning into its industrial and energy technology business, and it’s paying off – in a major way.
Since closing its merger with General Electric Co.’s oil and gas unit eight years ago, the company stands as the only one of the big three oil service providers to show growth in total shareholder returns in that time.
The oilfield servicer’s $9.6 billion acquisition of process-equipment supplier Chart Industries Inc. announced Tuesday further expands its energy technology offerings into liquefied natural gas, data centers and other tech industries, helping set the company apart from its more service-oriented peers.
The second-biggest oilfield contractor based on market value has expanded returns, including dividends and share price, while reducing exposure to the boom-and-bust cycles impacting oilfield services amid a slowdown in shale.
The company has been the clear best performer over the past five to seven years, with its industrial and energy technology unit playing a large part in the rise, Bloomberg Intelligence analyst Scott Levine said in an email.
“They have increased emphasis on industrial and power equipment at a time when the traditional oilfield services business has really struggled,” Levine said. “The basis of that business is the 2017 GE O&G merger.”
Baker Hughes has been on an upward trajectory since joining with GE Oil & Gas in July 2017. The deal created a new stock for the company, and it formed its Industrial, Energy & Technology business as a result in 2022. That unit now offers products including gas turbines and digital solutions.
The big bet has left investors asking what it means for Baker Hughes’ legacy oilfield services business as it plans to use “expected divestiture proceeds” to finance the Chart purchase, the company said in a statement Tuesday. It also prompts questions about how other companies plan to position themselves for future energy systems, said Jeff Krimmel, owner of energy consulting firm Krimmel Strategy Group.
“In many ways, the oilfield services sector is leaner, meaner, bigger, stronger than it’s been historically,” Krimmel said. “Yet the value thesis, the investment thesis around that sector, is as challenged as it’s ever been.”
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