HOUSTON—GE merged its oil and gas business with Baker Hughes Inc. to build a company strong enough to weather a tough oil and gas market.
Baker Hughes, a GE company—with the operation known as BHGE—brings together about 70,000 employees and a line of products and services for a full-stream offering for the market, according to a company spokeswoman with BHGE. The deal was announced in October 2016 and completed this past July. Financial details were not disclosed.
"It's covering that entire value chain from end to end, which is a unique offering for us," the spokeswoman said. "Because these companies are so complementary, I think that shows the portfolio merging together nicely."
In the upstream space, the company covers evaluation, drilling, completion and production. Midstream offerings include liquefied natural gas and pipeline and storage. Downstream, BHGE covers refining and petrochemical, and fertilizer, according to the spokeswoman.
On top of that is an industrial operating platform called Predict, which allows access to data picked up by sensors in an application, as well as applications that analyze the data collected. BHGE also has access to the "GE Store" of knowledge, experience and research, "which is the ability to accelerate and learn from the other individuals at GE," to innovate and bring new products to market faster, the spokeswoman said.
The acquisition creates a business with about 70,000 employees with operations in more than 120 countries, and dual headquarters—one in Houston and the other in London. It includes four product companies: Oilfield Services, Oilfield Equipment, Turbomachinery and Process Solutions, and Digital Solutions, as well as 24 product lines and segments. As the integration teams continue to work together, they'll be looking for about $1.6 billion in cost synergies during the next three years, the spokeswoman said.
"Now that the teams are coming together and business plans are in place, I think we're going to be in a better place to evaluate that. It's not going to be an easy process," she said.
Part of the integration includes looking at combined operations, including rooftop consolidation.
"We don't need to have duplicative plants in the same places, and we have about 40 rooftops in Houston alone, for example," she said.
Studying those numbers in some cases could mean hiring, and in others, it could mean consolidation, the spokeswoman said. In some cases, such as BHGE's July groundbreaking in Cincinnati to build a new 26,000-sq.-ft. data center starting with 15 employees, it means expansion. Specific plans for other facility or employee changes were not disclosed.
"When you have two such massive companies and an employee population of 70,000, we want to be strategic and thoughtful about those decisions," she said. "For the employee side, certainly we want them to know that we're giving it proper thought. We're looking at how the teams are coming together. We're looking at business plans and operating plans."
BHGE also will look for about $400 million in revenue synergies in the same three-year period. Combined revenue for the company will be about $23 billion, based on 2016 combined sales. It also will be looking for sourcing benefits that are available to the combined company.
"There's a lot of sourcing advantages you can get with the strength of the full GE system, and we can certainly get some great cost advantages as a result, given all of our other industrials," the spokeswoman said.
Those synergies are part of the company's efforts to build a more stable position for the current volatile market, according to Lorenzo Simonelli, president and CEO of BHGE.
"Disruptive change is the oil and gas industry's new normal. We created BHGE because oil and gas customers need to withstand volatility, work smarter and bring energy to more people," he said.
The oil and gas market has seen a challenging few years, the spokeswoman said, and that volatility is part of what brought the two companies together in the first place.
"We're convinced that this offering gives us a competitive advantage in the space, and certainly that means, in the long term, we're hoping that positions us to weather volatility better," she said.