Read Zacks_Analysts' blog in RSS
July 7, 2010
Share This
Baker Hughes Inc. (BHI) is moving forward to integrate its U.S. operations with the acquired BJ Services Company’s U.S. operations by selling a package of Gulf of Mexico (GoM) based simulation assets to Superior Energy Services Inc. (SPN) for $55 million.
As the merger (BHI-BJ Services) requires the divestiture of some assets, the two companies had previously reached a general understanding with the Antitrust Division of the U.S. Department of Justice.
The assets include two stimulation vessels (the HR Hughes and Blue Ray) and the BJ Services sand control completion tools product line, including a tool and screen manufacturing facility and technology center in Houston, Texas. The transaction is expected to close later this month, subject to regulatory approval.
Following the sale, Baker Hughes said it will have fulfilled its court-ordered obligation and will be free to complete the merger. Following this, the company will gain access to more efficient oilfield services by integrating BJ Services’ pressure pumping with the company’s wide range of products and services.
Baker Hughes is one of the most leveraged integrated services companies in the North American pressure pumping space. Post merger, the company expects to generate nearly 25% of the combined company’s revenues from BJ’s pressure pumping services.
The company’s strong portfolio of products and services should help it post better-than-average results in North America and enable it to further penetrate international markets.
While we are not sure about the timing of resumption of development drilling in the GoM, we believe Baker Hughes will be the biggest beneficiary in the diversified service space upon reinstatement. Following the news, shares of Baker Hughes rose nearly 4% at yesterday’s closing.
However, we are currently Neutral on Baker Hughes shares with Zacks #3 Rank (Hold).
Read the full analyst report on "BHI"
Read the full analyst report on "SPN"
Zacks Investment Research