GE Baker Hughes acquisition: Fullstream future?

Selected Major Oil Gas MA Activity 1990 2016Selected Major Oil & Gas M&A Activity (Jan 1990-Sept 2016) *This graph is not exhaustive, but it is illustrative of the extent of M&A activity in 1990-2016. (Image source: Douglas Westwood)Douglas Westwood look at the merger and acquisition activity cycles in the oil and gas industry, specifically analysing the latest GE and Baker Hughes acquisition 


As per their article, which can be found here, Douglas Westwood have shown that there have been a number of trends that occur in the oil and gas sector, particularly at times of fiscal difficulty. 

However, General Electric and Baker Hughes' merger has instead shown a different tact in trying to fight against the low oil price and the tightening of investors' belts. 

What GE and Baker Hughes propose to do as a result of the merger is create what is known as a fullstream offering. This is the encompassing of the entire lifecycle from exploration to power generation via downstream. 

Douglas Westwood suggest that GE may be onto a winning diversification opportunity, as operators are struggling with increased production cost. This is because of the standardisation across the fullstream that a company of that size would bring. Similar could be said of the Technip merger with FMC and Schlumberger's acquisition of Cameron. 

However, what is still an unknown quantity is what the market for fullstream opportunities currently are. However, with the investment in the oil and gas sectors not set to rise much above 70 per cent of the 2014 investment level in the next five years, it may be crucial for producers to remain competitive and profitable in an ever challenging market. 

The full DW Monday November 11 2016 can be found here

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