The new Baker Hughes is expected to generate a revenue of some US$34 billion, have approximately 70,000 employees, and operate in more than 120 companies, according to GE Oil & Gas CEO Lorenzo Simonelli.
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Image of Simonelli, from GE. |
Simonelli, who has been selected to lead the new Baker Hughes, and his team gave investors an update on the new Baker Hughes, and how the company is progressing regarding its proposed merger with GE yesterday (8 December).
“We feel very confident about being able to carry out our goals we’ve set out for 2018,” Simonelli said. “We are moving very quickly in each of the areas on how we create this value creation and also good investor story.”
“We are creating productivity. That is the name of the game for the industry; it is the name of the game that our customers are looking from us,” he said.
The company told investors that it identified some $50 billion in projects over the next five years in the world’s petro economies, which include Africa and South America.
In addition, Baker Hughes said it is working on several opportunities in deepwater that include well construction, subsea, and production.
In well construction, Baker Hughes is currently working on 1-2-1 strategy, redefining drilling productivity and reliability in deepwater. For 1-2-1, Baker Hughes is looking at having one tool, with two people at the rig, with at least one year of experience.
“To bring 1-2-1 to life, it requires all new sensors; all new products, in particular high-temperature, and high-pressure electronics; and a whole new analytic capability,” said Art Soucy, Baker Hughes president of products and technology.
According to Kishore Sundararajan, GE chieft technology officer, autonomous drilling is a quite possible with the proposed merger of Baker Hughes and GE robotics, controlled platforms and digital.
“It reduces the dependency on an aging workforce and expertise and as the market recovers, it’ll be a limitation for the market recovery, trying to recover all of those people back,” said Sundararajan. “The platform also moves the drilling from today an art form, to a science. This is a big industry changer, and this is what we achieve together as Baker Hughes and GE.”
In the subsea sector, the company is working on 5D modeling trees, blowout preventer (BOP) reliability and evolving services model to improve project economics.
In production, Baker Hughes is working on digital twins and OPEX commercial models for rotating machinery, and processing equipment.
The new Baker Hughes will also focus on major projects across all deepwater basins. When considering today’s oil prices, ranging between $35-$40 boe, Baker Hughes said that there is the potential of about 11 billion boe, or about 1.9 MMb/d of peak production available.
“Should there be an approximate 10% improvement in lifting cost, or a $5 improvement, that were added to project economics, we could significantly improve these marginal economics and increase the probability of project sanction, accelerating in our estimation, up to $200 billion of addressable market in deepwater projects that are known today,” Derek Mathieson, Baker Hughes chief commercial officer.
Simonelli said that when it comes to deepwater, the company is not assuming any big deepwater projects coming on very quickly.
“This is really opportunity as we go forward into 2020, 2021, as these projects start to come back,” Simonelli said. “But, we’ve got to address the productivity question now, and that’s what we’re going to be doing with our customers, because these projects are longer in cycle, but the resources that are there are going to be needed in the long term.”
Jody Markopoulos, GE chief operating office, touched on operations optimization, in which she revealed focus areas for Baker Hughes that include supply base rationalization with a deeper, stronger supply base, in addition to global risk management; procurement infrastructure with volume efficiency, and process standardization and automation; value engineering, including product standardization; and landed cost optimization with logistics efficiency and make/buy trade-offs.
“We are creating an unmatched, full stream capability. That term is going to become very well known in the industry and it really goes all the way from the extraction of the molecule to providing better benefits to our customers; and refining the movement of that molecule and end use,” Simonelli said.
The proposed merger, announced on 31 October, has already been unanimously approved by the boards of directors of both companies. At closing, which is expected in mid-2017, Baker Hughes shareholders will receive a special one-time cash dividend of $17.50 per share and 37.5% of the new company, with GE owning the remaining 62.5%. The deal is still subject to approval by Baker Hughes shareholders, regulatory approvals, and other customary closing conditions.
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