Baker Hughes Active in Brazil - Analyst Blog

Texas-based Baker Hughes Inc. (BHI), one of the largest oilfield service companies in the world, will build an advanced electrical submersible pumping (ESP) system. This new EPS system will be built in a testing and development center in Macae, Brazil.

This facility will reduce risks of the deepwater projects and maximize production by qualifying all the system components prior to deployment in the well. It includes a test well for system integration with electrical cable simulation for ESP systems.

The test well is fitted with Baker Hughes low-voltage and medium-voltage variable speed surface control units to supply power and control the downhole ESP system. It also features a fit-for-purpose control room that collects and displays real-time data from the ESP system.

Baker Hughes has a competitive set of technologies that enable it to continue deepwater activity. Its strong portfolio of products and services should help it post better-than-average results in North America and further penetrate international markets.

As deepwater drilling activity is gaining traction in Brazil, we believe the company is showing interest to build such a facility in this country. Baker Hughes has been lagging its competitors in the international growth arena. For this, the company geographically reorganized itself in the second quarter to focus on the regional needs of its clients.

We remained concerned about Baker Hughes for its weaker competitive position in executing integrated projects, low capital investment in the past few years and greater dependence on a volatile North American market. For the short term, we rate Baker Hughes Underperform with the Zacks #4 Rank (Sell).