BHI Gets DOJ Nod for Asset Sale - Analyst Blog

Baker Hughes Inc. (BHI) received the approval from the Antitrust Division of the U.S. Department of Justice (DOJ) for the sale of a package of Gulf of Mexico (GoM) based simulation assets. Baker will sell the assets to Superior Energy Services Inc. (SPN) for $55 million as announced on July 6, 2010.

 

The assets include two stimulation vessels (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 divestiture program was planned in connection with Baker’s objective to integrate its U.S. operations with the acquired BJ Services’ U.S. operations. Following the closure of the deal, which is expected early next week, the company will also gain access to more efficient oilfield services by consolidating BJ Services’ pressure pumping with its wide array of products and services.

 

The company completed the acquisition of BJ Services in April and reorganized its businesses geographically. The company’s better-than-expected second quarter results reflected solid contribution from BJ Services’ operations and improved performances in North America, Russia and Asia Pacific. However, the results were partially offset by performances in Latin America and Africa.

 

Given the continuous growth of unconventional gas and oil-directed drilling in the U.S., Baker Hughes foresees North America as key potential area. We believe Baker should benefit substantially from the positive trends in U.S. land drilling, particularly after acquiring BJ Services and its pressure pumping exposure and enable it to further penetrate the international market.

 

Although we expect the integration of BJ Services and Baker’s North American businesses to lead to margin expansion, we remain concerned about the company’s cautionary outlook due to the impact the GoM drilling moratorium on its expected earnings for the second half of 2010. Consequently, our Neutral recommendation remains unchanged for Baker Hughes.