Editors' pick: Originally published March 11, 2016
When General Electric (GE) chairman and CEO Jeffrey Immelt spoke at energy conference IHS CERAWeek last month, he made his intentions clear: His company wants to get bigger in the oil and gas industry. He said the company's balance sheet is strong and it's time to "fill in" its portfolio.
"We're not hamstrung by the cycle," he said. "It's an opportunity to be an even more important part of the industry."
Great fortunes are made in troughs, or so the saying goes, and the oil and gas industry is going through a doozy. Oil prices have fallen 70%, companies are laying off workers -- 1,000 announced at Anadarko Petroleum just this week -- and production is being halted. So it's a good time for a contrarian like Immelt to jump in and pick up some bargains. "We're in a period of slow growth and volatility," Immelt said. "You need courage to act."
The company certainly has the balance sheet to do a deal. It is expected to have more than $150 billion in cash once it's through its divestiture program, which includes its property portfolio and its financial services units. It's all part of Immelt's plan to move GE away from risky businesses and toward becoming a "simpler, more valuable" company involved in solving the world's problems.
"Our best days are ahead," he said last year.
GE spokesman Seth Martin wouldn't comment beyond what the company has said previously: "We're always evaluating opportunities." But analysts say the most likely candidates are the assets regulators are forcing Halliburton (HAL) and Baker Hughes (BHI) to sell in exchange for a blessing for their merger. They most likely include Baker Hughes' business that involves "completions," or finishing oil and gas wells once they're deemed promising, and Halliburton's drill bit and directional drilling business, which involves controlling the direction of the drilling, including horizontally, to get more out of a well, both onshore and off. They are global franchises that are number one or two in their respective segments and would instantly make GE the third largest oilfield services company after Schlumberger and Halliburton-Baker Hughes.