GE plans to buy a division of Scotland's John Wood Group for $2.8bn, hoping to tap into a rapidly expanding market for getting more oil and gas out of mature wells.
GE buys Wood oil retrieval unit
General Electric (GE), a global business group with interests across the Middle East, has agreed to buy a unit of Scotland's Wood Group that specialises in getting oil and gas from difficult places for about US$2.8 billion (Dh10.28bn).
The transaction awaits approval from Wood's shareholders. GE said in a statement that the transaction was expected to be finalised by the end of the year.
For GE's energy division, the deal offers a quick way into the growing business of collecting additional oil and gas from older wells.
The Scottish company's extraction division is also capable of collecting shale gas, a difficult and expensive energy source but one many companies are trying to exploit at a time of higher energy prices. Prices for Brent crude are above $100 a barrel in trading on futures markets.
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Wood had $166 million in profits last year before interest, taxes, depreciation and amortisation, GE said.
The extraction division was expected to book revenues of $1.1bn this year.
The deal would be another step in a period of rapid growth for GE's oil and gas division.
GE in December spent $1.3bn buying Wellstream Holdings, an energy exploration equipment company based in the UK. GE also closed a $3bn deal to buy Dresser, an energy infrastructure outfit, this month.
"With world-class products and people, Wood Group's well-support division is an excellent strategic fit with our business model of high-technology engineering, manufacturing and services," said Claudi Santiago, the president and chief executive of GE Oil & Gas.
The acquisition comes as companies across the globe tap into rising demand for equipment and services to obtain oil and gas from unconventional sources. Given their cost, such methods make little economic sense when oil prices are low.
Wood's well-support division also comes with a business that produces electric submersible pumps, which GE said would become increasingly important in oil extraction as some of the world's biggest and oldest wells start running dry.
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Such pumps would be "paramount in helping oil producers meet the rising global demand for hydrocarbons, as maturing fields are expected to account for over 70 per cent of global oil production output by 2012", the company said, calling pump production "one of the fastest-growing segments" in the industry.
Wood operates in 50 countries across the globe and has 3,800 employees. It has 20 manufacturing and service facilities.
GE is a major player in oilfield services in the Gulf, providing pumps for extracting oil and injecting gases to push out more oil. It also makes turbines for electricity generation. The multinational is also an anchor tenant at Abu Dhabi's Masdar City, a sustainable city under construction near the capital's airport, as part of GE's effort to promote research, development and education about renewable energy sources.
The company also has a $8bn commercial finance joint venture with Mubadala Development, a strategic investment company owned by the Abu Dhabi Government. Mubadala, in turn, is a major GE shareholder.