Back to top

Image: Bigstock

Baker Hughes (BKR) Merges Subsea Drilling With Akastor Affiliate

Read MoreHide Full Article

Baker Hughes Company (BKR - Free Report) recently agreed to create a joint venture with Norwegian Akastor ASA. Per the deal, Akastor’s affiliate, MHWirth AS, and Baker Hughes’ Subsea Drilling Systems (SDS) business will be brought together. The move comes at a time when the company is expecting the energy industry to significantly recover in the near future.

The move will enable the companies to offer clients with a wide range of offshore drilling equipment and services. It will create a 50-50 JV with strong financial and integrated delivery capabilities. Operations of the JV will be managed from Houston and Kristiansand in Norway, following the deal closure in the second half of this year. The deal timing is interesting as the company expects a more balanced market by next year. While 2021 will witness vaccine rollouts and economic recoveries, energy investments will grow in 2022, expects Baker Hughes’ CEO Lorenzo Simonelli.

Merrill A. “Pete” Miller will serve as the CEO of the combined company. Notably, MHWirth has presence in five continents and operates offices in 13 nations. MHWirth and Baker Hughes’ SDS business, which is part of the Oilfield Equipment segment, is likely to collectively provide a full offshore drilling equipment package to clients. The SDS business of Baker Hughes — one of the world’s largest oilfield service providers — has service and manufacturing facilities in 11 nations. Importantly, pro-forma revenues of the combined entity for 2020 are estimated at $713 million and adjusted EBITDA is projected at $102 million.

Baker Hughes will hold a 50% stake in the combined entity and receive $200 million in consideration, of which $120 million will be paid in cash during closing. The deal signifies Baker Hughes’ value generating capabilities from assets during challenging times. Via its equity method, profits from the JV will reflect on Baker Hughes’ overall results. Similarly, Akastor will receive a 50% interest in the JV and $120 million, of which $100 million will be paid as cash.

Price Performance

Baker Hughes’ shares have gained 45.5% in the past year compared with 19.5% rise of the industry it belongs to.

Zacks Rank and Stocks to Consider

The company currently has a Zacks Rank #3 (Hold). Some better-ranked players in the energy space include Berry Corporation (BRY - Free Report) , ConocoPhillips (COP - Free Report) and Pembina Pipeline Corporation (PBA - Free Report) , each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Berry’s bottom-line estimates for 2021 have witnessed three upward revisions and no downward movement in the past 60 days.

ConocoPhillips’ sales for 2021 are expected to increase 54% year over year.

Pembina Pipeline’s bottom line for 2021 is expected to increase 28.6% year over year.

Zacks Top 10 Stocks for 2021

In addition to the stocks discussed above, would you like to know about our 10 best buy-and-hold tickers for the entirety of 2021?

Last year's 2020Zacks Top 10 Stocks portfolio returned gains as high as +386.8%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.

AccessZacks Top 10 Stocks for 2021 today >>

Published in