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Cactus Forms JV With Baker Hughes, Boosts International Presence
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Key Takeaways
Cactus is acquiring 65% of Baker Hughes' Surface Pressure Control Business for $344.5 million.
The SPC deal boosts Cactus' presence in the Middle East, where 85% of SPC's revenues are generated.
SPC boasts a $600M order backlog, aiding WHD's revenue growth and cash flow across global markets.
Cactus Inc. (WHD - Free Report) recently entered into an agreement with Baker Hughes Company (BKR - Free Report) to acquire 65% of the Baker Hughes Surface Pressure Control Business. Cactus’ subsidiary, Cactus Companies, LLC, signed an agreement with the subsidiaries of Baker Hughes to form a joint venture, where BKR will offer its surface pressure control (SPC) product line. Cactus will assume operational control of the joint venture. The total valuation for the transaction is approximately $344.5 million.
Overview of the Baker Hughes SPC Business
Baker Hughes Surface Pressure Control Business is involved in designing, manufacturing, and servicing specialized surface pressure control solutions, which mainly include wellheads and production tree systems. This business operates primarily in international markets. BKR will hold a 35% stake in the joint venture after the transaction closes. This acquisition is expected to establish WHD as a leading player in oilfield equipment manufacturing, with a diverse geographical presence.
Geographic Diversification and Revenue Stability
Cactus noted that this acquisition will still allow it to maintain its position as a capital-light manufacturer of highly engineered pressure control equipment, which can be sold directly to end users. The acquisition is expected to benefit Cactus in terms of diversification, as nearly 85% of SPC’s revenues come from the Middle East, allowing the company to generate diversified and stable revenues from its Pressure Control segment. Furthermore, SPC’s limited dependence on the U.S. market for external sales makes its revenue growth more resilient to domestic market cycles.
Long-Term Growth Potential
The deal is expected to be highly accretive to major financial metrics, providing increased earnings and cash flow growth for the company. Notably, SPC boasts a backlog of more than $600 million in product and aftermarket service orders as of year-end 2024. This is expected to benefit WHD’s revenues and cash flow generation. Additionally, the company intends to maintain a conservative balance sheet.
Cactus mentioned that the geographic footprint of the Baker Hughes Surface Pressure Control Business complements its existing operations in international markets and provides access to new markets that are not affected by tariffs. This applies to both its Pressure Control and Spoolable Technologies product lines. The expanded footprint is expected to support the company’s continued growth and help stabilize its revenue profile across different market cycles.
Zacks Rank & Key Picks
Currently, WHD carries a Zacks Rank #4 (Sell) while BKR carries a Zacks Rank #5 (Strong Sell).
Flotek Industries specializes in green chemistry, which provides innovative solutions aimed at reducing the environmental impact of the energy industry. Flotek develops specialty chemicals tailored for both domestic and international energy producers, as well as oilfield service companies. These chemicals not only help reduce the environmental impact of hydrocarbon production but also lower operational costs.
Energy Transfer is a midstream player that owns and operates one of the most diversified portfolios of energy assets in the United States. Its pipeline network spans more than 130,000 miles across 44 states. With a presence in all the major U.S. production basins, ET’s outlook seems positive.
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Cactus Forms JV With Baker Hughes, Boosts International Presence
Key Takeaways
Cactus Inc. (WHD - Free Report) recently entered into an agreement with Baker Hughes Company (BKR - Free Report) to acquire 65% of the Baker Hughes Surface Pressure Control Business. Cactus’ subsidiary, Cactus Companies, LLC, signed an agreement with the subsidiaries of Baker Hughes to form a joint venture, where BKR will offer its surface pressure control (SPC) product line. Cactus will assume operational control of the joint venture. The total valuation for the transaction is approximately $344.5 million.
Overview of the Baker Hughes SPC Business
Baker Hughes Surface Pressure Control Business is involved in designing, manufacturing, and servicing specialized surface pressure control solutions, which mainly include wellheads and production tree systems. This business operates primarily in international markets. BKR will hold a 35% stake in the joint venture after the transaction closes. This acquisition is expected to establish WHD as a leading player in oilfield equipment manufacturing, with a diverse geographical presence.
Geographic Diversification and Revenue Stability
Cactus noted that this acquisition will still allow it to maintain its position as a capital-light manufacturer of highly engineered pressure control equipment, which can be sold directly to end users. The acquisition is expected to benefit Cactus in terms of diversification, as nearly 85% of SPC’s revenues come from the Middle East, allowing the company to generate diversified and stable revenues from its Pressure Control segment. Furthermore, SPC’s limited dependence on the U.S. market for external sales makes its revenue growth more resilient to domestic market cycles.
Long-Term Growth Potential
The deal is expected to be highly accretive to major financial metrics, providing increased earnings and cash flow growth for the company. Notably, SPC boasts a backlog of more than $600 million in product and aftermarket service orders as of year-end 2024. This is expected to benefit WHD’s revenues and cash flow generation. Additionally, the company intends to maintain a conservative balance sheet.
Cactus mentioned that the geographic footprint of the Baker Hughes Surface Pressure Control Business complements its existing operations in international markets and provides access to new markets that are not affected by tariffs. This applies to both its Pressure Control and Spoolable Technologies product lines. The expanded footprint is expected to support the company’s continued growth and help stabilize its revenue profile across different market cycles.
Zacks Rank & Key Picks
Currently, WHD carries a Zacks Rank #4 (Sell) while BKR carries a Zacks Rank #5 (Strong Sell).
Some better-ranked stocks from the energy sector are Flotek Industries Inc. (FTK - Free Report) and Energy Transfer (ET - Free Report) . While Flotek Industries sports a Zacks Rank #1 (Strong Buy) at present, Energy Transfer carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Flotek Industries specializes in green chemistry, which provides innovative solutions aimed at reducing the environmental impact of the energy industry. Flotek develops specialty chemicals tailored for both domestic and international energy producers, as well as oilfield service companies. These chemicals not only help reduce the environmental impact of hydrocarbon production but also lower operational costs.
Energy Transfer is a midstream player that owns and operates one of the most diversified portfolios of energy assets in the United States. Its pipeline network spans more than 130,000 miles across 44 states. With a presence in all the major U.S. production basins, ET’s outlook seems positive.