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Baker Hughes (BHI) to Create New Fracturing Joint Venture – $BHI

Baker Hughes Incorporated BHI recently declared that it has entered into an accord with CSL Capital Management and The Goldman Sachs Group, Inc. GS to create a fracturing joint venture (JV).

The oilfield services player has gained 31% year to date compared with a 23% gain witnessed by the Zacks-categorized oil and gas field services market. We believe that the deal will help Baker Hughes to maintain this momentum.     

The JV – a hydraulic fracturing firm – will be headquartered in Tomball, TX and is expected to operate under the BJ Services brand of Baker Hughes. It is to be noted that Baker Hughes will have 46.7% interest in the new entity, while the remaining 53.3% will be held by CSL Capital Management and Goldman’s West Street Energy Partners.   

Per the deal, Baker Hughes’ North American land cementing and hydraulic fracturing operations – comprising U.S and Canadian properties – will get added to the JV. However, international pressure pumping operations or Gulf of Mexico offshore pressure pumping businesses of Baker Hughes will not be part of the entity. Moreover, the Allied Energy Services platform of CSL Capital Management will also be included in the JV.   

Together, CSL Capital Management and West Street Energy Partners are expected to contribute cash of $325 million to the JV. Of the total, $175 million will be allocated to the balance sheet of the new entity, while the remainder will be in the possession of Baker Hughes.

Baker Hughes believes that the strong financials, diverse assets and experienced management team of new entity will lend it a competitive edge in the North American land pressure pumping market. This will likely earn sufficient cash flows for shareholders in the long run.

Houston, TX-based Baker Hughes is one of the major oilfield service companies in the world that provides an array of services to the global oil and gas industry. The company recently entered into a deal with General Electric Company GE to create the second-largest oilfield service player in the world after replacing Halliburton Company HAL.

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