GE and Lufkin Industries Inc. announced April 8 a joint agreement whereby GE will acquire Lufkin, a leading provider of artificial lift technologies for the oil and gas industry and a manufacturer of industrial gears, for approximately $3.3 billion.
Artificial lift, used in 94 percent of the roughly 1 million oil-producing wells around the world, helps lift hydrocarbons to the surface in reservoirs with low pressure and improves the efficiency of naturally flowing wells. The global artificial lift sector is expected to approach $13 billion in 2013, according to Spears & Associates.
Upon closing the deal, Lufkin will broaden GE Oil & Gas’ artificial lift capabilities beyond electric submersible pumps (ESPs) to include rod lift, gas lift, plunger lift, hydraulic lift, progressive cavity pumps and an array of well automation and production optimization controls and software. The ESP category of artificial lift is the only lift segment in which Lufkin does not currently compete.
“Advanced technologies, combined with new drilling practices, are revolutionizing the oil and gas industry,” said Daniel C. Heintzelman, president and CEO, GE Oil & Gas, in an official announcement. “The artificial lift segment is at the heart of critical changes that are helping producers maximize well potential—which translates into increased output at lower operational cost. Lufkin’s world-class people, equipment and services fit perfectly in our portfolio and will enable us to offer a wide range of artificial lift solutions to our customers in this fast-growing artificial lift sector. In turbomachinery, Lufkin is already one of our suppliers for turbo gearing and specialty bearings products, and this acquisition allows us to further utilize their technologies and expertise for our customers.”
Headquartered in Lufkin, Texas, with approximately 4,500 employees in more than 40 countries, Lufkin manufactures and services artificial lift equipment through a global network of more than 110 service centers and nine manufacturing facilities. In addition, Lufkin’s three turbomachinery production facilities and seven service centers manufacture industrial gears and engineered bearings that are designed for turbine applications, predominately for energy-related industrial applications.
The transaction is expected to close in the second half of 2013 subject to Lufkin shareholders’ approval, regulatory approvals, and customary closing conditions.
In 2012, Lufkin posted record revenues of $1.3 billion, which reflected growth of 37 percent. New business bookings in 2012 grew 38 percent companywide to $1.3 billion year over year, driven by a 47 percent increase in its artificial lift business. With synergies from GE Oil & Gas’ on a global scale, GE said it believes the business is well positioned for significant top and bottom line growth.
GE’s portfolio of turbomachinery equipment is used in mechanical-drive, compression and power-generation applications such as liquefying natural gas, moving hydrocarbons through pipelines or generating power via gas turbines at a production or industrial site. GE says Lufkin’s suite of gears and bearings will complement GE’s existing product line and are currently in use on GE’s compressor and gas turbines. Lufkin will continue to sell these to the open market as it does today.