What is in this article?:
- GE to Acquire Lufkin Industries for $3.3 Billion
- GE's Energy Efforts
- “Artificial lift” systems critical to strategy
- Gray and ductile iron foundry, too
- “…revolutionizing the oil-and-gas industry”
Lufkin Industries, a Texas-based designer and manufacturer of oilfield rigs, pumps, and related equipment, agreed to be bought by General Electric Co. for an estimated $3.3 billion. GE’s specific interest in the Lufkin, TX, company apparently is its line of “artificial lift” systems, which are used by nearly all of the word’s oil-producing wells, and are in particular demand for shale oil extraction. However, Lufkin produces a variety of products and machinery for drilling operations, and operates a captive iron foundry.
GE Oil & Gas president and CEO Daniel C. Heintzelman said Lufkin’s equipment and services fit the group’s current portfolio, and would allow it to offer a wider range of artificial lift solutions.
“Artificial lift” is a pumping process used to lift hydrocarbons to the surface in reservoirs with low pressure, and improves the efficiency of naturally flowing wells. GE referenced a source that indicated the global artificial lift sector will approach $13 billion in 2013, driven by the development of shale oil reserves and “liquids rich” fields.
“Artificial lift will continue to see robust demand as operators try to boost production using enhanced recovery methods,” explained Frost & Sullivan Chirag Rathi. “Lufkin’s gear manufacturing unit was already a supplier to GE’s turbo machinery division, so the acquisition of a key supplier of transmission systems gives a huge competitive advantage to GE in the turbo machinery market.”
Rathi said the acquisition is among a series of strategic initiatives transforming GE into a more integrated, oilfield services company, “which is GE's long-term objective."
Lufkin’s products include various oilfield-pump designs, well automation systems, gas lift and plunger lift systems, progressing cavity pumps, and well completion products. It also produces power transmission products.
It manufactures pumps at three turbo-machinery plans and operates seven service centers that produce industrial gears and engineered bearings.
The Lufkin Industries foundry, also in Lufkin, TX, is more than a century old. It produces e than 330 tons per day of medium- and large-sized ductile iron and gray iron castings, for captive manufacturing as well as customers producing agricultural, mining, and construction equipment, renewable energy systems, machine tools, material handling systems, water works, and the oilfield business.
The Frost & Sullivan analyst said Lufkin’s foundry business “will provide benefits to (GE’s) recently acquired valves portfolio, and other heavy equipment manufacturing divisions.”
Lufkin has more than 4,500 employees across all manufacturing segments. President and CEO John F. "Jay" Glick said “the global scale that GE offers, combined with its deep service offerings and network of research labs, will create new opportunities for our customers and employees around the world.
“This transaction allows us to realize our strategic objectives for expanding both our portfolio and our global platform, and will allow us to reach global customers much faster and more effectively than we could have done as a standalone company,” according to Glick.
He offered that the financial terms of GE’s proposal represent “full and fair value for Lufkin’s shareholders.”