Founded in 1898 by Thomas Edison, General Electric (GE) is the epitome of the old-fashioned corporate conglomerate.
And now, the company famous for light bulbs, washing machines and aircraft engines has been successfully expanding into oil and gas technologies.
GE’s new Oil and Gas division came to be through $11 billion in acquisitions.
And that includes the recently announced purchase of oil and gas equipment supplier Lufkin Industries (LUFK) for $3.38 billion.
This rush to growth seems to be paying off.
Oil and Gas is GE’s fastest-growing division, with revenue totaling $15.2 billion in 2012, or 10% of the company’s total annual revenue.
Driving those results has been massive growth in domestic natural gas production, higher shale oil production and rising demand in emerging markets.
And with that, the energy segment should continue to add to GE’s bottom line.
So let’s take a closer look…
The New Kid on the Block
GE Oil and Gas covers every facet of energy production, including land and offshore drilling, deep sea innovations, unconventional energy, refining and petrochemicals, liquefied natural gas, and pipeline and storage.
In fact, GE was recently awarded special recognition for its new 5K Blind Shear Ram deep sea technology at this year’s annual Offshore Technology Conference.
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A blind shear ram is part of a blowout preventer (BOP) – the device that gained infamy during the 2010 Deepwater Horizon disaster.
Its purpose is simple: sever the drilling element and seal the well bore before a spill can occur.
As Chuck Chauviere, GE’s President of Drilling, recently stated: “This technology [is] like an airbag in an automobile. When you need it, you need it to work each time, every time.”
In addition to the 5K Blind Shear Ram, GE has also developed:
- Advanced electrical safety systems for offshore platforms, where 16% of all injuries are electrical, rather than mechanical, in nature.
- A new Acoustic Leak Detection System that uses sound to detect even small oil and gas leaks in subsea equipment.
- Compressed natural gas – GE’s “CNG-In-A-Box” system makes it faster, easier and cheaper for fleet operators to fuel up their natural gas vehicles (NGVs), improving their bottom lines.
- The Micro LNG Plant – a small liquefied natural gas (LNG) plant capable of producing approximately 50 to 150 kilotons of LNG per year, specifically for smaller local markets, like truck stops and refueling stations.
Clearly, GE has transformed itself into a major player in the energy arena.
It may not be out in the oil and gas fields exploring for itself, but it’s there with the equipment and technologies to make production safer, easier and more profitable.
At around $23 per share, with a P/E ratio of about 16, shares are fairly priced.
And with $18.1 billion from the sale of NBC Universal hitting the books, GE plans to return more value to shareholders in the form of dividends and share repurchases.
That makes this a long-term, diversified play.
And “the chase” continues,