GE Increases Presence in Oil and Natural Gas with Acquisition

General Electric is moving to increase its presence in the oil and natural gas market with the purchase of Lufkin Industries. Lufkin makes oil field pumps and are the pumps everyone sees moving back in forth on top of oil wells. GE has been making huge moves in recent years in the oil and natural gas business. Since 2007, the company has spent nearly $11 billion in acquisitions related to the oil and gas business. The oil and natural gas business is the fastest growing section of the company and makes up about 10% of the GE’s revenue right now.

The deal, worth nearly $3 billion, with Lufkin Industries is expected to close by summer and values Lufkin shares at $88.50 per share. This is a 38% premium over Friday’s closing price of $63.93. GE’s CEO Jeff Immelt hinted recent weeks the company will be looking at making acquisitions at the $1 billion to $3 billion. Immelt told analysts natural gas development is the place to be right now, “the place to play both in terms of the U.S. and the rest of the world.”

General Electric is wanting to focus more on oil and natural gas as they think the oil pump market will grow by low teen percents over the next decade.

GE hasn’t made any decision on whether they will keep the Lufkin brand or its staff members, but analysts are saying the company is leaning towards retaining Lufkin’s staff.

Recent earnings from Lufkin have been positive with the company beating profit estimates in the fourth quarter. They did note however that the current quarter could see lower profits due to a slower recovery on shore drilling in the States. While Lufkin operates mainly in the U.S., analysts are expecting GE to use the Lufkin technology elsewhere around the world.

As expected Lufkin shares rose to over $88 a share today. Meanwhile, GE shares are down a couple of pennies at $22.86.

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