G.E. Deals for Unconventional Oil Support Unit

Wednesday, February 16, 2011 @ 01:02 PM gHale

In an effort to boost its unconventional oil and natural gas production services, General Electric will pay $2.8 billion to pick up the John Wood Group’s well-support business.

The deal is the latest by G.E. in the energy sector, as the behemoth builds out its deepwater oil and natural gas production capabilities. G.E. said the International Energy Agency forecasts that unconventional natural gas production would make up about 35 percent of global supply by 2035, while unconventional oil production would account for 10 percent.

G.E. has already struck several deals, including the $1.3 billion takeover of Wellstream Holdings of Britain two months ago.

John Krenicki Jr., president and chief executive of G.E.’s energy business, said the purchase of the well-support division of John Wood would give G.E. a large market presence in fast-growing segments of the oil and natural gas industry. John Wood, for example, makes specialized pumps used for enhanced recovery in large oil wells.

Two thirds of the world’s oil, comes from about 300 giant wells, where one third of the oil is out of the ground so far, Krenicki said. Combining G.E.’s energy research with technology from John Wood should lead to improvements in oil recovery.

Last year, John Wood’s well-support business posted a 55 percent jump in earnings, to $166 million, atop $947 million in revenue. The unit has more than 3,800 employees and more than 20 manufacturing and service centers around the world.

The deal should close later this year.

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