Baker Hughes CEO Martin Craighead on Monday offered CNBC an explanation for why his company's stock sank that morning when the oilfield services company announced it would merge with General Electric's oil and gas business: The deal is complicated.
He may have been referring to the unique ownership structure, but the combination is also complicated because it creates a new type of oilfield services firm that defies easy comparisons. The new GE-controlled Baker Hughes would be the world's second-largest oilfield services company, with revenue projected at $34 billion in 2020.
GE Oil & Gas is primarily known as an equipment manufacturer, while Baker Hughes specializes in services and products like horizontal drilling and hydraulic fracturing, which is used to free oil and gas from shale rock by pummeling it with water, minerals and chemicals.
"The combination of GE Oil & Gas with Baker Hughes I think is increasingly blurring the lines between the oilfield equipment manufacture process and the services element," said Byron Pope, managing director of oil service research at investment bank Tudor Pickering Holt.
The marriage of the two will create what executives billed as the first-ever "fullstream" services company — meaning it will cater to all of the industry's three "streams": upstream exploration and production, midstream transportation, and downstream refining and marketing.
But the unprecedented nature of its business mix has raised concerns among some analysts about how the companies will be integrated — especially since that is where most of the shareholder value is supposed to lie. Shares of Baker Hughes fell almost 3 percent Tuesday, after their more than 6 percent drop Monday, suggesting investors remain skeptical.