Q&A with CEO
Lorenzo Simonelli talks about the future of the new Baker Hughes in Houston and beyond.
The new Baker Hughes, a GE company, officially has started its first chapter as the world’s secondlargest energy services giant after General Electric acquired a majority of the storied Houston company.
Ex-GE Oil & Gas chief Lorenzo Simonelli takes over as CEO of the company trading under the “BHGE” ticker symbol, with former Baker Hughes CEO Martin Craighead as the new vice chairman.
A native of Florence, Italy, Simonelli takes the reins of one of the oil field companies most rooted in American ingenuity dating to the businesses founded about 110 years ago by Howard Hughes Sr. and Reuben “Carl” Baker. BHGE will have dual headquarters, in Houston and London. An edited interview follows.
Q: The energy market is very tight
with low oil prices. Where are the best opportunities for the new Baker? How would you describe the strengths?
A: When we decided to complete this merger and announced it in October, it was really to create a transformation in the industry. We’re really able to take the historical strength and capability of Baker Hughes in the oil field services space and align it with the equipment focus that GE Oil & Gas has to drive better outcomes for our customers. We’re going to be linking in to the data analytics and the industrial operating system with the capabilities and all the rich data Baker Hughes has, from all of its drilling services, its drill bits, and then marry it up.
Q: You talk about marrying services from oil production to electricity generation — upstream through downstream. Is that the idea for more integrated services?
A: What does Baker Hughes do for us? It really helps to complete the full integration of what we’ve done, full stream. And that means from the upstream all the way down, to provide our customers capability and productivity second to none.
Q: In that way, do you believe chief competitors like Schlumberger and Halliburton fall short?
A: I have nothing but respect for the competitors. When you look at our offering, though, it’s differentiated because we truly have an industrial operating system, which is in-house, called Predix. To my knowledge that isn’t in place in Schlumberger or Halliburton — they’re working with third parties. Most of all, you look at the linkage we have into actually doing something with the molecule itself. When you think about the midstream, the liquefaction and being able to provide LNG. When you think about being in a refinery, and being able to help provide that petrochemical. Or, when you think about creating gas to power linkage with power generation. We’ve got the linkage for the GE Store and GE Power. And that is something that makes us very unique across the value chain.
Q: How about redundancies in the two companies? Everyone is always worried about layoffs. What does the merger mean for workers in Houston and worldwide?
A: We’ve always said this is a complementary transaction, and we feel good about the two portfolios coming together. That being said, there are cost synergies. And we’ve also been very clear in the target we’ve set ourselves by 2020, with the $1.2 billion. Predominantly, you look at rooftops. We’re going to have a lot of empty spaces already. We’re able to combine and bring those rooftops down. We’re able to look at the supply chain where we’re buying from the same suppliers, we’re able to rationalize. Is there people impact? Yes. As you look at some of the other areas, from an enabling perspective, as you look at trying to drive productivity. But our focus is really on that combination being complementary.
Q: Where will the consolidations occur, in terms of building space, and what properties might be sold or subleased in the Houston area?
A: That is something that the integration team is working through. I think we have over 40 properties here in Houston. We clearly need a lot of those properties. It’s something that the integration team will look at and be very conscious about what leases to keep, what leases don’t make sense, also where we have the headquarters here at Aldine Westfield, and the big presence already.
Q: You’re moving from London to Houston, so how engaged will you be in both the local and global operations?
A: I am stationed where I need to be stationed. And I would also say I am very much hands-on in the new company. I will be residing in Houston. At the same time, I travel extensively already, and I think it’s important for a global leader to be close to the employees and the customers, and I intend to keep that global reach.
Q: How has the closing process gone? GE is selling its Water & Process Technologies business to satisfy regulators — was that more than what you wanted?
A: I want to give recognition to the team for getting done what we said we’d get done in the timeline we said. The team’s done phenomenal job. The GE Water business wasn’t in the GE Oil & Gas portfolio. It was a decision from a strategic standpoint that GE made to dispose of that business irrespective of the transaction. It was announced at the same time. We knew there was some overlap there.