HOUSTON — Baker Hughes will spend $250 million to acquire Weatherford’s pipelines and special services business, the companies announced Monday.
The business is the first of four that Geneva-based Weatherford, one of the world’s largest drilling services companies, hopes to sell. Weatherford had announced in November its plans to divest from units it doesn’t consider to be part of its core business, including its businesses in testing and production services, drilling fluids, and wellheads.
“We are pleased to have reached agreement on the sale of this business to Baker Hughes, which complements their existing process and pipeline services business,” said Bernard Duroc-Danner, Weatherford’s chairman, president and CEO. “We believe that Baker Hughes is really well positioned to maximize the potential of this business.”
The pipeline and specialty services division inspects, cleans, tests and helps maintain pipelines, according to Weatherford’s website.
Martin Craighead, chairman and CEO of Baker Hughes, said in a statement that the acquisition of the business would “help us leverage our existing technologies and global supply chain network into profitable, growing markets.” Baker Hughes representatives did not respond to questions about the transaction.
Oil field technology: New rigs march past the old in oil patch
Weatherford hopes to sell the four divisions by the end of 2014, the company has said in filings with the Securities and Exchange Commission. The company expects the four divisions to generate a combined $1.1 billion to $1.3 billion in revenue in 2014, according to a presentation it gave Monday.
The company wants to focus on the core aspects of its business like well construction, formation, completion and evaluation.
Weatherford is selling the four divisions off in hopes of improving its profit margins. With those sales, executives believe margins will improve from 16.3 percent in 2013 to 20 percent or higher in 2016.
The company is also selling the businesses to help pay down its debt. It expects to eventually cut its debt-to-capitalization ratio in half as a result of the transactions.
Meanwhile, Weatherford is trying to become more efficient through a leaner workforce. In January, it announced plans to reduce its workforce by 7,000 positions as part of the divestment strategy. That move is expected to be completed before mid-year. At the close of 2013, Weatherford had about 67,000 employees.
The deal is subject to closing conditions and regulators’ approval.