Baker Hughes
| Company type | Public (NYSE: BHI) |
|---|---|
| ISIN | US05722G1004  |
| Industry | Oil and Gas |
| Founded | 1987 (merger) |
| Headquarters | Headquarters in Houston. Operates worldwide |
Key people | Chairman & CEO: Chad Deaton, President & COO James Clark |
| Products | Oilfield services & equipment |
| Revenue | $9.0 billion USD (2006) |
Number of employees | > 34,600 worldwide (2007) |
| Website | BakerHughes |
Baker Hughes NYSE: BHI is the world's third-largest oilfield services company behind Schlumberger & Halliburton, its main competitors. Baker Hughes provides the world's oil & gas industry with products and services for drilling, formation evaluation, completion and production. Baker Hughes operates in over 90 countries worldwide mainly based in countries with a mature petroleum industry as is the case with most oil & gas service companies.
Baker Hughes Incorporated was formed when Baker International and Hughes Tool Company merged in 1987. Baker Hughes is headquartered in Houston, Texas and operates worldwide with major offices in Aberdeen (UK), Singapore, Dubai, Research & Maintenance Facility in Celle (Germany), (Lafayette) Louisiana, Houston, Pescara (Italy), Kuala Lumpur (Malaysia) and Hartlepool, UK. The company is administered broadly in four regions worldwide, namely EARC (Europe, Africa, Russia & Caspian), MEAP (Middle East, Asia-Pacific), NA (North America) and LA (Latin America). Chad Deaton is the CEO.
History
Baker Hughes is the combination of many innovative companies that have developed and introduced technology to serve the petroleum service industry. Their combined history dates back to the early 1900s. During its history, Baker Hughes has acquired and assimilated numerous oilfield pioneers including: Brown Oil Tools, CTC, EDECO, and Elder Oil Tools (completions); Milchem and Newpark (drilling fluids); EXLOG (mud logging); Eastman Christensen and Drilex (directional drilling and diamond drill bits); Teleco (measurement while drilling); Tri-State and Wilson (fishing tools and services); Aquaness, Chemlink and Petrolite (specialty chemicals), Western Atlas (seismic exploration, well logging).
The Hughes Tool Company was founded by Walter B. Sharp and Howard R. Hughes, Sr., father of Howard Hughes, Jr., the famous aviation enthusiast (of The Aviator movie fame) who flew the infamous Spruce Goose. In 1908, Howard Hughes, Sr. and his partner Walter Sharp, built the first two-cone bit, designed to enable rotary drilling in harder, deeper formations than was possible with earlier fishtail bits. They conducted two secret tests on a drilling rig in Goose Creek, Texas. Each time, Hughes asked the drilling crew to leave the rig floor, pulled the bit from a locked wooden box, and then his associates ran the bit into the hole. The drill pipe twisted off on the first test, but the second was extremely successful. In 1909, the Sharp & Hughes bit was granted a U.S. patent. In the same year, the partners formed the Sharp-Hughes Tool Company in Houston, Texas to manufacture the bit in a rented space measuring 20 by 40 ft. After Walter Sharp died in 1912, Mr. Hughes purchased Sharp's half of the business. The company was renamed Hughes Tool Company in 1915. Through the 1950s and 1960s, Hughes Tool Company remained a private enterprise, owned by Howard Hughes, Jr. Howard Hughes, Jr. formed the Hughes Aircraft Company, which was eventually splintered into various business units and merged into companies of Raytheon, General Motors and Boeing. While Mr. Hughes was engaged in his Hollywood and aviation enterprises, managers in Houston, such as Fred Ayers and Maynard Montrose, kept the tool company growing through technical innovation and international expansion. In 1958, the Engineering and Research Laboratory was enlarged to accommodate six laboratory sections that housed specialized instruments such as a direct reading spectrometer and x-ray diffractometer. In 1959, Hughes introduced self-lubricating, sealed bearing rock bits. After collecting data from thousands of bit runs, Hughes introduced the first comprehensive guides to efficient drilling practices in 1960. The year 1964 saw the introduction of the X-Line rock bits, combining new cutting structure designs and hydraulic jets.
Baker International was formed by Reuben C. Baker, who developed a casing shoe that revolutionized cable tool drilling. In July 1907, R.C. Baker, a 34 year-old inventor and entrepreneur in Coalinga, California, was granted a U.S. patent for a casing shoe that enabled drillers to efficiently run casing and cement it in oil wells. This innovation launched the business that would become Baker Oil Tools and Baker Hughes Incorporated. Mr. Baker had arrived in the California oilfield in 1895 with 95 cents in his pocket and dreams of making his fortune in the Los Angeles oil boom. Subsequently, he hauled oil for drillers with a team of horses and became a drilling contractor and an oil wildcatter before achieving success as an innovator in oilfield equipment. In 1928, Baker Casing Shoe Company changed is name to Baker Oil Tools, Inc., to reflect its broad product line of completion, cementing and fishing equipment.
In early 1956, during one of the most successful periods in the company's history, Reuben C. Baker retired as President of Baker Oil Tools. A few weeks later, he died after a brief illness. He was 85 years old. R.C. Baker left a legacy of creative genius, integrity, and dedication to providing quality products and services to the oil and gas industry. Although he only had three years of formal education, Mr. Baker was awarded 150 patents. He was succeeded as Baker Oil Tools president by his long-time associate Ted Sutter. During its 80-year history before the Baker Hughes merger, Baker would have only three chief executives. In 1965, Mr. Sutter was succeeded by E.H. "Hubie" Clark, who would become the first Baker Hughes chairman of the board in 1987.
The legacy companies of Baker Hughes completing 100 years of service in 2007 is being celebrated as an accomplishment of its corporate history.
Business Units
Drilling & Evaluation Group
- Hughes Christensen - Hughes Christensen provides Tricone® and PDC drill bits, ream-while-drilling tools and drilling optimization services.
- Baker Atlas - Baker Atlas provides wireline-conveyed well logging, data analysis and perforating services for formation evaluation, production and reservoir management.
- Baker Hughes Drilling Fluids - Baker Hughes Drilling Fluids provides fluids systems and services that help optimize the drilling and completion processes, maximize hydrocarbon production and manage drilling waste.
- INTEQ - INTEQ provides directional drilling, measurement-while-drilling (MWD), logging-while-drilling (LWD) and wellsite information services.
Completion & Production Group
- Baker Oil Tools (BOT) - Baker Oil Tools provides completion and intervention solutions that help manage cost and risk while optimizing production.
- Baker Petrolite - Baker Petrolite provides chemical technology solutions for hydrocarbon production, transportation and processing, and also delivers pipeline integrity services.
- Centrilift - Centrilift provides artificial lift systems, including electric submersible pumps (ESP) and progressive cavity pump systems, as well as specific engineering, project management and well monitoring services.
- ProductionQuest - ProductionQuest business unit provides technology and services that help maximize recovery from both new and mature fields. The unit provides production optimization services centered on the wellbore, including permanent monitoring, chemical automation, intelligent production systems, and consulting services.
Legacy Companies
Completions
In 1929, Cicero C. Brown organized Brown Oil Tools in Houston, and patented the first liner hanger in 1937. Liner hangers enable drillers to lengthen their casing strings without having the liner pipe extend all the way to the surface. This saves capital cost and reduces weight borne by offshore platforms. Hughes Tool Company acquired Brown Oil Tools in 1978. In 1970, Baker Oil Tools acquired Lynes, Inc., which produced liner hangers and other completion equipment. In 1978, Baker Oil Tools introduced the Bakerline casing liner hanger. In 1985, the FlexLock® Liner Hanger Packer was introduced, extending the performance range and functionality of liner hanger systems. In 1987, the Brown liner hanger technology was merged into Baker Oil Tools. In 1992, BOT introduced the ZXP Liner Hanger Packer, with expandable metal seals, which set the stage for development of expandable screen and casing systems. Today, Baker Oil Tools is the industry leader in liner hanger technology, and liner hanger systems are BOT's largest product line.
In 1994, Baker Oil Tools introduced multilateral completion systems, which enabled operators to install completion tools and perform selective intervention work in multiple horizontal sections from a common main wellbore. The division established itself as the leader in high-end multilateral solutions.
Production
- Centrilift
In 1957, the Centrilift electrical submersible pump (ESP) was developed in Vernon, California, and the product line was purchased by Byron Jackson Pumps division of Borg Warner. More than 20 prototypes were built and tested. In 1959, the first Centrilift ESP system was installed in a well on Signal Hill in Long Beach, California. Also in 1959, Centrilift's engineering and manufacturing operations were moved to Tulsa, Oklahoma. In 1980, Hughes Tool Company purchased Centrilift from Borg Warner, and the Claremore plant was opened the same year. Also in 1980, Centrilift acquired variable speed drive technology when it purchased Submergible Oil Services. With the addition of the cable plant in 1983, Centrilift took design and manufacturing control over all major ESP components. The company is still the only ESP supplier that holds this distinction.
Also during the 1990s, Centrilift continued to strengthen its manufacturing capabilities in Claremore, Oklahoma, introduced new products and expanded its markets to the Eastern Hemisphere, including Russia, China, and to Venezuela in South America. In 1993, Centrilift began to export ESP systems to the Former Soviet Union, establishing Baker Hughes as a supplier in this slowly emerging market. During the decade, Centrilift introduced the Electrospeed® ICS Variable Speed Controller, and the Horizontal Injection Pump. In 1997, Centrilift strengthened its capabilities with the acquisition of Oil Dynamics, Inc, an ESP competitor with unique technology
Drilling Fluids
In 1931, Max B. Miller devised a drilling mud using a white clay as a weighting material. To market the new mud, he formed The Milwhite Company in Texas. In the mid-1930s, the company mined barites in conjunction with the Magnet Cove Barium Corporation (later called Magcobar). After a hiatus during World War II, the company resumed grinding operations using barite from a mine in Missouri and conducted mud sales through independent distributors. After 1956 Milwhite Mud Sales Company built its own sales network. In 1963 the company acquired the Aquaness chemical company, and in 1964 the combination became Milchem Incorporated. In 1971, Baker Oil Tools acquired Milchem. In 1985, Baker International acquired the drilling fluids division of Newpark Resources and merged it with Milchem's mud division to form Milpark. Meanwhile, in 1942, Oil Base Drilling Company was founded by George Miller, and made its first application of oil base mud. The company was acquired by Hughes Tool Company in 1979, and renamed Hughes Drilling Fluids in 1982. In 1987, when Baker Hughes was formed, Hughes Drilling Fluids was merged into Milpark, and in 1993, Milpark became a product line within Baker Hughes INTEQ. Baker Hughes Drilling Fluids was established as a stand-alone division in 2004.
Mud Logging
In 1952, in Sacramento, California a group of Stanford University engineering and geology graduates founded Exploration Logging Company (EXLOG) to provide geologic mud logging services from mobile logging units using technical innovations in hot-wire gas detection. Vern Jones was the company's first president. EXLOG would become a world leader in surface logging, rig instrumentation and data acquisition. Baker International acquired EXLOG in 1972, and invested in its expansion. By the 1982, the company had more than 200 logging units and 1,000 geologists on staff. Its broad expertise in geological services would eventually become the Surface Logging Service product line of Baker Hughes INTEQ.
Directional Drilling & Diamond Drill Bits
In 1929, H. John Eastman introduced "controlled directional drilling" in Huntington Beach, California, using whipstocks and magnetic survey instruments to deflect the drill pipe from shore-based rigs to reach oil deposits offshore. In 1934, Mr. Eastman gained notoriety, and respect for directional drilling techniques, when he drilled the world's first relief well to control a blowout in Conroe, Texas, that had been on fire for more than a year. INTEQ carries on the leadership in directional drilling established by the original Eastman Oilwell Survey Company.
In 1957, Christensen Diamond Products opened its manufacturing plant in Celle, Germany. The facility built diamond core heads and drilling bits and soon began producing stabilizers, drilling jars and other equipment. In 1977, the Celle engineering and manufacturing team introduced the Navi-Drill® line of downhole drilling motors, which has led the drilling industry in performance and reliability for three decades. Other innovations developed in Celle include the industry's first steerable motor system, and the AutoTrak Rotary Closed Loop System. In 2007, the Celle Technology Center became Baker Hughes' leading research and engineering facility in the Eastern Hemisphere.
Measurement while Drilling
Teleco Oilfield services Inc was founded in 1972 and introduced the world's first MWD tool [1] in 1978. Schlumberger introduced the LWD service in 1980. The legacy MWD company Teleco Oilfield Services Inc. was integrated into a new division, to be known as Eastman Teleco in 1992. The division then merged the directional drilling products and services once marketed by the Eastman Christensen division with Teleco's measurement-while-drilling (MWD) services. In January 1992, Baker Hughes agreed to purchase Teleco from Sonat Inc. for $200 million cash, preferred stock and royalty from future sales of Teleco's "triple combo" sensors.
Before the acquisition, Teleco was recognized as the world's leader in MWD, with an estimated $140 million in revenues, of which about $120 million were from MWD alone. Eastman Teleco was then combined with others to form INTEQ in 1997
Simultaneously, Baker Hughes sought to strengthen its directional drilling capabilities. Soon after the creation of INTEQ, the company introduced the NaviGator reservoir navigation system, combining the Navi-Drill® steerable drilling motor and quantitative resistivity MWD measurements near the bit. The system was specifically designed to use geosteering techniques for precise well placement within the reservoir.
Fishing Tools & Services
Specialty Chemicals
William Barnickel's Tret-O-Lite business in 1920 had outgrown his initial manufacturing plant, so he built a new one in Webster Groves, Missouri. The ingenious new facility had six times the capacity of the old plant and was built on a hillside so that raw materials were unloaded from a railroad line on the top of the hill, and the chemicals flowed through the plant using the force of gravity. Finished product was loaded on rail cars at the bottom of the hill. In 1922, the company sold 10,815 drums of Tret-O-Lite demulsifier, representing a recovery of 50 million barrels of oil from produced oil/water emulsion. In 1923, Mr. Barnickel died at age of 45, of a perforated ulcer, and John S. Lehmann succeeded him as Tret-O-Lite president.
Meanwhile, Frederick Cottrell and James Speed were developing electrostatic methods for separating oil from water. In 1911, Allen C. Wright formed the Petroleum Rectifying Company of California (PETRECO), which built electric dehydrating plants --based on Contrell's and Speed's inventions -- to serve California oilfields. By 1922, Petreco had 417 treaters in operation, but was running into competition from Barnickel and his chemical process. In 1930, as the worldwide Depression began, the two competing companies -- PETRECO and Tret-O-Lite-- merged to form Petrolite
Wireline Logging & Geophysical Exploration
(previously formed by the merger of Dresser Atlas & Western Geophysical)
In 1932, Bill Lane and Walt Wells invented bullet gun perforating and formed the Lane-Wells Company in Vernon, California. They performed their first job on Union Oil's La Merced #17 well in Los Angeles. The company that would become Western Atlas (later Baker Atlas) grew quickly and added other wireline services, including the gamma ray log in 1939 and the neutron log in 1941, which were developed by Well Surveys Inc., an affiliated company. In 1948, a Lane-Wells crew performed the company's 100,000th job on La Merced #17, the site of the first perforating run. In 1963, Baker Atlas predecessor Lane-Wells introduced the Neutron Lifetime Log service, providing the ability to detect oil through well casing, and initiating the line of Baker Atlas pulsed-neutron logging tools for cased hole logging and reservoir monitoring. It took another five years for competitors to introduce a comparable service. Beginning in 1948, Well Surveys Inc. physicist Arthur Youmans led the team of engineers and scientists to develop this technology. The highly complex instrument included a miniaturized particle generator and sensors to detect and analyze sub-atomic particles. Mr. Youmans went on to become Vice President of Research and Engineering for Dresser Atlas. In 1968, Lane-Wells and the Pan Geo Atlas Corporation (PGAC) merged to form Dresser Atlas, a name chosen to “position” the company as more than a perforating provider and as part parent company of Dresser Industries. A competitor with Lane-Wells but possessing deeper expertise and an international reputation in open hole logging, PGAC was the perfect merger partner to form an integrated wireline services company. Since its inception, Lane-Wells had generated most of its income from perforating services, but log interpretation had narrowed down producing zones, resulting in fewer perforations and less revenue. During the oil slump of the 1999, Western Atlas was acquired by Baker Hughes and the wireline division was created within the company rebranded as Baker Atlas. Western Geophysical was meanwhile allied with GecoPrakla of Schlumberger and later combined into a separate business entity called WesternGeco.
Joint venture
In 2000, Baker Hughes and Schlumberger formed a joint venture called WesternGeco. The Joint venture was signed for a period of five years in November 2000. WesternGeco was formed by the merger of Baker Hughes's Western Geophysical and Schlumberger's Geco-Prakla which were the two leading seismic interpretation companies of the time. Due to diminishing exploration markets, new marginal oil fields, and low barrel prices the worldwide business of seismic exploration was surviving on just the corporate strength of the two big service companies. The only new technology that was being introduced at the time was the 4-dimensional seismic survey monitoring.
In 2006, Baker Hughes announced in a press release that it was selling its 30% share of the WesternGeco joint venture to Schlumberger for $2.4 billion in cash. Baker Hughes used the services of Goldman, Sachs & Co. who consulted them on the sale.