Welcome back to the Deep Dive. We are pulling
a complex corporate giant out of the ground today.
Oh, really are. We are cracking open the history,
the strategy, and what I think is a massive internal
pivot of Baker Hughes Company. And when you hear
that name, you likely picture the rugged world
of, you know, deep oil and gas drilling. And
you would be right. For the most part. But the
modern strategic map of this company looks radically
different from its legacy. That's it. That's
the core mission of this Deep Dive. We're going
to trace the century -plus history of this global
energy technology powerhouse. Right, and analyze
how constant, often aggressive mergers and acquisitions
built its current identity. And most importantly,
I think, understand its dual organizational focus.
Exactly. It's split between the traditional oil
services and this unprecedented push into new
energy technologies like carbon capture, hydrogen,
and even geothermal. Exactly. So this isn't just
a corporate history lesson. This is a blueprint
for corporate adaptation on a truly immense scale.
It really is. Okay, so let's unpack this with
some quick context. We're looking at a Fortune
500 company. It's co -headquartered in Houston,
Texas. The heart of the oil patch. And London,
UK, which I think reflects its global and increasingly
European energy transition focus. That's a great
point. And it's a major component of both the
NASDAQ 100 and the S &P 500. And you have to
appreciate the sheer scale of the operation we're
discussing here. Absolutely. For 2024, the company
recorded a revenue of U .S. $27 .83 billion.
billion. Wow. And they employ approximately 57
,000 people globally. They're operating facilities
and service locations in over 120 countries.
So everywhere. Basically everywhere, stretching
across every major hydrocarbon and renewable
energy basin from the North Sea to the Middle
East, Australia to the Gulf of Mexico. A company
this large doesn't change direction easily. So
this is a true strategic shift we're talking
about. It has to be, which is why the roots are
so important. Right. Before Baker Hughes was
Baker Hughes, there were two distinct corporate
empires, each founded on a single brilliant mechanical
innovation. Yeah. We have to start between, what,
1907 and 1987. That's when these two separate
giants were just revolutionizing how we accessed
underground energy. And it's fascinating how
complementary their original expertise was. It
really is. The eventual modern company was born
from the union of two really distinct specialties.
One was mastering the sheer mechanical act of
drilling the hole. Okay. And the other was perfecting
the science of completion and production. You
know, making the well -bore secure and getting
the fluid to flow efficiently. Two sides of the
same coin, really. Exactly. So let's start with
the Hughes Tool Company, founded in 1908. We
all know the name Hughes, right? Mostly because
of Howard Hughes Jr. The famous aviator, filmmaker,
the eccentric billionaire. Right. But the actual
foundational genius, it came from his father,
Howard R. Hughes Sr., working with his partner,
Walter Bonona Sharp. And that foundational invention,
the reason Hughes is still a household name in
the drilling sector, was the two -cone drill
bit. So what was so special about that? I mean,
what were they using before? Well, before 1908,
when you drilled for oil, especially with those
early rotary rigs, you used what were called
fishtail bits. Fishtail bits, okay. Yeah, they
were essentially sharp pieces of steel that just
scraped the rock. They worked okay, you know,
in soft sedimentary formations. But when you
hit hard rock -like igneous or dense limestone,
which you often find when you're trying to access
deeper, older reservoirs, they just failed. They
just stopped. They stopped. The drillers either
had to give up or switch to the much, much slower
percussive cable tool method. So the two -cone
bit changed the fundamental physics of drilling.
Completely. Instead of scraping, Hughes and Sharp
designed two rotating cones with hardened teeth.
and they were positioned to roll across the bottom
of the hole. So they're crushing, not scraping.
They're shearing and crushing the rock simultaneously.
This allowed rotary drilling to tackle those
deeper, harder formations that were previously
inaccessible. It unlocked vast new oil reserves
across the entire globe. The impact must have
been immediate. It was immediate and massive.
It transformed drilling from a geographical gamble
into a viable deep -earth engineering project.
And the origin story is it's pure industrial
folklore. You have to tell the anecdote of the
Goose Creek secret in Texas. It is cinematic,
isn't it? Hughes Sr. was paranoid about protecting
his intellectual property. And for good reason.
For very good reason. The technology was revolutionary.
So he conducted the first two tests on a drilling
rig in Goose Creek. And he'd physically request
the entire drilling crew to leave the area. No
way! Brought the prototype bit out of a locked
wooden box and conducted the operation in total
privacy with only his trusted associates. So
what happened? Well, the first run was not without
drama. The drill pipe actually twisted off, which
kind of highlights the massive forces at play
here. Sure. But the second test was an unqualified,
spectacular success. It demonstrated the bit
could just chew through rock that had previously
stopped drilling cold. And that led to the patent.
It led to the founding of the Sharp Hughes Tool
Company in 1909, and the patent was granted to
Hughes on August 10, 1909. And the scale started
very small, as most great industrial firms do.
Tiny. Their first dedicated manufacturing shop
was just a 20 foot by 40 foot rented space. And
then in 1912. Sharp passed away. Right. And Hughes
Sr. bought out his partner's share. The company
was officially renamed Hughes Tool Company in
1915. This is where the narrative thread gets
complicated. Very. Hughes Sr. died unexpectedly
in 1924, and the company was inherited by his
son, Howard Hughes Jr., who was just 19 at the
time. And the junior Hughes was, let's say, famously
uninterested in manufacturing tools. Not at all.
His passions were in aviation, film production.
and ultimately a reclusive life. So who ran the
company? I mean who kept the lights on? It's
a great example of the technical expertise and
management depth that existed independent of
the owners. Astute managers in Houston, particularly
Fred W. Ayers and Maynard Ellsworth Montrose,
they kept the company growing. So they were the
ones who insisted on continued R &D and international
expansion. They turned the company into a cash
machine that, you know, fueled Hughes Jr.'s increasingly
expensive hobbies. And they kept the intellectual
property flowing. Constantly. The two -cone bit
was great, but they kept improving. In 1933,
they introduced the tricone drill bit. It refined
the original concept, spread the load, and just
ensured a smoother operation. And then came the
really big leap in efficiency in 1959. The self
-lubricating, sealed -bearing rock bits. Yes.
That detail about the sealed bearings is so critical
for you to understand. Before that, the bearings
on the cones would rapidly wear out because of
the abrasive drilling mud and high heat. Right.
And when the bearings failed, the bit was useless.
So you had to stop drilling, pull the entire
string of pipe out of the hole, which could take
hours or even a full day on a deep well, just
to replace the bit. It's what the industry calls
non -productive time, and it's incredibly expensive.
So sealed bearings dramatically extended the
bit's life, reducing that non -productive time
and just cutting costs tremendously. Precisely.
And they were pioneers in the science of efficient
drilling, not just the tools themselves. That's
right. They opened an enlarged engineering and
research laboratory in 1958. It had advanced
instruments like a direct reading spectrometer.
And they published the industry's first comprehensive
guides to efficient drilling practices in 1960.
So they transitioned from just selling hardware
to selling an engineered solution. Exactly. And
then in the 1970s, Hughes Tool began its acquisition
spree. In 1978, they acquired Brown Oil Tools,
which had been around since 1929. patented the
first liner hanger in 1937. Let's pause on the
liner hanger for a moment because this is an
essential completion technology. It really is.
So when you drill a deep well, you continuously
run casing pipe down the hole to prevent the
wellbore from collapsing. Okay. But running that
pipe all the way back to the surface becomes
incredibly expensive and heavy. A liner hanger
allows you to hang a new, shorter string of casing
aligner from the bottom of the previous larger
string. It saves time, material, and structural
weight. Yes, which is particularly important
for offshore platforms. So by acquiring Brown,
Hughes bought critical completion expertise.
They also expanded into drilling fluids, or mud.
In 1979, Hughes' tool acquired oil -based ink,
or OBI. And they were pioneers in specialty drilling
fluid additives. They famously introduced black
magic SFT in 1949, a product still sold today.
And what did that do? This additive was used
to free pipe when it got stuck in the hole, which
is a very common and very costly operational
issue. So Hughes was moving beyond just the bit
and into the entire downhole ecosystem. Okay,
so that's pillar one. Now we turn to the second
pillar. Baker Oil Tool Company, founded around
the same time, starting in 1907. And if Hughes
was the mechanical innovation focused on destroying
the rock. Baker was the completion engineering
genius focused on securing the wellbore. And
the founder, Ruben C. Baker, is one of those
incredible stories of American ingenuity. Oh,
absolutely. The sources show he was a farm boy,
only three years of formal education. Three years.
Yet he went on to receive over 150 patents in
his lifetime. He started in the oil patch in
1895, just hauling oil. And by 1896, he was a
drilling contractor himself. He saw all the problems
firsthand. His core revolutionary invention patented
in July 1907 was the casing shoe. And this was
monumental, especially for the cable tool drilling
techniques that were so prevalent then. When
you run casing into a well, especially through
unstable formations, debris can fall into the
bottom and block the pipe. or the casing itself
can get damaged. So the casing shoe goes on the
very bottom of the casing string. Right. It has
specialized guides and often features a float
valve. Its purpose is basically threefold. To
guide the casing past obstructions, to protect
the bottom edge of the pipe from damage, and
most importantly, to allow the efficient running
and subsequent cementing of the casing. Which
ensures the uninterrupted flow path for the oil
once the well is perforated. Precisely. So he
established the Baker Casing Shoe Company in
1913, but he quickly realized the potential for
a much broader range of downhole tools. So by
the 1920s, they were aggressively expanding.
They established a critical Houston base and
changed the name to Baker Oil Tools, Inc. In
1928, reflecting a product line that was now
focused on cementing, fishing, which is retrieving
lost tools, and other completion equipment. Their
growth continued through the mid -century, and
it was driven partly by necessity. The Model
D Packer was introduced in 1942, partly spurred
by steel shortages during World War II. The Model
D packer was key because it enabled multiple
completions in a single well bore. What does
that mean exactly? Before, you might need several
different wells to produce from different geological
zones. A packer seals the annulus, that's the
space between the casing and the production tubing,
and it allows engineers to isolate specific zones
for selective production, testing, or treatment.
So it's a massive leap in efficiency. Huge. It
earned the company the prestigious Army -Navy
-E flag in 1943 for their wartime manufacturing
contributions. Baker himself retired in 1956
and passed shortly after. But the company culture
he built, focused on relentless patents and acquisition,
just continued. By 1976, the company was large
enough to rebrand as Baker International Corporation,
consolidating its massive portfolio in Houston.
We see that same aggressive acquisition strategy
mirroring Hugh's tool. Oh, yeah. In the 1960s,
Baker International acquired Pressure Services
in 62 and then COBE in 63, which manufactured
high -tech hydraulic systems for oil well pumping.
They were diversifying beyond passive tools into
active downhole equipment. And crucially, they
solidified their completion expertise by acquiring
Lines Inc. in 1970, which produced liner hangers.
You guessed it, liner hangers, a key technology
they now shared with their future merger partner,
Hughes. The market was clearly demanding these
comprehensive solutions. But the acquisition
that truly broadened their scope was Miltim in
1971. A major drilling fluids provider. Right,
tracing its history back to the 1930s and drilling
fluids. are the lifeblood of the drilling process.
They lubricate, cool the bit, control formation
pressure, and they carry cuttings back to the
surface. So Milcom provided the chemical expertise
that complemented Hughes' mechanical expertise.
Exactly. And the need for knowledge just kept
pushing them. In 1972, Baker International acquired
Exploration Logging Company, or XOG. XOG specialized
in mud logging. Right. As the mud returns to
the surface, technicians analyze the physical
and chemical properties of the rock cuttings,
and the gas is carried up. This provides real
-time geological information. Like where you
are, what pressures you're seeing, and most importantly...
If you're hitting oil or gas. Eckexog was founded
in 1952 in California, and its acquisition shows
Baker's shift toward integrated information services,
not just hardware sales. So... Stepping back
for a minute, what we're seeing here is two massive
companies building these complementary empires
through internal innovation. The bit and the
casing shoe. And then aggressive external acquisition.
They were both aiming for total vertical integration
of oil field services. The stage wasn't just
set for a merger. It was set for an inevitable
collision, especially when the economic environment
changed so dramatically. That collision finally
came in 1987. The 1980s oil glut had created
tremendous market pressure. Oil prices collapsed,
and suddenly the cost of competition became unbearable.
Yeah. When prices fall, the efficiency of oil
field services becomes paramount. And the best
way to achieve radical cost reduction and leverage
market dominance is through consolidation. Which
led directly to the birth of Baker Hughes Incorporated.
Baker International merged with Hughes Tool Company
in a stock transaction valued at $728 million.
But as you pointed out, this was less of a smooth
partnership and more of a shotgun marriage driven
by survival. The merger was fraught with drama
right in the beginning. Well, it was contentious
because the merger created such a huge market
share in several crucial tool categories, regulatory
bodies. The DOJ. Specifically, the U .S. Department
of Justice. They demanded concessions to prevent
monopolization. Baker had to enter into a consent
decree, which forced it to divest significant
product lines. Including Reed Tool Company, which
Baker had acquired back in 1975 for $120 million
and its Baker Lift division. And here's the dramatic
turn. Hughes actually attempted to terminate
the agreement after Baker had already begun the
process of divesting these profitable businesses.
Why? They argued that the divestitures materially
changed the value proposition of the deal. Which
led to Baker suing Hughes for a billion dollars
just to force the deal through. Can you imagine?
Despite the legal battles and all the acrimony,
Hughes shareholders voted overwhelmingly to complete
the transaction, forming the modern Baker Hughes
Incorporated. This contentious start is, I think,
highly indicative of the company's culture. They
have been forged in this crucible of relentless
M &A, legal battles and forced adaptation. It
definitely prepared them for the nonstop structural
reshaping that continues to define them today.
And this brings us right up to the current structure,
which underwent a major simplification. post
-2022. This reorganization is critical because
it explicitly signals their future priorities.
That's right. The company is now organized into
two primary operational units. The first and
the largest pillar is what they call oil field
services and equipment, or OSE. This is the traditional
cash engine. It covers the entire lifecycle of
a well. The drilling, the completion, the intervention,
the production, subsea systems, the flexible
pipes required to move the fluids. All of it.
But the nuance here is where the pivot begins
subtly. The OFSE segment explicitly serves both
the petroleum and the geothermal industries.
And that's a huge strategic insight. Geothermal
energy involves drilling extremely deep wells
to access reservoirs of high temperature heat
or steam. So they are tapping into the Earth's
core energy, not hydrocarbons. But wait, how
much of that century -old drilling technology
actually applies to geothermal? I mean, are the
temperatures and materials not wildly different?
Is this a genuine leverage point or is it just
good marketing? That's a fantastic point to probe.
The core expertise managing high -pressure environments,
dealing with directional drilling deep underground,
handling corrosive materials, it's all completely
transferable. However, you're right. Geothermal
temperatures are significantly higher, sometimes
reaching over 300 degrees Celsius. That stresses
electronics, elastomers, and metallurgy far more
severely than standard oil and gas drilling.
So? So Baker Hughes is banking on the fact that
they have the best tools for drilling deep, difficult
holes, regardless of the fluid coming out. It's
an effective way to diversify risk without abandoning
their core competencies. But the real shift,
the genuine redefinition of the company identity
is housed in the second pillar. The industrial
and energy technology or IEG segment. Right.
This segment is where the future capital investment
is focused. It provides high -tech equipment
for mechanical drive, compression, power generation,
and specialized measurement tools. But the strategic
focus is squarely on climate -related technologies.
This includes the equipment and infrastructure
needed for carbon capture, hydrogen production,
and sophisticated emissions management solutions.
So if the OSE segment is leveraging their legacy
to keep the lights on... The IET segment is explicitly
designed to future -proof the company. Yeah,
the skills they developed managing massive compressors
for LNG or natural gas pipelines... are now directly
applicable to compressing hydrogen or compressing
CO2 for sequestration. It's the organizational
mechanism they're using to chase their net zero
goals. So that 1987 merger was, as we established,
just the beginning of a new, even more aggressive
phase of growth and specialization. The goal
was to dominate specific technological niches.
And the 1990s were marked by massive strategic
technology acquisitions. One of the most pivotal
deals was in 1990, the acquisition of Eastman
Christensen for a whopping $600 million. This
wasn't about just getting bigger. This was about
cornering the market on the next great technological
leap in drilling, directional drilling. Absolutely.
So explain the magnitude of that technological
shift. What did Eastman Christensen bring to
the table? Okay, so directional drilling is the
process of intentionally steering the drill bit
to follow a specific non -vertical geological
path. Eastman's lineage goes back to 1929 in
California. They pioneered the use of whip stocks
and magnetic instruments to deflect the pipe.
And then later, the Christensen side brought
advanced diamond bit technology and, critically,
downhole motor innovations like the knobby drill
line. So this wasn't just about pointing the
bit in a different direction. It was about precision.
Total precision. They developed the industry's
first truly steerable motor system and the revolutionary
AutoTrack rotary closed loop system. And that
was a quantum leap. A quantum leap. The AutoTrack
allows the driller to continuously rotate the
drill string while steering. That eliminates
friction and allows for much longer horizontal
wells. Before you had to stop rotating the pipe
to steer. Right, which created friction and limited
the length of the lateral section. This technology
unlocked the age of horizontal drilling that
completely dominates fracking and deep reservoir
development today. That kind of dominance came
at a price, though. The acquisition process itself
revealed the necessary ruthlessness of M &A.
It did. To secure U .S. Department of Justice
approval for the Eastman -Christensen deal, Baker
Hughes was forced to sell its own Hughes Tool
diamond bit business. Wow. So they effectively
sold off a piece of their legacy technology to
acquire a far superior suite of directional drilling
and measurement tools. They did. The combined
entity was named Hughes -Christensen. And the
innovation under Hughes -Christensen didn't slow
down. They introduced the AR series PDC bits
in 1993, claiming penetration rate increases
of up to 100%. And by 95, the gold series PDC
line focused on reducing frictional forces. They
were continually building on the Genesis HCM
bits with patented easy steer depth of cut control,
making the drilling process highly automated
and efficient. The next piece of the puzzle was
real time information. Right. They moved into
measurement wall drilling, or MWD. In 1992, they
acquired Teleco Oil Field Services for $200 million.
Teleco was the provider of the world's first
MWD tool, introduced back in 1978. So why is
MWD so valuable, especially when you pair it
with directional drilling? Because MWD transmits
real -time data from the drill bit back up the
pipe to the surface using pressure pulses in
the drilling fluid without having to stop drilling.
And this data includes the direction, inclination?
and crucial formation properties. If you're drilling
a horizontal well, MWD is your eye down hole.
You can steer the bit to stay precisely within
a thin layer of reservoir rock, maximizing exposure
to the hydrocarbon. Without MWD, you would be
operating blind. Totally blind. Constantly pulling
the pipe out to check your position, which is
incredibly costly and time consuming. This accumulation
of integrated services, directional drilling,
advanced bits, real time measurement led to another
corporate shuffling moment in 1993. Right. Creating
Baker Hughes NTQ to combine five of the company's
oil field divisions. It's just this perpetual
state of corporate synthesis. And that strategic
push reached its peak in the late 1990s with
the colossal 1998 acquisition of Western Atlas.
This was. Massive. $5 .5 billion in stock, plus
they assume $700 million in debt. And Western
Atlas was the final piece of the integration
puzzle. It brought expertise in seismic data
and downhole wireline services. It did. And here's
where it gets really interesting on the corporate
rivalry front. They spent billions just to keep
it out of Halliburton's hands. That sounds like
a Cold War mentality in the oil patch. How did
that shape the culture of the combined company?
It absolutely was a defensive, existential, strategic
move. Western Atlas was a strong competitor specializing
in subsurface imaging. Seismic uses sound waves
to map geological formations, helping companies
decide where to drill. And wireline services
use cables dropped into the well to take precise
measurements and logs. So by acquiring Western
Atlas, Baker Hughes gained robust capabilities
in seismic data and downhole logging, matching
the full spectrum of services. offered by Schlumberger
and preventing Halliburton from gaining a significant
advantage. It showed a willingness to pay a premium
to ensure competitive parity. A huge premium.
So what happened to that massive seismic business?
Well, it didn't last. In 2000, during an industry
downturn, Baker Hughes merged its Western Geophysical
Division with Schlumberger's GEICO to form Western
GEICO. An attempt to reduce capital expenditures.
Right. In the high cost seismic market. But by
2006, Baker Hughes decided to exit the highly
cyclical seismic data business entirely, selling
its 30 percent share of Western Geico back to
Schlumberger for two point four billion dollars
in cash. It shows that even massive strategic
alliances can be treated as temporary assets
to be monetized when the market shifts. Exactly.
From data acquisition toward higher margin downhole
services. So while they were growing rapidly,
this aggressive expansion into new high stakes
international markets also brought significant
corporate complications. Most notably, the 2007
guilty plea regarding the Foreign Corrupt Practices
Act or FCPA violation. This is a sobering reminder
of the ethical and regulatory risks involved
in securing massive international contracts.
The violation covered activities from 2001 to
2003. The company pleaded guilty and agreed to
pay $44 .1 million in fines and penalties. And
this was linked to commission payments related
to a major oil services contract for the Karachaganak
field in Kazakhstan. Correct. The $4 .1 million
in improper payments were funneled through consultants
to allegedly help secure that lucrative contract.
Mm -hmm. Which companies then spend years and
millions of dollars resolving through deferred
prosecution agreements? It shows that maintaining
global dominance requires rigorous internal compliance,
which is a constant challenge for firms operating
in high -risk regions. On a different front,
but still related to global operations, we saw
friction in their labor relations, particularly
in Norway. A critical North Sea operating base.
Yeah. In June 2012, trade unions like SAITH threatened
strike action involving 114 employees across
multiple installations. The threat was serious
because even a small localized strike can shut
down complex offshore operations, incurring huge
costs. Right. Fortunately for the company, the
strike was called off quickly after the parties
successfully agreed to a new collective agreement.
It reminds us that for a technology firm to operate
smoothly, the human element managing thousands
of employees under various collective agreements
globally is as critical as the technology itself.
Now, let's fast forward to the failed mega merger
of the mid 2010s. This is a proposed acquisition
by their major rival, Halliburton. Announced
in November 2014, valued at $34 .6 billion. That
would have been the single largest merger in
the history of the petroleum industry. It would
have created an unchallenged global services
behemoth. And the stockholders of both companies
approved it. That reflects the internal drive
to consolidate during a period of global oil
price volatility. The industry felt consolidation
was necessary to control costs and exert pricing
power. But the U .S. Department of Justice wasn't
having it. Not at all. The DOJ sued to block
the transaction in 2016. They had serious concerns
that the merger would lead to a near monopoly
in specific critical markets. Not just broadly
in oilfield services, but in highly specialized
niches. Right. Like deepwater cementing, specialized
directional drilling tools, and certain types
of drilling fluid systems. They argued that competition
would be severely harmed, leading directly to
higher prices for the remaining E &P companies.
And the companies formally terminated the deal
just weeks after the lawsuit was filed. So having
failed to merge with their largest competitor,
they quickly pivoted their focus to a completely
different type of partner, General Electric.
A huge pivot. They successfully merged with GE
Oil & Gas in July 2017. And this GE chapter fundamentally
reshaped the company. It provided access to GE's
capital, its industrial scale, and its advanced
turbine and compressor technology. The combined
entity initially took on the name Baker Hughes,
a GE company. And even this successful merger
required regulatory concessions. It did. To satisfy
regulators, Baker Hughes sold a significant portion
of its hydraulic fracturing and cementing business,
a segment that included the previously reacquired
BJ Services Company for $325 million. So that
was the cost of marrying into GE, shedding core
traditional services to integrate GE's industrial
technology portfolio. Exactly. And in a final...
twist of corporate churn, even the GE alliance
proved temporary. GE subsequently announced plans
to divest its entire stake by 2023, refocusing
on its core industrial and healthcare businesses.
So by the end of 2021, GE's ownership had already
plummeted. It had. And the company that emerged
from the GE chapter was the Baker Hughes company
we see today, aggressively independent, focused,
and armed with the technologies it gained during
the merger. And now clearly focused on energy
transition. That GE divorce coincided precisely
with the global escalation of climate targets,
forcing the company to decide how to leverage
its massive infrastructure for the future. And
the answer lies in that industrial and energy
technology IET segment. It's become the primary
vehicle for this pivot. The first step was establishing
clear externally facing climate pledges. They
made a significant commitment in January 2019
to reduce carbon dioxide equivalent emissions
by 50 percent by 2030 and to reach 100 percent
net zero emissions by 2050 using a 2012 baseline.
And these aren't minor adjustments. These are
huge public decades spanning targets that demand
radical investment. And they back those pledges
up by chasing the most difficult technological
challenge in the energy transition. industrial
scale carbon capture technology. Right. This
involved both licensing external expertise and
acquiring specialized firms. They moved quickly.
In November 2020, they acquired Compact Carbon
Capture. What was the significance of that? Compact
Carbon Capture focused on developing solvent
-based carbon capture patents. Solvent -based
systems are the most established method for stripping
CO2 from industrial flue gases. So they use liquid
chemicals, solvents that... Chemically bond with
the CO2. Exactly. Which is then released and
captured by heating the solvent. This was a direct
entry into a crucial decarbonization market.
And following that, in March 2021, they secured
a license for the use of Mixed Salt Process Technology,
or MSP, for flue gas carbon capture from SRI
International. So the MSP technology is a parallel
competing methods for CO2 capture. It's often
cited for its lower energy demands when dealing
with high volume, low concentration flue gases.
Like those from certain power plants or large
industrial facilities. Exactly. So by acquiring
both the solvent based systems and licensing
MSP, they are strategically pursuing multiple
technological pathways to build a comprehensive,
full spectrum carbon capture portfolio for their
clients. And this commitment is translating into
real world projects, not just patents. In June
2021, they entered into a joint venture with
Borg CO2, specifically targeting a waste -to
-energy plant in Sarpsburg, Norway. That project
is key because it moves them from laboratory
or pilot -scale work to practical large -scale
deployment. They are tasked not only with capturing
the CO2, but also with engineering the infrastructure
for its liquefaction. Cooling and compressing
the gas into a liquid state. Right. And transportation
to a final sequestration site. CCUS carbon capture
utilization and storage chain solution. Beyond
carbon management, they're looking at the fundamental
components of energy infrastructure. We saw a
major joint venture in December 2020 with Aramco
to create novel non -metallic solutions manufacturing.
This is all about modernization and material
science. The goal of novel is to produce advanced
non -metallic materials like high -grade composite
pipes and equipment. And why is that important?
Well, nonmetallics offer superior resistance
to corrosion compared to traditional steel. They
weigh less and they can significantly lower maintenance
costs. This is particularly relevant in the Middle
East, where high sulfur content often accelerates
pipeline decay. And it will be crucial for handling
highly corrosive fluids like wet CO2 or future
hydrogen blends. You got it. Their strategy also
shifted heavily towards software, services and
asset integrity, the knowledge economy side of
energy management. Which feeds directly into
the IET segment. In 2021, they acquired RMS Reliability,
providing advisory services and software across
several industries. ARMS focuses on predictive
maintenance and operational efficiency. Instead
of waiting for a pump or compressor to break,
their software uses data analytics to predict
failure, allowing for planned maintenance. This
is a high margin business that increases the
efficiency and safety of massive infrastructure.
And it's a crucial component of emissions management,
as efficient operations inherently reduce waste
and consumption. That knowledge focus was cemented
in November 2022 with the $279 million acquisition
of Quest Integrity. Quest Integrity provides
critical asset integrity services. They make
sure that aging infrastructure pipelines, refineries,
storage tanks remain safe and operational using
advanced inspection technologies and data analysis.
These types of acquisitions are not flashy, but
they are essential for integrating high -tech,
high -margin services into the overall portfolio.
Right. It moves them away from being merely a
tool provider to a full -service technology manager.
And while the IET focus is clear, they haven't
abandoned the core drilling and intervention
services. Not at all. In March 2021, they announced
a joint venture with Acaster ASA's subsidiary,
MH Worth AS, focused on global offshore drilling
solutions. And in March 2022, they acquired Altus
Intervention, a Norwegian oil well specialist,
strengthening their well intervention position.
These moves show the balanced strategy. They
are still optimizing and consolidating their
core OSC business to generate the necessary cash
flow and maintain market leadership. which in
turn funds the massive R &D and M &A required
for the IAT pivot. And that M &A strategy culminated
in the most significant indicator of their IET
commitment, the massive announced acquisition
of Chart Industries in July 2025 for $13 .6 billion.
This is the definitive strategic shift. Chart
Industries is a specialized manufacturer recognized
globally as a powerhouse in industrial gas processing,
liquefaction and cryogenic technologies. And
cryogenics is the science of extremely low temperatures.
Right. Often used to turn gases into... to liquids
for storage and transport. So why does this acquisition,
valued at $13 .6 billion, instantly change Baker
Hughes' competitive position? Because it provides
the essential high -tech hardware required for
both the hydrogen economy and large -scale CO2
management. Hydrogen must be liquefied at extremely
cool temperatures, around minus 253 degrees Celsius,
to be economically transported and stored. And
CO2 must also be highly compressed and often
liquefied for injection into sequestration walls.
And CHART provides the necessary togo machinery,
heat exchangers, storage tanks, and specialized
compression systems. So by absorbing CHART, Baker
Hughes instantly acquires decades of sterilized
expertise in industrial cryogenics. They go from
being a hopeful participant in the energy transition
to a fully integrated technology provider. Right.
Capable of delivering the entire infrastructure
for CCUS and hydrogen projects, challenging established
industrial gas players like Lynn or Air Products.
It accelerates their pivot by years, arguably
making the IET segment equal in future importance
to the Elvesi legacy business. The journey from
the two cone bit. Invented in a rented 20 by
40 foot shop to a company focused on cryogenic
liquefaction for hydrogen is just, it's remarkable.
It's a story of constant reinvention driven by
the singular goal of efficiency and dominance.
Yes. So what does this all mean for you, the
listener? Well, if we connect this to the bigger
picture, the modern Baker Hughes is a synthesis
of genius level mechanical innovation at its
root and relentless surgical corporate consolidation.
They have mastered not only drilling deep holes,
but the data, the chemistry and the materials
needed to manage those holes efficiently. And
the modern structure explicitly signals an intent
to move beyond just oil services into becoming
a holistic energy technology company. Right.
Focusing on geothermal precision measurement
and critically emissions management. The final
takeaway for you is that the journey of Baker
Hughes is a powerful story of corporate adaptation
from being defined by revolutionary iron tools
in 1908 to being defined by climate -focused
software, high -pressure compression, and cryogenic
technology in 2025. It's a blueprint for how
a legacy energy company attempts to future -proof
itself by strategically deploying vast amounts
of capital. This raises an important question
that you should keep in mind as you watch the
energy sector evolve. Considering the company's
long history of aggressive acquisition and contentious
murders, especially the massive 2025 purchase
of Chark Industries, how quickly can a company
built on a century of traditional petroleum services
truly pivot its core identity and massive operational
infrastructure to deliver on its ambitious 2050
net zero emissions pledge? The challenge isn't
the technology, which they now own. It's the
execution and the cultural shift required to
deploy it at global scale while simultaneously
managing the decline of their legacy business.
A challenge for sure, and one that will define
the next decade of the energy market. We will
certainly be watching. Thank you for joining
us, and we'll catch you on the next Deep Dive.