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Baker Hughes

Pelican Energy Partners LP, a Houston-based private equity fund, said it will buy the assets of the surface pressure control flow business unit of the oilfield equipment segment of Baker Hughes.

Pelican said they are working in cooperation with the management team of Baker Hughes’ SPC flow to carve-out the business unit as a stand-alone business wholly focused on providing pressure control products and services primarily in the U.S., with operations also in Australia, Papua New Guinea and Trinidad & Tobago, the company said.

The deal is expected to close in the fourth quarter of 2020.

Baker Botts acted as legal counsel to Pelican Energy Partners and McDermott Will & Emery served as legal counsel to Baker Hughes. BofA Securities acted as financial advisor to Baker Hughes.

Baker Hughes’ shares closed about 0.07% lower at $14.12 on Wednesday; the stock is down over 40% so far this year.

Baker Hughes stock forecast

Thirteen analysts forecast the average price in 12 months at $20.67 with a high forecast of $26.00 and a low forecast of $18.00. The average price target represents a 46.39% increase from the last price of $14.12. From those 13 analysts, 11 rated “Buy”, two rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave a target price of $20 with a high of $24 under a bull-case scenario and $8 under the worst-case scenario. UBS Group raised their price target on shares of Baker Hughes to $20 from $17 and gave the stock a “buy” rating.

Other equity analysts also recently updated their stock outlook. Goldman Sachs Group cut shares from a “conviction-buy” rating to a “buy” rating. Barclays raised their target price to $17 from $14 and gave the stock an “overweight” rating.


Analyst views

“Defensive portfolio positioning: Baker Hughes’ (BKR) exposure to non-oil & gas end-markets is among the highest among its peers, and its portfolio is relatively concentrated in the higher end of the OFS market, which we expect to be more resilient if the market deteriorates as we expect. High-quality balance sheet: BKR is the least-levered diversified service company and has the ability to defend its dividend much more capably than most of its peers,” said Connor Lynagh, equity analyst at Morgan Stanley.

“Cost-out, efficiency initiatives, and a focus on more profitable business buoys OFS longer-term: BKR’s OFS business has struggled, but we think results could still improve in out-years,” Lynagh added.

Upside and Downside Risks

Upside: 1) Recovery in upstream investment appetite. 2) Evidence of self-help improving OFS margins. 3) Order intake inflection in OFE/TPS. 4) Removal of GE divestiture overhang – highlighted by Morgan Stanley.

Downside: 1) Market share loss. 2) Execution issues. 3) Failure to deliver on expected operational improvements. 4) Market impact of GE divestiture. 5) Commodity price/cyclical risk.

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