General Electric (NYSE:GE) may be one of the largest oil service companies that most investors have never heard of. The storied American company recently announced an acquisition in this area, increasing its multibillion dollar oil and gas services business.

IN PICTURES: 5 Investing Statements That Make You Sound Stupid

GE's Latest Acquisition
General Electric is acquiring the Well Support Division of John Wood Group PLC (LSE:WG), an English company that is involved in a variety of engineering, power generation and oil and gas services businesses.

General Electric is paying $2.8 billion for this division, which reported 2010 revenues and EBITDA of $947 million and $166 million, respectively. The company expects this new division to grow rapidly and produce $1.1 billion in revenues and $200 million in EBITDA in 2011.

Well support refers to products and services that increase and enhance production from oil and gas wells, including artificial lift. Other businesses that General Electric is getting include wireline and logging services and pressure control equipment used to control and monitor the flow of hydrocarbons.

One justification that General Electric gave for the deal was that it would provide an entry into the enhanced oil recovery (EOR) services business. This is a fast-growing sub-segment of the oil services business as many older wells require some type of assistance to produce enough oil to make them economical.

GE's Oil and Gas Business
General Electric has its oil and gas business within the Energy Infrastructure segment for reporting purposes. The Energy Infrastructure segment reported total revenues of $10.96 billion in the fourth quarter of 2010, with the oil and gas business making up $2.4 billion or 22% of this total.

This level of revenues put General Electric close to Weatherford International (NYSE:WFT), which reported $2.9 billion in revenues in the final quarter of 2010. General Electric's oil and gas business also saw $2.9 billion in new orders from customers in the fourth quarter of 2010, with a 23% increase in equipment orders.

Recent Orders for GE's New Services
One recent order came from Petrobras (NYSE:PBR), which is developing new fields in the offshore area. General Electric will supply $50 million worth of subsea wellhead and installation tooling systems to the company. General Electric has a multiyear deal with the Brazilian oil company to supply sub-sea and other related equipment.

General Electric is also a major supplier to the Gorgon project located in Australia. This is a massive natural gas project operated and 47% owned by Chevron (NYSE:CVX). General Electric has been awarded more than $1 billion in contracts for this project. Exxon Mobil (NYSE:XOM) and Royal Dutch Shell (NYSE:RDS.A) each also have a 25% ownership in the Gorgon project.

The Bottom Line
General Electric is a major player in the oil and gas services business, but this is generally unknown to many investors due to the size of the overall company. The company got even larger here with a recent acquisition of a Well Support business from an English company, but this new acquisition is well worth investors' attention. (For related reading, check out How Does Crude Oil Affect Gas Prices?)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Stock Analysis

    The Biggest Risks of Investing in Netflix Stock

    Examine the current state of Netflix Inc., and learn about three of the major fundamental risks that the company is currently facing.
  2. Mutual Funds & ETFs

    Top 3 Commodities Mutual Funds

    Get information about some of the most popular and best-performing mutual funds that are focused on commodity-related investments.
  3. Stock Analysis

    What Seagate Gains by Acquiring Dot Hill Systems

    Examine the Seagate acquisition of Dot Hill Systems, and learn what Seagate is looking to gain by acquiring Dot Hill's software technology.
  4. Chart Advisor

    Agriculture Commodities Are In The Bear's Sights

    Agriculture stocks have experienced strong moves higher over recent weeks, but chart patterns on sugar, corn and wheat are suggesting the moves could be short lived.
  5. Stock Analysis

    The Biggest Oil Producers in Asia

    Learn which Asian countries deliver the most crude oil to market, and discover what companies are the biggest producers in each country.
  6. Stock Analysis

    The 5 Biggest Russian Oil Companies

    Discover the top Russian oil companies by production volume and find out more about their domestic and international business operations.
  7. Mutual Funds & ETFs

    What Exactly Are Arbitrage Mutual Funds?

    Learn about arbitrage funds and how this type of investment generates profits by taking advantage of price differentials between the cash and futures markets.
  8. Investing News

    Ferrari’s IPO: Ready to Roll or Poor Timing?

    Will Ferrari's shares move fast off the line only to sputter later?
  9. Stock Analysis

    3 Solar Stocks to Add to Your Portfolio

    Understand the growth and challenges of the renewable energy market and its success in 2015. Learn about the top three energy stocks to add to a portfolio.
  10. Investing News

    Glencore Shares Surge in Hong Kong

    Shares of Glencore International, a leading multinational commodities and mining company, jumped by around 15% on London Stock Exchange, after the shares had gained about 71% earlier on the Hong ...
  1. Can working capital be too high?

    A company's working capital ratio can be too high in the sense that an excessively high ratio is generally considered an ... Read Full Answer >>
  2. How do I use discounted cash flow (DCF) to value stock?

    Discounted cash flow (DCF) analysis can be a very helpful tool for analysts and investors in equity valuation. It provides ... Read Full Answer >>
  3. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  4. What is the formula for calculating compound annual growth rate (CAGR) in Excel?

    The compound annual growth rate, or CAGR for short, measures the return on an investment over a certain period of time. Below ... Read Full Answer >>
  5. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  6. When does the fixed charge coverage ratio suggest that a company should stop borrowing ...

    Since the fixed charge coverage ratio indicates the number of times a company is capable of making its fixed charge payments ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!