GE to buy Wood Group’s oil well support business

Fairfield-based General Electric Co.’s oil and gas business has reached a deal to buy the well support division of John Wood Group PLC for around $2.8 billion, The Associated Press reports.

The deal, which must be approved by Wood Group’s shareholders, is expected to close later in the year. It’s another in a string of acquisitions for the oil and gas unit as it moves to expand in a growing market for drilling and transporting equipment.

Wood Group’s well support division makes electric submersible pumps, wellhead pressure control systems and information logging systems.

The acquisition gives GE an entry into the fast-growing market for equipment to recover oil from mature fields. It also expands GE’s products into unconventional oil and gas production including shale gas, the statement said.

With the acquisition, GE gets access to Wood Group’s technology to make pumps that work under water, a market that is sure to expand in future years as oil producers try to get more oil out of existing well fields, said John Krenicki, a GE vice chairman and CEO of the company’s energy business, which includes the oil and gas division.

Currently, two-thirds of the world’s oil production comes from giant oil fields where oil companies have tapped only a third of the reserves, Krenicki said in an interview with The AP.

“With electric submersible pumps, you can squeeze more out of these wells,” he said.

The deal also bolsters GE’s position in the rapidly expanding equipment market for unconventional oil and gas production, which is expected to account for 35 percent of the increase in global supply and 10 percent of the world’s oil demand by 2035, GE said.

Wood Group’s well support division also makes products such as high-tech control valves and pressure control systems that safely get natural gas from shale to pipelines that are made by GE, Krenicki said.

Wood Group’s well support division has 3,800 employees and more than 20 factories and service centers across the world. Last year it reported $947 million in revenue and earnings before interest, taxes, depreciation and amortization of $166 million. Revenue grew 16 percent last year over 2009, and the division has averaged 13 percent revenue growth over the past decade, the statement said.

GE expects the division to generate $1.1 billion in revenue this year.