Qualitative Analysis: Baker Hughes
In a recent report issued by the famous Deloitte Inc, the Oil and Gas Industry will soon enter the period of transformation as the industry will now move from upstream production and exploration to the mid-stream infrastructure, refinery operations and petro-chemical facilities. This will help the companies to grow in value from recent discoveries and acquisitions. The expectations for 2013 also turned true as the oil and Gas Sector benefited from the record investment in new development and improvements in the existing assets holdings. Overall, the industry experts expect more investment in research and development in the Oil and Gas Arena.
As for Baker Hughes, the third largest Oilfield Service Provider in the United Kingdom, the analyst is having mixed opinion over the stock performance. However, most of the analyst’s recommendations are from Hold-Strong Buy with rare opinion on recommendation to sell the stock. Such positive expectations are in line with the reported last quarter earnings in line with analyst expectations and also the market pundits expects that the strong growth in the company will also continue during 2014 as they expect high growth in the international markets. Furthermore, Baker Hughes also plans to keep their capital spending on flat/moderately lower side. Thus, the recommendation to hold the stock seems rationale.
Considering the strengths and weakness of the company, below schedule will help us in understanding the real picture of the company:
- Brand Recognition
- High product Range and new products in line
- Stability and extensive spending on research and developments
- Declining Oil reserves and increasing cost of operations
- Cost of Environmental Hazards
In a recent event, the company also signed an agreement with CGC Company to obtain RoqSCAN technology being offered by the latter company. RoqSCAN is known to deliver a highly quantitative compositional and textural mineralogical data from drilling cuttings and core pieces, thus helping in revealing the mineralogical DNA of the reservoir.
Final Recommendation: Buy
Considering the industry outlook, analyst expectations and recent news event, I would recommend to purchase more shares of the company
CGG and Baker Hughes Sign Exclusive Long-term RoqSCAN Agreement as Part of Shale Science Alliance. 25 March 2014. 28 March 2014 <CGG and Baker Hughes Sign Exclusive Long-term RoqSCAN Agreement as Part of Shale Science Alliance>.
SWOT Analysis of Baker Hughes Inc. 9 November 2010. 28 March 2014 <http://www.managementparadise.com/forums/principles-management-p-o-m/208367-swot-analysis-baker-hughes.html>.
Wall Street Journal . Oil and Gas Industry: 2014 Outlook. 28 March 2014 <http://deloitte.wsj.com/cfo/2014/01/30/oil-and-gas-industry-2014-outlook/>.