GE to Acquire Lufkin Industries, Boost Artificial Lift Portfolio

April 8, 2013

approximately 13.5x based on 2013 estimated earnings before interest, taxes, depreciation and amortization. In 2012, Lufkin posted record revenues of $1.3 billion, which reflected growth of 37 percent. New business bookings in 2012 grew 38 percent companywide to $1.3 billion year over year, driven by a 47 percent increase in its artificial lift business. With synergies from GE Oil & Gas’ global scale and broad array of solutions, GE believes the business is well positioned for significant top and bottom line growth.

Oil & Gas is GE’s fastest-growing business, and with the addition of Lufkin’s artificial lift products and automation and optimization solutions, GE can provide global exploration and production customers with a complete portfolio of offerings that address a wider variety of well types at all stages of the production lifecycle.

GE’s portfolio of turbomachinery equipment is used in mechanical-drive, compression and power-generation applications such as liquefying natural gas, moving hydrocarbons through pipelines or generating power via gas turbines at a production or industrial site. Lufkin’s suite of gears and bearings will complement GE’s existing product line and are currently in use on GE’s compressor and gas turbines. Lufkin will continue to sell these to the open market as it does today.

Artificial Lift’s Importance in Oil & Gas Extraction

The global artificial lift sector is expected to approach $13 billion in 2013, according to Spears & Associates. Growth is being fueled by the development of unconventional shale plays and liquids-rich resource plays. For example, in North America, an increased pursuit of oil has driven demand for the rod lift systems manufactured by Lufkin. In 2010, rod lift systems represented about 19 percent of the artificial lift sector (as measured by dollars of equipment sold per year). By 2012, rod lift had grown to 31 percent of the sector, according to Spears.

Lufkin Industries, Inc. is an industry leader in rod lift solutions, and its beam pump units are a universal symbol of oilfield production. Other artificial lift systems are in demand as well including progressive cavity pumps for heavy oil and gas lift for unconventional shale and offshore production. Lufkin also is pursing global opportunities and recently opened a large manufacturing facility in Romania to service Eastern Hemisphere markets.

Automation also is an integral part of Lufkin’s system-wide approach to artificial lift optimization, which helps reduce the overall cost of production in mature fields. It’s one of Lufkin’s fastest growing segments, driven by organic growth and three strategic acquisitions completed over the last 18 months. Lufkin’s expanded product line allows it to offer a broad suite of automation products, which today are installed on more than 150,000 wells around the globe. The automation portfolio of Lufkin contains the building blocks that will help drive smart technologies to develop an artificial lift “industrial internet” with “predict-and-prevent” service and maintenance issues through a connected network of technology, data and experts.

GE Oil & Gas has a proven record of acquiring, integrating and growing companies, as demonstrated by $11 billion in