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Merger a sign of natural gas rebound?

September 02, 2009
TOPICS: Natural gas
Baker Hughes' $5.5 billion bid for BJ Services could be a sign of good things to come for natural gas producers.

Analysts say the BJ buyout is Baker Hughes' attempt to capitalize on increased shale drilling driven by improving natural gas prices in the near future.

From the Houston Chronicle:

The deal between the two Houston energy services companies is as much a bet on a rebound in natural gas prices as it is a strategic move for Baker Hughes to compete with Halliburton and Schlumberger. Natural gas prices have fallen 64 percent in the past year, closing Tuesday at $2.82 per million British thermal units.

Baker Hughes hopes to expand on BJ Services' expertise in drilling for shale gas, which has been one of the hottest exploration markets in recent years. Company executives predict the acquisition will add to earnings by 2011, based on the assumption of increased drilling activity that would result if prices rise to at least $6.50, said Ted Harper, a senior research analyst with Frost Investment Advisers in Houston.

“This is definitely a call that they think we are at or near the bottom,” he said.

 
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