General Electric (GE) has been busy in the oil and gas sector as of late. The division was also being touted by CEO Jeffrey Immelt and he was very encouraging in the future contribution's of the Oil and Gas division going forward during GE'S annual outlook meeting in December 2011. GE has been developing revolutionary ways to transport and store LNG as well as compressed natural gas (CNG). GE's oil and gas division has grown from $1 billion in the early 1990s to almost $16 billion in 2011 and GE has been on the hunt to acquire smaller companies with inventive technologies with regards to LNG and CNG.
New Contracts
GE's Oil and Gas division announced that the GE will assist explorers in developing and implementing new technologies in order to further deepwater and unconventional drilling for liquefied natural gas (LNG) in more remote locations in Australia and for rapidly expanding Asian markets. Vice President Prady Iyyanki of GE's oil and gas unit wants to increase growth of the unit's book orders by 5-10% by providing innovative machinery and maintenance services, he explained "In South America, it's offshore and if you look at the U.S., it's the unconventionals, in Asia, it's just the GDP growth and in the Middle East, we see aging units which need upgrade."
Australia is good business for GE oil and gas, where the unit has been supplying turbines and newer technology for several LNG plants. Australia is believed to be the #1 exporter of LNG surpassing Qatar in as early as 2017-18. GE has a presence in the Inpex Itchys field as well as Gorgon and Wheatstone field and more recently has signed a $150 million a contract to supply machinery for the PETRONAS Train 9 project in Malaysia as well as a new contractual service agreement with Angola LNG located in the Soyo, Zaire Province in Angola.
GE has forged relationships with global market players like Angola LNG, PETRONAS Plc and Inpex Corporation. GE has developed ground-breaking techniques and machinery that has allowed oil and gas companies to export LNG and CNG easier. In addition GE has developed more useful ways for LNG and CNG to be used in residential home arena as well as for industry. GE is providing services to Chevron (CVX), Inpex and Royal Dutch Shell (RDS.A).
CNG In a Box
In other developments within GE Oil and Gas, GE has teamed up with Chesapeake (CHK) to develop and produce efficient fueling stations for the transportation industry with regards to compressed natural gas, liquefied natural gas and natural gas. The two companies will work in tandem to find innovative solutions to bring down ownership and operational costs of natural gas vehicle (NGV) fueling stations. The partnership was created to help bring down the biggest barrier for NGV, fueling stations. There are less than 400 refueling stations that are available for use to the U. S. public. The collaboration is believed to help furnish more access for CNG and LNG filling stations across the U.S. therefore making NGV more affordable and desirable to the average public.
GE is to furnish more than 250 modular and standardized CNG compression stations for NGV infrastructure projects. The unit, which is also called "CNG In a Box" and will be the beginning of a build out of CNG filling station infrastructure across the U.S. CNG In A Box is produced from natural gas from pipelines and is then compressed on-site at a traditional looking filling station for vehicles and can also be routed to large industrial parks in which refilling can take place rapidly and efficiently.
These existing and new contracts as well as on-going partnerships, described above, which have been forged by GE's oil and gas division is good for GE's overall growth and for the expansion of clean energy. Companies like Chesapeake Energy, Chevron Corporation, Exxon Mobil (XOM), Devon (DVN), ConocoPhillips (COP) and Anadarko Energy (APC) have been taking advantage of GE's research and development of over $40 billion in the last few years, in utilizing GE machinery to increase efficiency in transportation and storage of LNG and CNG.
Outlook
Overall GE's health is stable and is on schedule for double-digit growth for 2012. GE is expected to have earnings of $0.38 for the quarter ending in June 2012 and yearly earnings are still predicted to be around $1.55 per share. I believe an investor should buy GE even at $19 per share but the stock is still 10% off of its 52-week high. An investor should not forget the 3.5% dividend yield and dividend growth has been risen 70% since 2009. Albeit the dividend is not what it was in 2007-08 but GE has survived nicely without Jack Welch and Jeffrey Immelt has had a vision for the future.
Many investors may not see GE as an oil and gas sector investment but an investor can not forget that GE is a conglomerate of many business lines and offers many services as well as product lines. GE has committed to bringing cleaner and greener energy ideas to the market place, not only in the U.S. but globally too. I believe GE's role in producing machinery for the oil and gas industry is vital for future growth around the world and the revenues derived from these services is good for GE. If GE is successful in its oil and gas venture, I think the stock will reach the mid $20 range by next year.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
