Q&A: Siemens CEO still believes in oil and gas market

When Siemens CEO Joe Kaeser went to IHS Energy CERA-Week in 2014, he hinted at acquisitions to come. Within a year, the German conglomerate sealed two, picking up Rolls-Royce's energy business and then inking a multibillion-dollar deal for Houston energy equipment maker Dresser-Rand.

But European Union authorities are still reviewing the Dresser-Rand acquisition.

The company also has announced plans to cut some 7,800 jobs over the next two years. Kaeser talked with FuelFix ahead of his CERAWeek presentation Wednesday about his continued faith in the oil and gas business.

Excerpts below, edited for space and clarity:

Q: How will the oil price downturn change your view of the opportunities in the oil and gas sector right now?

A: The story hasn't really changed. We believe the oil and gas market is still one of the most attractive sectors to be in. In the meantime, what I was hinting at about a year ago: We now have a full range of oil and gas offerings to help the oil and gas industry get the costs out. That is one of the answers - if not the answer - on how to deal with the oil price. If the oil price is low, we need to get the cost out for the takeout of the oil. Siemens in the meantime is not only committed to that sector, it's also now equipped to do exactly what we promised.

Q: It seems that the value proposition becomes so much more important in this environment. Folks will still invest in new tech and products, but they want to see the value proposition.

A: Absolutely. The point is how can we help folks be successful, at price levels which are not easy to deal with.

Q: Do you have any qualms about the short-term pain, about riding this down cycle out?

A: If you look at businesses - and you can look at the attractiveness of those businesses - you look at first of all, are there growth areas? Secondly, is that a good profit pool? Thirdly, why Siemens, why is it that we are successful? Item number four: Is there a synergistic value of the product in that sector? And five, do we see paradigm shifts along the way?

Oil and gas is profitable in the long term because demand has not gone down. And secondly is there synergistic value? Absolutely, because we are generation, transmission, distribution, upstream, downstream, offshore, onshore. So we have a (broad role in) the oil and gas industry. Within oil, you see a capital expenditure-related issue but also an operational expenditure related issue. If you look at what the combined Siemens-Dresser-Rand-Rolls-Royce installed base looks like, it looks pretty good.

Q: We are seeing oil and gas players cut capital expenditure budgets. What does that mean for Siemens and other companies that see big projects delayed?

A: It means bookings will be down, in the short term; that's the bad news. But the good news in our particular situation is that we have enough time now to focus on the proper integration of the three assets: Dresser-Rand, Rolls-Royce, Siemens Oil and Gas. Of course, we don't like the oil price ... but on the other hand, it's a perfect time for us to do integration properly, and get ready for when folks are back in the field."