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By Bloomberg

Siemens AG Chief Executive Officer Joe Kaeser said his 6.8 billion-euro ($8.4 billion) outlay to buy companies that help extract and distribute fossil fuels wasn’t ill-timed even as the oil price slumped to its lowest in five years.

Europe’s largest engineering company hasn’t considered walking away from its planned takeover of U.S. oil-and-gas equipment maker Dresser-Rand Inc., Kaeser told analysts and investors in Berlin.

“If we walked away from that deal we would have a lot of happy competitors,” he said at the company’s capital markets day. “Who got rich from gold? Those discovering the gold or those supplying the shovels?”

Siemens agreed to buy Rolls-Royce Holdings Plc.’s energy assets in May and Dresser-Rand in September. Since the latter deal, Brent crude oil has fallen 32 percent to about $66 per barrel, its lowest since 2009. That decline prompted a series of questions from analysts at today’s conference about the viability of Kaeser’s plan to build Siemens around “electrification, automation and digitalization.”

“Don’t underestimate the installed base,” Kaeser said, referring to equipment Siemens has already supplied and has contracts to maintain. “Even if the market remains hypothetically at $60, then there will be winners and losers, and the weakest will go out of business.”

Feeling Good

The Dresser-Rand deal, which should be completed next year, is intended to boost Siemens’s revenue from contracts to maintain and service equipment in the oil and gas industry.

“In the mid- to long-term we look very positively in that field, in both oil and gas, and we feel good about what we’ve been doing in terms of the acquisitions,” Kaeser said.

Siemens expects the market for oil and gas equipment to grow 6 percent annually until 2020. The unconventional oil and gas sector, which includes processes such as hydraulic fracturing of shale gas, will grow about 8 percent each year.

About 35 percent of Siemens’s order backlog is in what finance chief Ralf Thomas called the “highly profitable” service business. In the 12 months through September, services generated some 14.5 billion euros of the company’s 72 billion euros in sales.

“The oil price matters for the capex spending of our customers,” Kaeser said, adding that spending on new equipment may decline in the short term. “But then again the world continues to use oil in many areas,” he said, adding that it’s still profitable for many customers to extract oil even if it were priced below $57 per barrel.