General Electric Co.’s (NYSE: GE) decision to hand control of the rapidly growing oil and gas division to Lorenzo Simonelli is fueling speculation that its youngest top executive is a leading candidate to someday run the company.

Simonelli, 40, will take control on Oct. 1 of a business that’s seen annual sales climb 54% since 2008 and has become a focus of GE’s acquisition strategy. He takes over for Dan Heintzelman, who was elevated to vice chairman after running the unit since 2011, GE said yesterday in a statement.

“If Simonelli is able to take the franchise Heintzelman created and take it to the next level, he’s obviously going to be in an excellent position,” Nick Heymann, a William Blair & Co. analyst in New York, said yesterday in a telephone interview. He has a market-perform rating on GE. “The Oil & Gas platform has the telltale signs of being the next chief vehicle of value creation on the industrial side.”

CEO Jeffrey Immelt, 57, is putting the oil and gas division at the forefront of his push to increase earnings at GE’s industrial businesses while shrinking its lending arm. It’s grown faster than any other unit since financial markets froze in the aftermath of Lehman Brothers Holdings Inc.’s bankruptcy in 2008.

Drilling Boom

Immelt spent $3.3 billion to acquire Lufkin Industries Inc. and bought Dresser Inc. and the well-support division of John Wood Group Plc to help push the oil and gas division’s annual sales to $15.2 billion in 2012. He has said that the moves position the company to benefit from a domestic “natural gas revolution” and climbing oil production from the U.S. shale drilling boom.

Seth Martin, a spokesman for GE, declined to comment on what the moves mean for CEO succession planning.

GE, based in Fairfield, Connecticut, rose 1.7% to $24.86 on Sept. 18 in New York. The shares advanced 18% this year compared with a 21% gain for the Standard & Poor’s 500 Index.

Both Heintzelman’s new position, in which he’ll help oversee operations and the company’s highly profitable services businesses, and Simonelli’s move show how valuable they are to Immelt, according to Eric Hugel, a New York-based analyst at S&P Capital IQ.

“These are promotions for everyone involved,” Hugel, who has a buy rating on GE’s stock, said by telephone. “These guys could be running multibillion corporations if they chose to leave, and GE understands they need to give them bigger and better challenges if it wants to keep its best talent.”

Future Executives

Simonelli, born in Florence, Italy and educated at Cardiff University in Wales, is a 19-year GE veteran. The youngest among executives at GE’s eight operating divisions, he joined the company through its entry-level financial management program, which recruits directly from universities and is designed to groom future executives. He’s being replaced at GE Transportation by Russell Stokes.

Heintzelman started his career at GE in 1979 at the company’s aircraft engines management development program and eventually headed its aircraft engines services business before taking over leadership roles at its energy businesses, according to the company’s website.

“His background lines up well with GE’s focus going forward as the company emphasizes industrial businesses like energy and aviation, and de-emphasizes the financial side,” Christian Mayes, an analyst with St. Louis-based Edward Jones, said in a phone interview yesterday. Mayes rates GE a hold.

Profit at divisions making industrial products including oil and gas equipment will account for about 65% of GE’s operating earnings by 2015, the company forecast at a meeting with investors and analysts last year. Those earnings made up 55% of profit, on the same basis, in 2012.

The changes follow a shake-up last year in which Immelt broke up GE Energy, with $43.7 billion in sales in 2011, into separate power and water, oil and gas and energy management units following the retirement of John Krenicki, its CEO. That eliminated a layer of management and put the new businesses’ leaders directly reporting to Immelt.

Photo provided by GE.