Home / Business / UPDATE: Are Halliburton and Baker Hughes playing monopoly?
The company logo of Halliburton oilfield services corporate offices is seen in Houston, Texas April 6, 2012. REUTERS/Richard Carson via NewsCred
The company logo of Halliburton oilfield services corporate offices is seen in Houston, Texas April 6, 2012. REUTERS/Richard Carson via NewsCred

UPDATE: Are Halliburton and Baker Hughes playing monopoly?

In an effort to minimize the impact of declining oil prices, the world’s second largest oilfield services company Halliburton is in preliminary talks with Baker Hughes Inc. discussing a possible merger.

Yesterday, Baker Hughes released a statement saying the company is in “preliminary discussions” with Halliburton regarding a “potential business combination.” However, the statement also specified that “these discussions may or may not lead to any transaction,” and, “Baker Hughes does not intend to comment further on market speculation or disclose any developments unless and until it otherwise deems further disclosure is appropriate or required.”

A report by the Financial Post, though, quoted an anonymous source familiar with the deal as saying that “if negotiations are successful, a deal could be announced as soon as next week.”

The acquisition of Baker Hughes by Halliburton would help protect both the companies from a market decline that has witnessed a drop in oil prices by one-third since June of this year. The declining market has spawned a plethora of mergers, acquisitions and consolidations of energy services companies across the nation.

On Thursday, U.S. benchmark crude dipped below $75 per barrel. Analysts have suspected that the dropping prices could spur a flurry of smaller deals involving specialized service companies, but the possible incorporation of the two largest domestic oilfield services companies has come as a surprise. Prior to the possibility of the merger being announced by Dow Jones, share prices of Baker Hughes and Halliburton had dropped more than 30 percent since July.

Bloomberg reported that the companies have been discussing the possibility of a merger for several months, ever since oil prices began to crumble. The deal could be a result of the declining market, but David Lesar, Halliburton’s CEO, recently told Bloomberg that he thinks prices will begin to stabilize and climb sometime next year. This indicates that Halliburton is capitalizing on the market’s short-term volatility to reinforce its stance against Schlumberger, the world’s largest oilfield services company.

The combined company, though, would still only be half the size of Schlumberger. The potential merger would make a drilling, logistics and services behemoth with a sum of publicly traded shares worth $67 billion, and would employ roughly 140,000 people. For comparison, industry leader Schlumberger currently has a market capitalization, or total value of publicly traded stocks, worth $125 billion, and employs about 123,000 people.

According to a report by Reuters, the trading of Baker Hughes stock shares was frozen on the New York Stock Exchange for a short time due to potential volatility. When trading of the shares was later reopened, the price per share jumped up 15 percent. On Thursday at 3:25 p.m., shares of Baker Hughes stock was priced at $48.68. No more than 25 minutes later, the price jumped to $61.22. Today at closing, shares were priced at $59.89. Before the market closed, shares of Halliburton stock had risen 1.1 percent.

The announcement had a resonating effect on share prices of other oilfield services as well. Share prices of other service companies such as Ensco, Nabors Industries, and Weatherford International climbed by the end of trading, some seeing share prices increase by six percent.

The merger of the two energy giants, however, will likely have to jump through a considerable amount of hoops to avoid anti-trust laws. Staff member for the U.S. Department of Justice’s anti-trust division, Seth Bloom, told Reuters, “The question with mergers like this is there are divestitures of submarkets that can solve the problem.” If the deal is finalized, he continued, the companies would likely have to sell off some assets to assure regulators that the deal wouldn’t be harmful to its competition. To avoid anti-trust laws, the combined companies may be required to sell off up to 20 percent of its assets.

The merger of the two companies will create an overlap of a variety of services and technologies such as cementing and casing work, lift systems and drill bits. The speculated deal will also likely attract scrutiny from overseas regulators in Europe, Mexico, Brazil and China, where relatively few oilfield services companies exist.

Even with the merger, though, the combined company would be in control of roughly only 30 percent of the U.S. onshore market, which remains mostly fragmented. This leaves plenty of space for other oilfield services companies to follow suit and broker deals that would protect themselves from declining prices.

In an interview with the Financial Post, Richard Spears, Vice President of industry consultant firm Spears & Associates, said, “These oilfield services companies need to have a global footprint of a complete portfolio of products and services … Schlumberger has it; a Halliburton-Baker Hughes combination would mimic the Schlumberger footprint.” The merger would fill in the disparity between the two companies’ services, combining Halliburton’s technology to increase production in older wells with Baker Hughes’ state of the art oil tools.

 

100 comments

  1. And huge layoffs for Bjs/Baker ppl.

  2. Who decides who is dubbed. ..A MONOPOLY? Probably an entity that has a monopoly on declaring monopolies. Oh…but excuse me…this is what passes for justice nowadays.

  3. Lower wages…. I can see where this is going…. Soon everyone will be working for peanuts

  4. Something when schlumberger bought camco, swaco, and all the other companies they have acquired. Halliburton is just going after a larger more diverse company. They won’t be monopolizing the market, they will just consolidate departments. Schlumberger will still be the larger company, then Halliburton, then weatherford.

  5. No monopoly there are still other companies to compete with.

  6. If halliburton buys baker they are still dwarfed by schlumberger. The 2 companies combined would be worth 71 billion and slb is 121 billion.

  7. Halliburton, Baker Hughes, Koch Brothers, they all have to be stopped!

  8. Wonder how all the Baker guys feel about taking the Halliburton pay cut. I know I would hate taking a pay cut while doing the same job because the color of my coveralls.

  9. Take into consideration a huge amnesty bill on the horizon and all the immediate cheap labor Halliburton will have at there fingertips… it wont just be the BH guys getting a paycut… Halliburton loves to aquire below the border labor now it may just get easier…

  10. A deal couldn’t be reached and I’m glad… I already did the red thing and I left for a reason

  11. Priscilla Boudreaux show this to dad this is what I was telling dad about

  12. with lower prices instead of making 10 million, they only make 9.7 million, it’s a greed thing that’s why Cheney got that dumbass Bush to start that war, Cheney has stock in Halliburton…

  13. Cameron did the same thing with Schelumberge the merged the subsea division and all pay stayed the same some got promotions an raises

  14. Well if they do that. The employees who have worked for one another. Maybe unemployed

  15. Bertin Sierra Ana Laura Meraz told Uall lol

  16. Big fish eat the little one’s

  17. I predicted this would happen when the unconventional plays gained popularity

  18. But amerika is a free market economy…..hahahahaha….so sheeple believe….

  19. Who cares. And if you don’t work in North Dakota you shouldn’t even have an opinion because you don’t know

  20. I’m looking to join the crew hope soon I hate being out of work it sucks please help

  21. Baker is a good company to work for.

  22. How is it a monopoly. Still many other companies out there! Hall would have to swallow every company out there to oversize SLB.

  23. This is what our president want. Cheaper labor

  24. If they were, they wouldn’t be laying people off.

  25. this will never happen without either divesting a lot of services like cement downhole tools etc, this would violate anti trust laws
    oil is down to $73/bbl from $100+ this summer this is just talk to raise stock prices that is all

  26. I know that Labcorp is. They are buying up every small lab that they can. Believe me, I work for them.

  27. They always have. No new news. The small co will fall and the big co will survive. The employees of these big co will pay as well, or should I say not get payed.

  28. Greed and back room deals are really pissing me off. It’s time to get off our ass and try these evil men for treason and fraud. From nongovernmental organizations to the president. What the hell are we waiting on!?

  29. Dick Chaney owns Halliburton. He’s an evil man.

  30. Even with a merger they’ll be less than half the size of Sclumberger

  31. War criminal. Polluter. Bionic azzhole.

    • Back to troll some more. Good job.

    • Tool = person who is an activist against something they do not know anything about or understand. lol @ armchair internet activism.

    • Really guy? I don’t know what I’m talking about?
      How about the fact your line of work is directly responsible for the current state of the atmosphere! 400ppm CO2 and fracking is absolutely wreaking havoc on the methane levels in the atmosphere.
      Or the fact that fracking is causing low level earthquakes… Or the fact that Halliburton isn’t capping their old wells which are leaking huge amounts of methane. Or the fact that you’re just a peon in the whole grand scheme to get rich at the cost of my daughter’s future.
      You work for tools. You are a tool.

  32. It will be more buying n near future only service company will be Halliburton

  33. A better question is, can they play Monopoly?

  34. Lol hurry up and die in a fire. You’re pathetic.

  35. Wishing death to a complete stranger over differing views? Nice! You shall have a long and fruitful life. Have a nice day, Internet tough guy.

  36. Oh, and Halliburton didn’t invent hydraulic fracturing. But, who cares about facts right? 😉

  37. Your daughter’s future is forfeit. My daughter’s future is forfeit. The only difference is I’m not a tool aiding in that destruction. Enjoy your fvcking oil job idiot. I hope it’s worth the true cost.

  38. Guy, you’re a hopeless tool.
    Keep working your oil job. That entire industry is a profit driven lie. You’re not even the evil billionaire pulling the strings. You’re the tool at the bottom eating the billionaires table scraps.
    What a wonderful planet you are working so hard to leave your kids.

  39. Where is your science? You probably think global warming is true and believe in chemtrails as well haha.

  40. *waits patiently for the links to be posted from huffington post and other crap websites*

  41. I will keep working my oil job. Because I see what actually happens out here, and it is nothing like your fantasy hysteria articles that you guys like to tout.

  42. And just so you know.. Everything is profit driven. Green energy too. Everything. Don’t kid yourself.

  43. You’re one those willfully ignorant types. You know.. The lazy talking point flinging wing-tard.
    Until you can understand the chemistry of the carbon cycle, you’re nothing but a talking head. Blah blah blah.
    He azzhole, how does a hydrogen bond work?
    What molecules make up methane? What kind of chemical bond is it?
    What is the carbon cycle? What happens during cellular respiration?
    I bet if I asked you how a carburetor works, you’d know that lol. You’re a joke. That’s why you chose an oil job instead of going back to school for a real one.
    I’m obviously an idiot right? Because YOU said so? Lmfao. I only hold the highest award at my college right now. Honor society and a 3.9 GPA (in accounting!)

  44. Wait, I’m an armchair activist right? Lmfao.

  45. Done patting yourself on the back? All that paper has done nothing I see. Still don’t know how to vet sources. Still don’t read peer reviewed scholarly articles about the topic at hand. Still sound ignorant, because you do not actually know anything about hydraulic fracturing. Molecules? Basic stuff. Don’t worry, that accounting degree qualifies you as a petroleum expert. Turd.

  46. Are you done being wrong about EVERYTHING you f-ing tool

  47. I bet you wish you earned of these

  48. K. When I need help with my 1040, I will let you know. Otherwise.. Your opinion about anything gas and oil related is completely worthless.

  49. Just get out of here. Lmfao

  50. Wow you are insanely pathetic. Lmao.

  51. Have a nice day tough guy.

  52. I’ve done everything you’ve done, only better. AND I continue to grow

  53. I’m pathetic right? That’s why the school ran out of honors to give me.
    That’s why I left the army as the most decorated specialist in my unit right? I’m so dumb too that my 118GT score was higher than my commander’s right?

  54. Joe does your arm hurt from patting yourself on the back?

  55. I guess nasa isn’t scholarly right oil corporal?

    http://science.nasa.gov/science-news/science-at-nasa/2014/09oct_methanehotspot/

    Do you even know what methane clathrates are? You know, the enormous deposits in the Arctic Ocean…
    What about the fact that the permafrost is melting and will surpass human emissions in a decade or two?

  56. Lol who cares. It is what is is. Either work for them and take what they pay or work somewhere else. That simple.

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