Schlumberger and Weatherford International Plc forms JV, targets Halliburton

Schlumberger and Weatherford International Plc forms JV, targets Halliburton

Bloomberg– Schlumberger Ltd. and Weatherford International Plc are forming a joint venture aimed at taking on the king of fracing, Halliburton Co.

Schlumberger, the world’s biggest oilfield service provider, will own 70% and be the operator of the hydraulic fracturing partnership, to be known as OneStim, the two companies said Friday in a joint statement. Weatherford, the No. 4 oilfield servicer, will own 30% and receive a one-time cash payment of $535 million. Halliburton is the world’s largest provider of fracing services.

Fracing, in which service companies blast water, sand and chemicals underground to release trapped hydrocarbons, has been one of the most battered businesses in the oil patch during the two-year market downturn. Weatherford said in February it had shut down its fracing unit and would sell the business after profits evaporated.

The new joint venture, expected to close in the second half of the year, will bring Schlumberger closer to its chief rival, Halliburton, which has a total fleet of fracing pumps that add up to 3 million horsepower, according to Spears & Associates, a Tulsa-based oil-field consultant. Schlumberger currently has about 2 million horsepower, while Weatherford has an estimated 800,000 to 1 million.

Neck-and-neck

“They would be on par with Halliburton in terms of horsepower,” Richard Spears, V.P. at Spears & Associates, said Friday in a phone interview. “I wouldn’t put them on par with Halliburton in terms of revenue, because Weatherford isn’t bringing any business to them. It’s just trucks.”

Last year, some of the biggest oilfield service providers told investors that pricing for their fracing work had dropped to unsustainable levels, forcing Baker Hughes Inc. and Weatherford to severely pull back their businesses. After a proposed merger with Halliburton failed to gain regulatory approval, Baker Hughes agreed to combine its oil and gas business with General Electric Co., forming another service company giant to challenge Halliburton and Schlumberger. The deal remains under regulatory review.

The partnership with Schlumberger comes as Weatherford prepares to welcome a new CEO, Mark McCollum, who will start next month after leaving his job as Halliburton’s finance chief.

McCollum’s predecessor, Krishna Shivram, ran Weatherford as interim CEO for several months. During that time, Shivram said Weatherford would look to sell its U.S. onshore fracing business and its land-rigs business for a total of $2 billion. He said last month that the company had shut down the last of its fracing fleets at the end of last year.

Halliburton revival

Halliburton is bringing its own fracing fleet back to life again after parking much of its equipment during the industry downturn of the past two years. Earlier on Friday, the Houston-based service provider said it’s reactivating twice as much of its fleet this year as it originally expected as a surge in shale drilling raises demand.

Price increases for fracing jobs are somewhere in the “ballpark” of 25%, Halliburton CEO Dave Lesar told analysts and investors Friday on a conference call.

The Weatherford-Schlumberger announcement was made after the close of normal trading Friday in New York. Weatherford rose 6.1% from the close to $6.25 at 5:45 p.m. Schlumberger was little changed.

 

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