Halliburton Acquires Baker Hughes for Integrated Platform or Pricing Protection

Halliburton Acquires Baker Hughes for Integrated Platform or Pricing Protection

halliburtonHalliburton (NYSE:HAL) acquired Baker Hughes (NYSE:BHI) creating an $80bn oilfield service company second only to Schlumberger (NYSE:SLB) in market capitalization.

Market Share Impact

We took a look at our Frac & Proppant Database this morning to get some insight on the market share of the companies. We estimate that the combined company would represent an approximate 40% share of the Frac Market with varying share mixes in different basins/regions.

There are several areas where one company is significantly stronger than the other (Williston, Eagle Ford, and DJ Basin – Niobrara) and other areas where it is more like a merger of equals (Permian and Barnett/Granite Wash).

The combined strength is impressive in areas like DJ Basin and Niobrara where the firm will be positioned as a dominant market leader; however, the combined market shares for the Eagle Ford and Marcellus are much less impressive.

Outside the major shale plays in the conventional markets, the combined firm appears to hold an advantage over many of the other top service companies.

Shift in Market Dynamics

Does this shift change anything for the buying power between oilfield services and E&P companies?  There is no doubt value is created with Halliburton’s integrated approach to field operations; however, many still are not willing to pay the price of integrated operations.

The merger will enable the new company to penetrate E&P accounts further. Buying power will likely change over time as the merger progresses and customers begin seeing operational and financial impacts. This will take time; however, we expect to begin seeing this in certain shale plays where the merger is favorable.

Baker Hughes Halliburton will benefit from Baker Hughes’ stronger relationships with larger E&Ps like Apache Corporation. Several E&Ps have relationships with Halliburton, Baker Hughes, and other service companies depending on the service line.  A higher concentration of frac crews in some areas will yield quick results; however, it is likely that the merger will cannibalize some business.

More information to come in our weekly insights

We are taking a deeper look at the customer and competitor impact in our weekly Insights (insights.energentgroup.com). Please contact us if you have any questions or are interested in our Frac & Proppant Database or other products.

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