Oilfied services firms Baker Hughes Inc. and BJ Services Co. said Tuesday they have reached a final agreement with the Department of Justice’s antitrust division on their proposed merger. The settlement requires the companies to divest assets before closing can occur, and must be approved by the U.S. Court of Appeals for the District of Columbia (see Daily GPI, April 5).
Absent the divestitures, the merger would combine two of only four existing companies that provide specialized pumping services, known as stimulation services, giving the united Baker Hughes-BJ Services company dominance in the market and the ability to influence prices.
The agreement requires the companies to divest two vessels used for providing stimulation services — BJ’s Blue Ray and Baker Hughes’ HR Hughes — along with certain other assets, including dock facilities in Port Fourchon, LA, sand control tool assets and stimulation fluid assets. Stimulation services prevent sand from interfering with the flow of oil and natural gas wells in the Gulf of Mexico.
First announced in late August 2009 (see Daily GPI, Sept. 1, 2009), the deal — which is valued at about $7 billion — would move the combined company to the No. 3 spot in market value for oilfield services behind leaders Schlumberger Ltd. and Halliburton Co. National Oilwell Varco Inc. is currently the No. 3 oilfield services provider.
Baker Hughes has said the merger would give the combined company the ability to compete around the world. The union is also seen as a bet that natural gas will play a bigger role internationally. When the deal was originally announced, Baker Hughes CEO Chad Deaton said he sees opportunities to grow, both in individual shale markets in North America and in the rest of the world in the future, and in deepwater drilling.
Houston-based BJ Services is one of the largest pressure pumpers in the world, a process used in unconventional natural gas plays to break up rock. Pressure pumping now accounts for 75% of BJ Services’ business; it is expected to be 20% of the combined company’s revenue. In 2008 pressure pumping accounted for 1% of Baker Hughes’ revenue.
Once the merger is completed, BJ Services shareholders would own more than a quarter stake in Baker Hughes, and two of its board members would join Baker Hughes’ board.
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