Denver-based Liberty Oilfield Services Inc. is set to become the third largest oilfield services operator in North America after clinching a deal to take over Schlumberger Ltd.’s massive hydraulic fracturing business.
In the agreement, the Houston-based giant is contributing its onshore OneStim completions business in exchange for a 37% stake in Liberty. OneStim provides pressure pumping, pump down perforating and Permian Basin fracture sand across the Lower 48 and onshore Canada.
“The last several months have been extremely challenging for the world, the industry and the Liberty family,” Liberty CEO Chris Wright said. However, “these times also bring opportunity. This transaction will be a transformative step forward in our journey as a company.
“Our expanded technology portfolio and breadth of operations will enable Liberty to further raise our already high bar” for innovative and efficient stimulation operations that are centered around environment, safety and governance initiatives, or ESG.
Once the combination is completed, Liberty would control an estimated 2.5 million high hp (hhp) for completions. Included would be 1.25 million hhp available for service and 1 million hhp in maintenance support. Liberty also plans to permanently retire 1 million hhp from the market.
Liberty management would continue to lead the company once the transaction is completed, set by year’s end.
Schlumberger CEO Olivier Le Peuch said Liberty “shares a like-minded focus on customers, technology, people and our safety culture. This partnership provides an ideal home for our OneStim business and its employees and is in line with our capital stewardship strategy, while benefiting from future market upside through our equity stake.
“Alongside the comprehensive suite of services and products that Schlumberger continues to offer in North America land, this partnership with Liberty will uniquely position us to leverage our technology and scale to significantly improve our customers’ performance.”
Schlumberger in 2017 had attempted to partner with Weatherford Ltd. in the OneStim business to build their onshore heft and to take on Halliburton Co., the No. 1 pressure pumper in North America. However, the combination fell apart, and instead, Schlumberger took ownership of Weatherford’s U.S. assets in 2018.
During the 2Q2020 conference call in July, Le Peuch signaled that partnerships could boost efficiencies and help insulate the industry from volatility, as well as declines in oil and gas demand. Schlumberger’s North America land revenue fell 60% sequentially in 2Q2020 as customers reduced spending.
An alliance agreement also was clinched with Liberty for future collaboration, giving it access to technology portfolios beyond the scope of the transaction. The agreement includes Schlumberger’s digital platform, subsurface expertise, downhole completions equipment, fracture trees and flowback technology.
Based on prices, the all-stock deal is valued at around $448 million, which includes exchanging 66.3 million Class A Liberty shares. Around $125 million in synergies are expected once the deal is completed, which is to come by reducing OneStim corporate overhead.
The 2019 combined pro forma revenue would have been $5.2 billion, with a market capitalization of $1.2 billion.
The combination marks “a structural change to the North American pressure pumping market,” Evercore ISI analysts said Tuesday. It also is in line with Schlumberger’s strategy to become more asset light, analyst James West noted.
“From Liberty’s perspective, the company understands the importance of driving differentiation in a structurally smaller North American market. This transaction should help the combined entity capture market share as operators continue their flight to quality service providers.”
Liberty, West noted, long has been “forward thinking and knows that consolidation had to occur in pressure pumping in order for returns to improve. They also are in-line with our views that operators will want to collaborate with service companies that are financially strong, drive improving efficiencies and differentiation, and have scale.”
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