November 21, 2014 / 12:08 PM / 3 years ago

Exclusive: With Baker Hughes, Halliburton cements leading North Dakota role

WILLISTON N.D. (Reuters) - Halliburton Co’s $35 billion takeover of Baker Hughes Inc will create an oilfield services powerhouse in North Dakota with more than half the cementing market and a leading position in fracking, according to data seen by Reuters.

Traders work by the post that trades Baker Hughes on the floor of the New York Stock Exchange November 17, 2014. Halliburton Co said on Monday it will buy Baker Hughes Inc for about $35 billion in cash and stock, creating an oilfield services behemoth to take on market leader Schlumberger NV as customers curb spending on falling oil prices. REUTERS/Brendan McDermid (UNITED STATES - Tags: BUSINESS ENERGY)

The deal, announced on Monday, will help Halliburton better compete with global leader Schlumberger NV, as well as smaller peers Calfrac Well Services Ltd, Trican Well Service Ltd and other oilfield services companies in North Dakota, the second-largest oil producer in the United States.

The North Dakota market share projections for the combined company will be of keen interest to competitors and regulators. The deal faces stiff antitrust hurdles and likely will receive close scrutiny from regulators in the United States and European Union. Halliburton has said it would be willing to shed units that generate revenue of $7.5 billion to ensure the deal closes.

Even though oil production in the state’s Bakken shale formation has grown exponentially in the past five years, more than 35,000 new wells are expected to come online in the state by 2030, highlighting the ongoing need for the services these companies provide.

“We will rule unconventionals now,” one Halliburton manager in North Dakota told Reuters, speaking on the condition of anonymity.

In the Williston Basin, the oil-rich geologic formation holding much of North Dakota’s Bakken and Three Forks shales, the combined company will control 53 percent of the market to line a new well with cement to prevent leaks, according to the data. The step is required by regulators and a key process to safeguard drinking water supplies.

The combined company will also control roughly 36 percent of the Williston Basin market for hydraulic fracturing - the process commonly known as ‘fracking’ where water and sand are blasted into a well at high pressure to extract oil. And roughly 35 percent of the market for directional drilling, the process to drill wells horizontally, will be held by the combined company, according to the data.

The Williston Basin market prowess in cementing and directional drilling would eclipse the united company’s global share of those markets. Fracking market share in the basin would nearly match the new Halliburton, globally.

UNIFORM PRICING

Halliburton is very interested in Baker Hughes’ artificial lift division, which makes products that help old wells boost their productivity, as well as its production chemicals unit, according to footnotes accompanying the data.

In a statement to Reuters, Halliburton said it is too early to discuss the status of the combined company. “It is important to remember that until the close of the transaction, Halliburton and Baker Hughes remain separate companies,” Halliburton spokeswoman Emily Mir said.

It was not immediately clear what Schlumberger’s market share is for various products and services in North Dakota, but the Halliburton-Baker Hughes tie-up gives the combined company clear dominance in most oilfield services performed in the state.

Schlumberger did not respond to a request for comment.

The deal could lead to higher prices for some oil producers. Baker Hughes historically has priced its services below Halliburton, and the deal will allow Halliburton to make pricing more uniform. Continental Resources Inc, for instance, uses a plethora of oilfield service companies for various well completion processes, often choosing the lowest bidder.

The deal also gives Halliburton access to Baker Hughes’ extensive North Dakota real estate holdings, including a training center it built earlier this year. Halliburton currently trains employees at centers in Oklahoma and Colorado.

Editing by Terry Wade and Muralikumar Anantharaman

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