Nov. 17, 2014, 3:59 PM
- In the wake of Halliburton's (NYSE:HAL) $34.6B offer for Baker Hughes (NYSE:BHI), it appears the next hot sector for M&A action is energy: More consolidation is likely, given the weakness for stocks in the oilfield services subsector, low interest rates, and as a drop in demand for oil increases cutthroat pricing competition.
- Speculation is running rampant as investors try to figure out who is next in an industry that is sure to undergo some more consolidation; some names identified as possible candidates include Kodiak Oil and Gas (NYSE:KOG), Marathon Oil (NYSE:MRO), Northern Oil and Gas (NYSEMKT:NOG), Anadarko Petroleum (NYSE:APC), Pioneer Natural Resources (NYSE:PXD).
- GE could go after National Oilwell Varco (NYSE:NOV) to show it is serious about the energy industry after last year’s purchase of pumpmaker Lufkin, Royal Bank of Canada says, and Oppenheimer says even BP could be an acquisition candidate.
- But Morgan Stanley does not see offshore drillers getting in on the action, as larger players like Diamond Offshore (NYSE:DO), Transocean (NYSE:RIG) and Seadrill (NYSE:SDRL) are still addressing dividend concerns while smaller companies such as Atwood Oceanics (NYSE:ATW) and Pacific Drilling (NYSE:PACD) still trade close to replacement value.
Nov. 17, 2014, 12:58 PM
- Halliburton (HAL -9.8%) must pay a $3.5B breakup fee if its deal for Baker Hughes (BHI +10.3%) falls through, ~10% of the $34.6B deal value, far higher than the usual ~4% paid by U.S. acquirers this year, according to data compiled by Bloomberg.
- The fee could be viewed as a barometer of the regulatory risk HAL faces, but it is also a sign that HAL is confident it will successfully navigate that risk.
- Once combined, HAL and BHI would dominate the $25B U.S. market for onshore fracking, and unseat rival Schlumberger (SLB +0.6%) in several key lines of business.
- Investors may be misreading the situation, says FBN Securities' head of merger arbitrage Kathy Renck, who believes a 10% breakup fee is not out of line in a situation with known antitrust issues.
Nov. 17, 2014, 10:39 AM
- Halliburton (HAL -7.2%) and Baker Hughes (BHI +12.7%) say they have already identified several potential buyers for the businesses they may have to sell off amid antitrust issues, as the two oil services companies agree to a $34.6B deal.
- In a conference call this morning, HAL CFO Mark McCollum said the company is looking at divesting businesses with up to $7.5B in revenue, but said the company doesn’t believe the sales will hurt the financial benefits of the deal.
- CEO Dave Lesar said the deal will boost HAL’s capabilities and technology offerings in unconventional shale plays, in deepwater oil fields and in mature fields, and BHI's deepwater technology aimed at spotting oil through thick rock will help expand market share.
- The companies said they see $2B in annual cost synergies, mostly from operational improvements in North America.
Nov. 17, 2014, 9:15 AM
Nov. 14, 2014, 9:26 PM
- With merger talks stalled, and today being the deadline to nominate directors for next year, Halliburton (NYSE:HAL) has informed Baker Hughes (NYSE:BHI) of its intention to try and throw out the entire Baker Hughes board at the April 2015 annual meeting.
- Baker Hughes Chairman and CEO Martin Craighead: "Baker Hughes believes that Halliburton's various attempts at coercive tactics, instead of being willing to negotiate a reasonable value for the Company's stock and despite having stated twice that they have room to increase the value of their offer, are attempts to control both sides of a negotiation and are entirely inappropriate."
- Source: Press Release
- Previously: Report: Halliburton-Baker Hughes merger talks have stalled
Nov. 14, 2014, 5:54 PM
- Baker Hughes (NYSE:BHI) -3.3% AH and Halliburton (NYSE:HAL) -1.2% following a Bloomberg report that merger talks have stalled, as the companies haggle over price and divestiture concerns.
- HAL reportedly could make an unsolicited tender offer for BHI instead, and nominate a slate of directors to BHI’s board.
- Today is the deadline to nominate directors to BHI’s board for the company’s 2015 annual meeting, WSJ reports; nominating directors would give HAL a path to go hostile if current negotiations break down and BHI resists further discussions.
- BHI’s 13 directors are all up for election every year, meaning HAL could seize control with one fell swoop.
Nov. 14, 2014, 12:48 PM
- Oil services companies are mostly higher as Halliburton (HAL +1.7%) is indeed in talks to buy Baker Hughes (BHI +0.5%), a deal that would provide a jolt to oilfield services companies contending with falling oil prices: SLB +0.4%, OIS +1.2%, SPN +2.3%, CAM +0.2%, FTI -0.3%, NOV -0.6%.
- Sterne Agee analyst Stephen Gengaro calls a potential HAL-BHI combo a “HAL of a Frac-ing Deal," seeing several positives for HAL including strengthening its relatively weak position in artificial lift and production chemicals which are critical to enhancing HAL’s mature field strategy, enabling it to leverage its unparalleled U.S. pressure pumping logistics chain to enhance the efficiency of BHI’s operations, and providing the opportunity for significant cost savings which likely would total $600M-$750M or more.
- While antitrust concerns could force some divestitures, Gengaro does not believe it would prevent a deal from happening.
- Other potentially attractive M&A targets among oil services companies could include Dril-Quip (DRQ +0.7%), Frank’s International (FI +2.6%) and Oceaneering (OII -0.2%), Simmons & Co. says.
Nov. 13, 2014, 6:56 PM
- Baker Hughes (NYSE:BHI) confirms it has engaged in preliminary talks with Halliburton (NYSE:HAL) about a potential business combination and will offer no further comment.
- A merger could provide HAL with a "significant advantage in gaining global share, expanding margins and competing" against Schlumberger (NYSE:SLB), UBS analysts say, but digesting such a large acquisition could take two years or more and be a distraction to HAL.
- A combination of the second and third largest listed oil services groups by market cap likely would draw scrutiny from U.S. regulators, but the biggest obstacle to a deal might come from its E&P customers worried about the potential for higher prices at a time of falling crude oil prices.
- Also, doing a deal as oil continues to slide should make it a tough sell to BHI shareholders: Why sell amid such turmoil?
- BHI +16.3%, HAL +1.3% AH.
Nov. 13, 2014, 5:39 PM
- Anadarko Petroleum (NYSE:APC) has suspended some operations in Colorado after a Halliburton (NYSE:HAL) worker was killed and two others were seriously injured at an APC well site in the Wattenberg oil and gas field.
- The workers were trying to heat a high-pressure water line that had frozen in record-breaking cold conditions, when it ruptured.
Nov. 13, 2014, 3:50 PM
- Baker Hughes (BHI +17.9%) resumes trading after a volatility trading halt following a WSJ report that Halliburton (HAL +4.8%) is in talks to buy the oilfield services company.
- Talks are moving quickly, and an agreement could be reached soon, according to the report.
- The price being discussed is not known, but a deal would be one of the largest in the energy sector in recent years.
Nov. 13, 2014, 3:20 PM
- U.S. crude oil prices break below $75/bbl for the first time in more than three years, brushing aside an IEA report showing a surprise 1.735M barrel inventory drawdown as well as remarks by the Saudi oil minister dismissing talk of an oil price war among producers.
- West Texas crude settled today at $74.21/bbl, -3.9% and breaking below an important support level; during the past three years, futures have tested but not broken through that level three times.
- Brent crude recently was trading below $78, -3%.
- Global oil majors are all lower: COP -1.9%, BP -1.4%, CVX -1.4%, XOM -1.1%, TOT -0.9%, RDS.A -0.7%.
- Oil services companies and offshore drillers suffer even sharper drops: SDRL -4.4%, SLB -4.2%, HAL -3.9%, BHI -3.9%, RIG -3.8%, DO -3.5%, NBL -2.9%.
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Nov. 10, 2014, 11:45 AM
- A new research report from Jefferies discusses four oil services stocks which it sees having huge potential upside, even as oil prices have taken a beating.
- Jefferies believes Schlumberger (NYSE:SLB) could be poised for years of solid growth despite the recent trend in oil pricing, and thinks the company will continue to drive margins on execution, technologies and efficiencies.
- Halliburton (NYSE:HAL) leads industry peers with North American margins of 18.2% and a plan to increase its allocation for its operations in North America.
- Baker Hughes (NYSE:BHI), which reported solid numbers for the quarter although some analysts were disappointed by margin guidance, while C&J Energy (NYSE:CJES) reported a very impressive earnings beat last week.
- The firm expects stock price increases of more than 40% for each of its selections.
Nov. 4, 2014, 2:10 PM
- Halliburton (HAL -4.8%) CEO Dave Lesar is the latest oil executive to say he is not particularly worried about falling oil prices, expecting them to climb next year.
- Lesar says the downward pressure on prices is mostly due to an oversupply, and he believes that will quickly prove self-correcting, especially when it comes to U.S. shale production.
- Unlike with conventional oil, shale wells peter out quickly and companies depend on constant new drilling to maintain production levels; lower prices will discourage new drilling, quickly removing the glut in crude supplies, Lesar says.
Oct. 28, 2014, 11:32 AM
- U.S. energy company CEOs remain confident they can still make money in a world of $80 crude oil prices, according to a Bloomberg report.
- The industry is used to price swings, Halliburton (NYSE:HAL) CEO David Lesar tells Bloomberg; if crude floats at $80-$100, "that’s a range that the service industry and our customers can easily live within."
- “We think there’s a lot of economic oil at $75... meaning we earn 15%, 16%, 17% returns,” Occidental (NYSE:OXY) CEO Stephen Chazen said during OXY's earnings conference call last week.
- Harold Hamm of Continental Resources (NYSE:CLR) even says prices could fall to $50/bbl before he would start worrying, and tells CNBC that his company has not yet altered any drilling schedules in response to the drop in crude prices.
- Some of the best operators can profit at low prices because they’re learning how to drill wells more efficiently and getting more production at lower costs; SM Energy (NYSE:SM) is getting 40% more production for a 10% increase in the cost of each well, and Carrizo Oil & Gas (NASDAQ:CRZO) has nearly doubled its cash flow/bbl from two years ago.
Oct. 27, 2014, 8:55 AM
- Goldman Sachs lowers its ratings on the oil services sector (NYSEARCA:OIH) to Cautious from Attractive and downgrades several specific stocks as it cuts its 2015 oil price forecast.
- U.S. land activity will suffer the biggest impact of the lower price deck, Goldman says, with customer capital spending expected to decline 6% next year vs. its prior outlook for a 9% increase; as a result, the firm now forecasts the horizontal U.S. rig count to fall 7%, or ~200 rigs, over the next 12 months.
- Goldman downgrades Parsley Energy (PE -3.8% premarket), Diamond Offshore (DO -1.5%), Laredo Petroleum (LPI -9%) and Basic Energy Services (BAS -6.2%) to Sell with sharply lower price targets; Patterson-UTI (NASDAQ:PTEN), Pioneer Energy (NYSE:PES) and Emerge Energy (NYSE:EMES) are cut to Neutral.
- The firm adds Oceaneering (OII -0.3%) to its Conviction Buy list; it also removes Halliburton (HAL -1.5%) from the list but maintains its Buy rating on the stock.
Oct. 24, 2014, 8:28 AM
- Upgrading the stock to a Buy from Neutral, Citi says HAL's opportunity for share gains in North America is not reflected in the stock price.
- The stock's bounced nearly 10% over the past few sessions, but remains lower by about 25% over the last three months. Alongside an earnings beat earlier this week, Halliburton chief Dave Lesar said the company has seen no drilling slowdown despite what he expects will be a short-lived fall in oil prices.
- Shares +1% premarket
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