Merger of Schlumberger’s North American Fracking Unit with Liberty Oilfield Services
Schlumberger Ltd. (NYSE: SLB), the world's leading oilfield services provider, announced that it is merging its hydraulic fracturing arm with Liberty Oilfield Services Inc. (NYSE: LBRT), an innovative service company based in Denver, United States. According to this merger, Schlumberger will contribute its onshore hydraulic fracturing business in the United States and Canada (OneStim), including its pressure pumping, pump-down perforating, and Permian frac sand business to Liberty, in exchange for a 37% equity interest in the combined company. The deal is estimated at a whopping USD 448 million. The transaction is expected to be completed by the fourth quarter of 2020.
Liberty Oilfield Services Inc. specialises in hydraulic fracturing and engineering services and provides efficient and high quality solutions to onshore oil and natural gas E&P companies in North America. It mainly serves in the Permian Basin, Williston Basin, DJ Basin, Powder River Basin, and Eagle Ford Shale, which are among the most active basins in the region. It has clients throughout the United States. The company mainly focuses on offering safe and innovative solutions to deal with clients’ problems. These solutions include custom fluid systems, innovative perforating strategies, unique purpose-built equipment, and integrated engineering, and “big data” approach.
The divestiture of OneStim by Schlumberger Ltd. to Liberty is the result of the plummeting oilfield sector amidst the COVID-19 pandemic. It is aimed towards expanding technology and operating capabilities, which will further enhance E&P operator efficiencies, improve shale asset economics, and raise the bar for sustainable and environmentally conscious frac operations.
There are numerous oil and gas companies in the United States, but the volatility and fluctuations in the market are forcing those numbers to shrink. This is due to the halt in production operations caused by the mass shutdown amidst the pandemic, which is adversely affecting the oil and gas industry. For both Liberty and Schlumberger, this merger is one such step to cope with the increasing difficulties and sustain their business during the tough time. The consolidation between the two major companies will help the oilfield sector to recover.
This merger will be financially compelling for both the companies’ stakeholders. It will allow combined pro-forma market capitalisation of USD 1.2 billion. It will also provide an alliance agreement for future collaborations and give access to the companies’ technological portfolios beyond the scope of this transaction, such as Schlumberger’s digital platform, subsurface expertise, downhole completions equipment, frac trees, and flowback technology. The deal is expected to double the available service horsepower of Liberty, further adding maintenance support horsepower and sand mine capacity. It will also increase Liberty’s intellectual property patents to around 500.
The collaboration of Liberty Oilfield Services, one of the most innovative and efficient frac company, with the technologies and scale of Schlumberger’s OneStim, they are expected to form a significant division in the world’s leading oilfield services companies. This acquisition will make Liberty the third-largest oilfield services firm by North American revenue with the company's executive team leading the combined business.