Comments due by Nov.22, 2014
Halliburton is in talks to buy Baker Hughes, a potential acquisition that would unite two of the biggest oil field services providers in what would be one of the largest energy deals in years, Baker Hughes confirmed on Thursday.
It is not clear what price Halliburton is considering, but Baker Hughes ended trading on Wednesday with a market value of about $25 billion. Its shares surged 20 percent in late afternoon trading on Thursday once The Wall Street Journal reported on the negotiations.
After the market closed, Baker Hughes issued a news releaseconfirming that it had engaged in preliminary discussions with Halliburton about a deal. “These discussions may or may not lead to any transaction,” it said. “Baker Hughes does not intend to comment further on market speculation or disclose any developments unless and until it otherwise deems further disclosure is appropriate or required.”
Both companies have been affected by a slump in crude oil prices this year, caused in part by a boom in domestic energy production that has flooded the market with oil and natural gas.
The drop has been a boon for American consumers, who are paying lower prices at the pump, but it has caused some hand-wringing in the energy industry. Investors fear that service providers like Baker Hughes and Halliburton may be forced to cut their prices, straining profitability. Shares of both companies have been falling since the summer, when crude oil prices peaked.
Energy analysts said a combined service company would probably not have the power to raise prices for drilling, cementing and hydraulic fracturing because of the great amount of competition around the world, especially with new service companies growing in places like China, South Korea and India.
The exception would be in areas requiring the highest levels of technology like the Arctic or the deepest offshore oil fields, where only the industry leader, Schlumberger, competes with Halliburton and Baker Hughes. Those areas may become less appealing for drilling anyway if oil prices continue to drop.
“They won’t have the market power to raise prices, especially now,” said Michael C. Lynch, president of Strategic Energy and Economic Research, a consulting firm. Nevertheless, he said that a purchase of Baker Hughes by Halliburton would be a big deal, adding, “It’s something like the 500-pound gorilla swallowing the 300-pound gorilla.’’
Still, a merger could help Halliburton and Baker Hughes compete against Schlumberger, which is much bigger than either company. Schlumberger, which was founded in 1926 by two French brothers who invented a geological mapping technique that became the industry standard, employs 126,000 people and has offices in Paris, Houston, London and the Hague.
Halliburton, the No. 2 player, was a pioneer of hydraulic fracturing, or fracking, the drilling technique that has propelled the United States energy boom. Founded in 1919, and with 80,000 employees, Halliburton is now a leading supplier of fracking equipment.
Baker Hughes, which has 60,000 employees, was formed in the 1987 merger of Baker International and Hughes Tool Company, two petroleum companies dating to the early 20th century. The founder of Hughes Tools, Howard R. Hughes Sr., had invented a rotary bit for drilling oil wells through rock. His company became the basis of the fortune of his famous son, the reclusive billionaire Howard R. Hughes Jr.
A spokeswoman for Halliburton declined to comment.
16 comments:
Halliburton and Baker Hughes are two major crude oil service providers. During this past week, there was speculation on whether or not the Halliburton would purchase Baker Hughes. This would be beneficial to both companies because the merger would help them with their biggest competition, Schlumberger. In class we discussed how certain speculated mergers are never brought to fruition because they bare the risk of becoming too powerful, such as AT&T and T-Mobile. However in this case I feel that this merger will be allowed to proceed. This is due mainly in what the merger and Schlumberger have to offer. Halliburton has become a leader in hydro-fracking, which overall has been an extremely controversial form of drilling because of the major risks (toxic water supply) it brings. Even combined with Baker Hughes it doesn't seem to pose an extreme threat in the market that would cause a major imbalance because of that.
If this merge were to happen this would give the two oil fields to actually be a rival to their competitor Schlumberger. This will also create a Dualopoly in the oil field industry. Even though this made me a good move on their part this may be bad on the consumer part. If the merger were to commence then that'll make the consumer be only to chose between one oil company or the other. Which the companies may fluctuate their prices because there are less rivals companies.
After reading this article it would be beneficial if both the two major crude oil service providers merged because it would help them take care of their biggest competition. Even though the government sometimes regulates this so they do not become too powerful this merger would be beneficial to the industry. By merging this creates a duopoly, this would be good on their part but might hurt the consumer.
This seemed like a big deal at first, but it doesn't seem like it will effect oil prices too much. When i first read that there will be two major drilling companies merging together, i thought there would be some kind of a monopoly forming, and that prices will rise. There are still bigger companies out there even if they merged together. That means there will still be competition between companies, so prices won't go up. This might actually be a good thing. This means the knew merged company will be able to compete with the top big companies out there. Even if these two companies were to have the power to raise prices, the government would step in and regulate the prices. If there isn't a chance for the prices going up, then i think the merging of these two companies will be allowed.
-Jack Madden
Two major Oil producers are in the mix of a merging. This can be either a good or bad thing. Usually when two huge companies come together it means good things for the companies and not so good things for the consumers. However this may be okay. Certain phone companies showed an interest in buying T-Mobile but the government stopped it as it would lead to bad things, but the two oil companies merging is not being stopped. In fact it is showing good sighns. But only time will tell.
This merger will most likely go through. While some might look at this merger as creating a monopoly, it would actually be creating more competition. Schlumberger is an oil company that is larger than both Halliburton and Baker Hughes combined. The merger of two companies that would not make the size bigger than the largest company in that field should not only be aloud to go through, but it should also be encouraged. Both of these companies have been going through a lot of losses because they do not have the resources and size to expand their operation. Both company's stock prices are dropping as a result from their prices going down since the summer. If they were to combine, it would create a much stronger company that would be able to compete very well with Schlumberger.
Halliburton and Baker Hughes are two of the biggest companies in the oil industry. Their only real competition is Schlumberger, which has set industry standards from it's foundation and still has the leg up for drilling in certain areas like the artic and Alaska. If the merger of Halliburton and Baker Hughes goes through, there will only be two leading competetors in the oil industry, creating a duopoly. Economists say even if they do merge, they most likely won't have the power to raise oil prices. This is beneficial to the general population but not the oil companies. The oil companies have been making less profits since this summer when the oil prices peaked. Consumers are more than happy to see oil prices continue to drop, but this means oil companies will be losing profit and may face some trouble in the future.
As this article started I was interpreting that some kind of a monopoly forming, and that prices will rise due to the fact that the two major crude oil service providers merged.Economists say even if they do merge, they most likely won't have the power to raise oil pricesBy merging this creates a duopoly, this would be good on their part but might hurt the consumer. However,I dont think the merger will most likely go through.
I do think this proposed merger would be allowed to proceed. Halliburton and Baker Hughes are two of the biggest oil field providers. I feel once they merge they would be able to rival Schlumberger, in the sense that Halliburton and Baker Hughes would now have acquired the highest levels of technology. Together they might become number 1. They also wouldn't have the power to raise prices anyways so they won't monopolize the industry.
I do believe that they should be allowed to merge temporarily. I don't believe they should merge for the long run but rather the short run. This is because oil prices have fallen miserably the past year and a change needs to be made to somehow push oil in a better direction. For the long run, however, these companies should have to split back to its origins after a small 2 year max contract where oil is on the right track. This is simply because of the economic principles and the inefficiency of a monopoly. Just because its inefficient, however, does not mean it will 100% not work, but will be more inclined to fail. In this situation though I believe for a quick short term a monopoly on oil could be the best bet we have at recovering, and once recovered, back to the basics and where we are now with 2 unmerged companies.
Halliburton and Baker Hughes are two major oil companies. Recently, there was word that these companies may merge because Halliburton was trying to purchase Baker Hughes. Not only is this a duopoly, it seems at first glance like a terrible idea. Especially, with oil as high as it is now. The only plus side would be that the government could control the prices easier. Now, with oil being as high as it is now part of me wants to say let it merge it cant get any worse. Nevertheless, I wouldn't like to bite my tongue and have the government continue to raise prices
The merge between 2 of the top 3 largest crude oil service providers is a great possibility. The positives that can come of this is the demand for more labor workers as the company increases in size and the price of oil will remain relatively low with a greater output in oil fracking by Halliburton and Baker Hughes. THe negatives of this merge is the decrease in market competition. As 2 of the top 3 largest providers of oil merge that creates only a competition between 2 very large companies. Much like How AT&T tried to buy Sprint and the government stopped it because of competition problems, Hughes and Halliburton is the same thing. If Hughes and Halliburton successfully merge, their only competition is Schlumberger.
I feel that the merger should be allowed to go through since there is still another company that is bigger than the two of them combined. If the companies merge then they would become more competitive with the larger companies in this field and the price may come down even further. All in all, this merger would be beneficial to the companies as well as the consumers.
Austen Verhulst said...
on the whole, this merge is a big move. And from the looks of it may result in a positive effect on the industry due an increase in competition. As it is Schlumberger is the big dog, and in control, in the industry. The Merger would effectively create a duopoly, which would then lead to competition. supply will go up, price will go down. From the consumer standpoint this is extremely good. For the suppliers, there will still be enough profits to go around.
This article discusses two major crude oil traders; Halliburton and Baker Hughes. The main focus of the article was the thought about whether or not Halliburton was going to try to buy Baker Hughes and whether or not that would be a good idea. Many people say that this merger would be benefical to these two companies because than they would be able to double their resources and efficiency and allow them to be a sufficient rival against their biggest competitor which is Schlumberger. The downside to the merger would be if the two merging companies developed too much power which would then set an offset of balance within the market. Unfortuntaley these kinds of mergers are often times only good for the company and not for the consumer. They can result in price increases which help their profits but obviously hurt the customer
Although government regulation usually prevents large companies from joining and becoming too powerful, the merging of these too oil companies would be beneficial to the industry. The joining of Halliburton and Hughes would make them large enough to provide some competition for their rivals. This merging would actually prevent a monopoly on the other end, also this forming together would be a dupoloy. Some may assume that the merging of both companies would cause an increase in prices but even if they form together there will still be bigger companies out there and if anything they will create more competition for these powerful companies which would be beneficial. I feel that there should only be a certain amount of time they are allowed to merge for, a time constraint would be safe and protective just incase they do become too powerful.
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