Weatherford halts joint venture
The oil services company Weatherford International has scrapped plans for a joint venture with competitor Schlumberger and instead sold outright its pressure pumping and hydraulic fracturing fleet to the international giant for $430 million in cash.
The move will push Schlumberger, the world’s largest oil services company, another step toward catching the industry’s largest fracking fleet owned
by Halliburton, based in Houston, while allowing a smaller Weatherford to focus on a return to profitability.
It’s also a harbinger for a heated 2018 oil services race, said Jonathan Garrett, an analyst at the Houston energy research firm Wood Mackenzie.
With prices low and profits thin, fracking firms had been reluctant to buy more equipment, worried they’d be stuck with the fleet and no work. But several companies have announced in recent months that they’d be adding horsepower, gearing up for what they expect will be a busy year with oil prices back around $60 a barrel.
The addition of Schlumberger bolsters the outlook.
“They don’t want to miss the boat,” Garrett said. “It looks like people are getting more comfortable with where oil prices are.”
Oil settled at $60.42 a barrel Friday, the first time it has closed above $60 since June 2015.
Schlumberger, which has one of its four principal offices in Houston, will take ownership of Weatherford’s U.S. pressure pumping facilities and contracts, Weatherford said Friday. About 100 Weatherford employees will transfer to Schlumberger. Weatherford will hold onto its well completions portfolio, manufacturing capability and supply chain, and use the cash to pay down debt.
Weatherford, which operates out of Houston, reported more than $7.5 billion in debt at the end of September, and $256 million in losses in the third quarter.
“Although not as originally anticipated, this transaction delivers cash proceeds,” Weatherford CEO Mark McCollum said. It will lead the company to a “leaner” future and higher profits, he added.
McCollum suggested Weatherford will refocus on onshore completions, a process that involves cementing and other steps to make wells ready for production.
The companies had planned to close on the joint venture by year’s end. It recently was approved by U.S. regulators. It’s unclear why the companies abandoned that plan.
But this deal will give Schlumberger complete control and make operations simpler, including eliminating the need to integrate the software of two companies to run equipment, Garrett said.
The deal also will help Weatherford focus on other segments of the oil services market, he added.