Oilfield services firm Schlumberger agreed to sell its North America shale fracking business to rival Liberty Oilfield Services, unloading a unit that underperformed during the shale bust.
The sale comes less than three years after Schlumberger sought to expand in hydraulic fracturing through a $430 million purchase of a rival’s fracking equipment. That bet soured as shale-oil producers cut drilling on weak oil demand and prices.
Schlumberger will take a 37 per cent stake in Liberty, and the projected revenue would make Denver-based Liberty the third-largest U.S. oilfield services firm by sales.
This year’s shale downturn hit fracking services. BJ Services and Calfrac filed for protection from creditors, and rivals Keane and C&J Energy Services merged.
Liberty, which will pick up advanced hydraulic equipment and two West Texas frack sand mines, sees little customer overlap between the fracking operations, Liberty Chief Executive Officer Chris Wright said.
“The technology portfolio is truly exceptional. That’s a huge part,” he said. Fracking will recover to over 200 active fleets by next year, he forecast, up from around 76 last month.
Schlumberger has been retrenching, pulling out of businesses and cutting thousands of employees to halt losses. CEO Olivier Le Peuch had pledged to pare its North American hydraulic fracturing portfolio.
“This transaction should help the combined entity capture market share,” wrote James West, a managing director at investment firm Evercore ISI, amid a consolidating fracking sector.
Liberty, whose shares were off 42 per cent this year, jumped $2.26, or 36 per cent to $8.81, while Schlumberger fell less than 1 per cent to $18.66.
The combined company will have a market capitalization of $1.2 billion, and 2019 revenue would have been $5.2 billion.
The deal is expected to close in the fourth quarter and Liberty will continue to be led by its current management team.
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