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Irony: DOJ Scuttled Halliburton/BH Merger, then Collects $11M Fine

ValueActThe news is now months old that Halliburton and Baker Hughes ended their attempt to merge. The reason they called it off was because of opposition from the Obama Department of Justice (see Obama DOJ Kills Halliburton/Baker Hughes Merger, Deal “Terminated”). The companies didn’t have the stomach to go up against the bullies at DOJ. So it was the DOJ that actually killed the deal. During the process of DOJ’s review, an “activist investor” (i.e. corporate raider) by the name of ValueAct Capital snapped up $2.6 billion worth of Halliburton and Baker Hughes stock with, according to the DOJ, the intent to influence the companies’ business decisions as the merger unfolded.” The DOJ charged ValueAct “with violating the reporting and waiting period requirements of the Hart-Scott-Rodino Antitrust Improvements Act” (see DOJ Sues ValueAct Capital for Meddling in Halliburton/BH Merger). ValueAct has settled by paying $11 million in shakedown money to the DOJ to make it all go away. Which we find ironic. The DOJ killed the deal, and yet the DOJ is extracting money for the deal they killed…
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US Rig Count Up by 9 in June, Marcellus/Utica Holds Even at 36

Baker Hughes logoWe’re starting to crack a smile of hope that drilling has once again picked up. Our first bit of evidence that the tide is turning came last week when we reported that Patterson-UTI Energy’s rig count had gone up by two in June (see Tide has Turned: Patterson-UTI June Rig Count Ticks Up by 2). We now have further evidence. Baker Hughes is fresh out with their broad-based rig count numbers. For June, the U.S. active rig count increased by nine! In the Marcellus/Utica, the rig count month over month remained the same. It was 36 active rigs in May, and once again 36 active rigs in June. Have we FINALLY hit bottom? We sure hope so…
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Moodys Downgrades Halliburton/Baker Hughes Debt Post-Failed-Merger

Moodys Ratings ScaleEver hear the phrase, “Better to try and fail than never to try at all.” That’s actually the name of a poem from William O’Brien (dead poet, read his famous poem here). Contrary to the wisdom of O’Brien’s poem, in some cases it may be better to never have tried in the first place. At least that’s what Halliburton and Baker Hughes may be thinking about their failed attempt to merge (see Obama DOJ Kills Halliburton/Baker Hughes Merger, Deal “Terminated”). Halliburton ended up having to pay Baker Hughes a $3.5 billion break-up fee (see The Road Ahead for Baker Hughes – Post Halliburton Deal). Ouch. But that’s not all. Last week Moody’s Investors Service downgraded the debt for both Halliburton and Baker Hughes–from A2 to Baa1. Why? In part because of the failed merger deal. That’s what Moody’s says. What does the credit downgrade mean? It means their outstanding debt is harder to buy and sell, affecting $12.8 billion of debt for Halliburton and $3.9 billion of debt for Baker Hughes. It also means should either company want to borrow more money, the cost will be higher to do so…
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May 2016 Rig Counts Continue to Slide in US, Marcellus/Utica

Baker Hughes logoBaker Hughes released their monthly rig count, for May, yesterday. While the worldwide rig count went up by 9, it continued to crash here at home in the U.S. May’s rig count in the U.S. was down another 7% (in one month), from April’s count. Sadly the trend was the same in the northeast. While PA’s count averaged the same month over month–16 active rigs–both OH and WV slid, with 10 rigs operating in each state. Overall the Marcellus/Utica rig count was down by 3 in the past month…
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Baker Hughes Reorg/Leadership Change; Buying Back $1B in Debt

Baker Hughes logoRecently the proposed merger/buyout of Baker Hughes (BH) by Halliburton crashed and burned (see Obama DOJ Kills Halliburton/Baker Hughes Merger, Deal “Terminated”). So what happens now? It certainly helped that BH got a $3.5 BILLION break-up fee from Halliburton (see The Road Ahead for Baker Hughes – Post Halliburton Deal). They’ve received the money and per their previous statements, BH is now paying off debts with the money. The company is also changing up its leadership structure, combining and eliminating certain operations–all in a move to make the company stronger to weather the severe downturn in the oilfield services market. Below we have a pair of announcements on the post-Halliburton evolution of BH…
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April 2016 Rig Counts Continue to Slide in World, US, Marc/Utica

chart going downThe rig count–both internationally and domestically here in the U.S.–continues its historic slide. Last Friday Baker Hughes announced the average rig count numbers for April. Rigs operating outside the U.S. slide another 39, from 985 in March to 946 in April. In the U.S., the count slide 41 from 478 in March to 437 in April. In the Marcellus/Utica, the count was down another 2–both rigs lost came in Pennsylvania, which now has the lowest count in decades: just 16 rigs operating in the state. Ohio and West Virginia held constant month over month with 11 rigs operating in the Buckeye State and 12 rigs operating in the Mountain State. Here’s the sad news of the continuing decline in rig counts…
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Halliburton CEO Talks About Failed BH Merger, Industry Turnaround

David Lesar
David Lesar

Halliburton, the second largest oilfield services company in the world, released its first quarter 2016 update yesterday. Along with it, Halliburton CEO Dave Lesar held court with stock analysts on a ubiquitous quarterly earnings call. Among Lesar’s comments is that he thinks the oil and gas industry is right now beginning to turn more positive. Lesar believes that drilling will begin to pick up again later this year. He also had a number of comments, and questions, about the failed takeover/merger attempt with Baker Hughes (see Obama DOJ Kills Halliburton/Baker Hughes Merger, Deal “Terminated”). We found Lesar’s prepared remarks interesting and thought you would too…
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The Road Ahead for Baker Hughes – Post Halliburton Deal

Baker Hughes logoYesterday MDN brought you the news that the Halliburton buyout of Baker Hughes is now officially dead (see Obama DOJ Kills Halliburton/Baker Hughes Merger, Deal “Terminated”). So what’s ahead for Baker Hughes? First up is that they will get a $3.5 billion (with a “b”) payment from Halliburton tomorrow. At least, they’re supposed to. Baker Hughes says they will use $1.5 billion of the money to buy back company stock, and the other $1 billion to pay off certain debts. The company will also “rationalize” (i.e. downsize/cut) certain segments of its business–like the onshore pressure pumping business. You have to wade through lots of euphemisms and management gobbledygook speak, but here’s the Baker Hughes “path to the future” statement they issued yesterday…
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Obama DOJ Kills Halliburton/Baker Hughes Merger, Deal “Terminated”

It's Dead JimIt’s a sad day for Halliburton and Baker Hughes. The two companies intended to get married, with Halliburton buying out BH and merging it in a deal worth $35 billion (see Shotgun Wedding: Halliburton Forces Baker Hughes to Sell). That was in November 2014. Since then, the two companies have jumped through every hoop demanded of them, including shedding assets (see Halliburton/Baker Hughes Hold a Pre-Merger Garage Sale). By the end of last year, rumors were circulating that the deal is in trouble (see Whispers Turning in Chorus, Halliburton/BH Deal in Trouble). Then European regulators began throwing cold water on the deal (see Europe Puts Halliburton/BH Merger Under a Microscope). No problem–HalliHughes thought they could still pull it off. But then the bullies of the Obama Justice Department got involved and sued to block the deal (see Obama DOJ Sues to Block Halliburton/Baker Hughes Merger). We can’t remember a time when the DOJ opposed a big deal it ended up happening. And so it is with this one. The bullies have won. In a rare Sunday press release, Baker Hughes says the deal is now off–and Halliburton owes Baker Hughes $3.5 billion in a breakup fee–due by this Wednesday. Happy May Day, Halli!…
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Baker Hughes: Rig Counts Will Slide Another 30% in 2Q16

trending-down.jpgYesterday Baker Hughes released its first quarter 2016 update. According to BH CEO Martin Craighead, “the industry faced another precipitous decline in activity” in 1Q16, which means it wasn’t good for BH. The company reported that revenues were down 42% year over year during the first quarter. Ouch. The company list $981 million for the quarter, nearly $1 billion! Double ouch. The company, which maintains THE rig count everyone watches, said rig counts will stabilize in the second half of the year, but the company expects 2Q16 rig count numbers to slide another 30%, to all-time historic lows. Triple ouch. What about the Halliburton buyout of BH? The deal expires in two days on April 30. BH says beyond that date the merger agreement does not automatically terminate–they may decide to continue riding the merger horse. Time will tell. Here’s the BH update from yesterday…
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Scuttlebutt: With Halliburton Deal Crumbling, GE Eyes Baker Hughes

rumor-mill.jpgLast Thursday MDN brought you the news that the Dept. of Justice has decided to try to block the merger/buyout of oilfield services company Baker Hughes by bigger oilfield services company Halliburton (see Obama DOJ Sues to Block Halliburton/Baker Hughes Merger). When you add up opposition from both Europe and Brazil, this deal looks like it will never take place. So what happens now? Halliburton/BH say they will fight the DOJ’s action. But let’s get real. When was the last time anyone went up against the DOJ antitrust division and won? Which brings us to the rumor mill, which is now swirling that General Electric’s (GE) Oil & Gas division may make a run at buying out Baker Hughes…
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Rig Counts for World, US Continue Steep Slide in March; M-U Down 1

We’ve now gone beyond cutting into the bone and sinew with rig count losses–we’re now severing limbs. February’s Baker Hughes rig counts were awful, with both international and U.S. counts hitting record lows (see Rig Counts for World, US & Marcellus/Utica Crash in February). Somehow, it got worse in March. International rig counts went down 33 from 1,018 counted in February to 985 in March. In the U.S., rig counts went from 532 in February to 478 in March–a loss of 54 (10%). Month after month it just keeps going lower. Will the patient survive the carnage? On a more positive note, the number of rigs in PA, OH and WV cumulatively (the Marcellus-Utica) went down by just 1 rig. PA’s count went up 1 rig, OH’s count went down 2 rigs, and WV’s count stayed the same. Here’s the details…
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Obama DOJ Sues to Block Halliburton/Baker Hughes Merger

That didn’t take long. Yesterday MDN told you that sources in the Obama Dept. of Justice (DOJ) were leaking to the press that they would soon file a lawsuit against the Halliburton/Baker Hughes merger, in order to block it (see DOJ “Preparing Lawsuit” Against Halliburton/BH – Deal Looks Dead). They did. Yesterday the DOJ filed to block the merger saying the “merger would eliminate significant head-to-head competition in oilfield services industry.” Halliburton and Baker Hughes were quick to respond saying they will “vigorously contest the U.S. Department of Justice’s (DOJ) effort to block [the] pending merger.” Bring on the lawyers! Halliburton/BH say the DOJ has “reached the wrong conclusion in its assessment of the transaction and that its action is counterproductive, especially in the context of the challenges the U.S. and global energy industry are currently experiencing.” Here’s the dueling press releases issued yesterday…
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DOJ “Preparing Lawsuit” Against Halliburton/BH – Deal Looks Dead

Yesterday MDN told you that the U.S. Dept. of Justice has sued investment firm ValueAct Capital with an accusation that ValueAct has inappropriately pulled strings with both Halliburton and Baker Hughes in their planned merger (see DOJ Sues ValueAct Capital for Meddling in Halliburton/BH Merger). It seems that’s not the only lawsuit the DOJ is going to lodge. According to the Wall Street Journal and other national media sources, the Obama DOJ has let leak they plan to sue Halliburton/Baker Hughes to stop the merger. It appears as if it’s all but dead. The Europeans are not fans of the plan (see Europe Puts Halliburton/BH Merger Under a Microscope). Brazil is also against the deal (see Is the Halliburton Buyout of Baker Hughes in Trouble?). If the DOJ turns against it–there’s no way the deal will happen, in our humble opinion. Here’s the latest in the shotgun wedding that may turn out to be a couple at the alter with no one willing to marry them…
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DOJ Sues ValueAct Capital for Meddling in Halliburton/BH Merger

So what’s happening with Halliburton’s $34.6 billion buyout of Baker Hughes? At last check the deal was at best a 50/50 proposition as to whether or not it would happen. Europe currently has the deal under a microscope (see Europe Puts Halliburton/BH Merger Under a Microscope). The European Commission launched a “second phase” of their investigation into the deal, which is problematic for Halliburton. The European Commission says they see “serious potential competition concerns” with the deal. Not good. But that was in January. Since then we’d not heard anything about the deal’s progress–until now. Yesterday the U.S. Dept. of Justice sued ValueAct Capital, accusing the company of purchasing $2.6 billion worth of stock in Halliburton and BH with “the intent to influence the companies’ business decisions as the merger unfolded.” The company has been charged with violating the reporting and waiting period requirements of the Hart-Scott-Rodino Antitrust Improvements Act…
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Baker Hughes Closes $40M Facility in Clinton County, PA

The slowdown in Marcellus drilling continues–and it continues to take a big bite out of local jobs and local economies. The latest victim comes in Clinton County. Baker Hughes has closed its pressure pumping facility in Lamar Township in Clinton County. That $40 million facility was only opened in 2012. The company, which has laid off thousands of people over the past year or so, says those who worked at the Clinton facility “may be eligible for redeployment.” Here’s the sad news…
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