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U.S. oilfield firms slash prices as mega-mergers shrink customer base
The Hindu
U.S. oilfield service companies face bankruptcy as mega-mergers among producers lead to slashed prices and fierce competition for customers.
A wave of mega-mergers among oil producers is forcing the U.S. service companies that drill and hydraulically fracture wells to slash their prices, merge, or risk bankruptcy as they compete for a dwindling number of customers.
U.S. oil producers, also known as operators, announced more than $275 billion in deals over the past year and a half, including multi-billion-dollar combinations such as Exxon Mobil and Pioneer Natural Resources.
As big producers integrate and become more efficient while raising oil output, there is less work for the oilfield services companies that depend on them, according to service company executives and energy analysts.
Diamondback Energy, for example, anticipates $550 million in annual cost synergies following its acquisition of Endeavor Energy. Of that, $325 million in savings are tied to operations, $150 million to land and $75 million to financial and corporate costs.
“When customers combine, you might have a guy who was running seven rigs, and a guy who was running five rigs, that adds together to 12. But when they come back, they run 10," said Chris Wright, CEO of Liberty Energy, which holds 6% of the U.S. services market, according to consultancy Rystad Energy.
The U.S. rig count fell to 586 last week, off 83 from this time last year, its lowest since December 2021, according to services company Baker Hughes.
The fragmented U.S. oilfield service sector is led by Halliburton with 14% of market share, according to Rystad. Some smaller firms with older technology have been forced to lower prices to stay competitive as their customer bases shrink and clients opt for more efficient drilling, executives and analysts said.