Halliburton to sell drilling units in move related to Baker Hughes acquisition

Halliburton (NYSE: HAL), in a move related to its pending acquisition of Baker Hughes (NYSE: BHI), plans to separately market for sale the company’s fixed cutter and roller cone drill bits, directional drilling, and logging-while-drilling/measurement-while-drilling businesses.

The final sale of these businesses will not be completed until Halliburton has negotiated and reached acceptable terms and conditions, along with the approval of Halliburton’s board of directors and final approvals of the Baker Hughes acquisition by competition authorities.

Dave Lesar, chairman and CEO of Halliburton, said, “Although we would prefer to retain these assets, we will be required to divest some of our overlapping businesses to obtain competition authorities’ approvals as anticipated when we announced the Halliburton-Baker Hughes transaction. We are excited about the many benefits of our pending acquisition of Baker Hughes, which was recently approved by the stockholders of both companies, and look forward to creating a bellwether global oilfield services company for the benefit of our stockholders, customers, employees, and other stakeholders.”

Halliburton will operate as one company, including the businesses held for sale, until the sale of the identified businesses is complete. The company expects to complete the sale of the businesses in the same timeframe as the closing of the pending Baker Hughes acquisition late in the second half of 2015.

Regarding the potential sale of these business units, Oppenheimer analysts commented, “Halliburton announced that it is separately auctioning the company’s fixed cutter and roller cone drill bits, directional drilling and logging-while-drilling (LWD)/measurement-while-drilling (MWD) businesses. While it is no surprise that these businesses are on the auction block, the timing suggests that things may be moving along quicker than we expected. Nevertheless, we still see the potential for plenty of speed bumps along the way, and we continue to forecast an end-of-year closing. We view the directional drilling/MWD/LWD auction as most important strategically as Halliburton (and Schlumberger) seek to preserve a de facto duopoly in international markets.

“The announcement does not conclude the process. Rather, it is the first round of asset divestitures. Later asset sales are likely to include offshore stimulation vessels (we estimate $50M–$250M) and potentially some combination of completion equipment ($0.5B–$2B).

“We forecast drill bits will fetch ~$1.5 billion from National Oilwell Varco [NOV], Superior Energy Services, private equity, or large industrials such as GE. Directional drilling and MWD/LWD businesses could bring in roughly $5 billion from land drillers, industrials, Superior Energy, NOV, Weatherford, or private equity.”

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