Halliburton, Baker Hughes receive antitrust inquiries from Department of Justice about fracking business, Schlumberger possibly also being investigated

Halliburton, Baker Hughes receive antitrust inquiries from Department of Justice about fracking business by The Associated Press, July 25, 2013, The Times Colonist
Federal officials have contacted Halliburton Co. and Baker Hughes Inc. as part of an antitrust investigation into an oil and gas drilling process used in hydraulic fracturing, or fracking. Halliburton spokeswoman Beverly Blohm Stafford said Thursday that the company received what’s called a civil investigative demand from the Justice Department’s antitrust division during the April-to-June quarter regarding pressure pumping services and is responding to the request. “We understand there have been other participants in the industry who have received similar correspondence from the DOJ, and we do not believe that we are being singled out for any particular scrutiny,” Stafford said. Baker Hughes disclosed the investigation regarding pressure pumping services in a regulatory filing late Wednesday. It says the Justice Department requested information under an antitrust law for two years’ worth of material in late May. The Houston energy services company said that it was working with the government to provide the “documents and information,” and couldn’t predict where the probe would lead.

“The Antitrust Division is investigating the possibility of anticompetitive practices involving pressure pumping services performed on oil and gas wells,” said Department of Justice spokeswoman Gina Talamona. Neither company gave any details about the information requested by the government. Pressure pumping is part of the practice of fracking, in which water and chemicals are pumped under great pressure into a well to break open tight underground rock formations and allow the release of trapped oil and natural gas. … Halliburton is the biggest pressure-pumping provider based on revenue, with nearly 29 per cent of the market in 2012, according to a Barclays Capital report this month that cited figures from Spears & Associates, an oilfield-services consulting firm. Schlumberger Ltd. had 21 per cent, and Baker Hughes almost 4 per cent, according to the report. No other company even reached 5 per cent. It was not clear whether federal officials also sought information from Schlumberger. The company declined to comment. Halliburton’s stock fell 48 cents, or 1.1 per cent, to close at $44.34 Thursday. Baker Hughes’ shares dropped 30 cents to $47.46, while Schlumberger stock slipped 28 cents to $82.57.

Halliburton, Baker Hughes Cooperating on U.S. Frack Probe by David Wethe & Mark Chediak, July 25, 2013, Bloomberg
Halliburton Co. (HAL) and Baker Hughes Inc. (BHI), two of the largest providers of hydraulic-fracturing services, said they are cooperating with a U.S. Justice Department antitrust investigation related to the fracking market. Halliburton received a Civil Investigative Demand from the department during the second quarter and is in the process of providing responses, Beverly Blohm Stafford, a spokeswoman for the Houston-based company, said in an e-mail today. Baker Hughes got a May 30 demand from the department, covering the prior two years of information, the Houston-based company said in a regulatory filing yesterday. “We understand there have been other participants in the industry who have received similar correspondence from the DOJ, and we do not believe that we are being singled out for any particular scrutiny,” Stafford wrote. Schlumberger Ltd. (SLB) declined to comment on whether it is part of the probe. Closely held FTS International Inc. hasn’t been contacted by the Justice Department, Pamela Percival, a company spokeswoman, said in an e-mail today. … The department confirmed today its antitrust division is investigating possible anticompetitive practices related to hydraulic fracturing processes. Baker Hughes fell 0.6 percent to $47.46 at the close in New York. Halliburton declined 1.1 percent to $44.34 and Schlumberger dropped 0.3 percent to $82.57. With more equipment and competitors pouring into the market, as much as a 29 percent oversupply of equipment developed by the fourth quarter of last year, according to PacWest Consulting Partners LLC, a Houston-based industry adviser. Demand for fracking fell as natural gas prices slumped amid a supply glut, the consultant said. “With 54 frack players in the U.S. market, probably half of which are new entrants in the last five years, the idea of a non-competitive market is absurd,” Alex Robart, principal at PacWest, said in a phone interview yesterday. Prices charged for U.S. fracking services slid 14 percent in 2012 and are expected to fall another 6 percent this year, according to PacWest.

The investigation is a surprise, Jud Bailey, an analyst at International Strategy & Investment Group in Houston, said in an interview yesterday. He expressed doubt about investigators’ ability to prove antitrust activity. “It doesn’t seem to hold much water,” said Bailey, who rates Baker Hughes the equivalent of a buy and doesn’t own the stock. Baker Hughes said it can’t predict what action, if any, might be taken in the future by the Justice Department or other government authorities because of the investigation.

[Refer also to:

Chesapeake, Encana sued in civil antitrust action filed by Northstar Energy

Encana’s denial of collusion charges leaves many questions unanswered

Chesapeake Energy subject to U.S. antitrust investigation for possible collusion with Encana, Company subpoenaed to produce documents for grand jury in Michigan land sales probe

Encana swings into red on impairment charge

Chesapeake, Encana antitrust case deepens

Encana’s troubles widen with collusion allegations

Chesapeake: From Bad to Worse to Potentially Criminal

Report alleges Chesapeake Encana combined to supress land prices

Encana investigating claims of collusion with rival, Calgary energy company accused of land sale scheme with Chesapeake Energy

Michigan probing allegations of Encana-Chesapeake anti-competitive practices

EnCana faces California gas price-fixing trial ]

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