Fayetteville Shale oil service operators Halliburton, Baker Hughes call off $35 billion blockbuster merger

Oilfield service giants Halliburton Co. and Baker Hughes Inc., both of which played key roles in providing technology to help drillers ramp up the Fayetteville Shale, announced Sunday (May 1) that the two companies have terminated their $35 billion merger over concerns from U.S. antitrust regulators.

The breakup of the blockbuster deal by two of the largest oil and gas drilling, technology and equipment companies, effective April 30, also means that Halliburton will have to pay smaller Houston-based rival Baker Hughes a $3.5 billion termination fee by May 4, company officials said.

“While both companies expected the proposed merger to result in compelling benefits to shareholders, customers and other stakeholders, challenges in obtaining remaining regulatory approvals and general industry conditions that severely damaged deal economics led to the conclusion that termination is the best course of action,” said Halliburton Chairman and CEO Dave Lesar.

“I sincerely thank both our employees as well as the Baker Hughes employees for their tireless efforts throughout the regulatory review process. While disappointing, Halliburton remains strong. We are the execution company – our strategy, technologies and service quality are focused on helping customers maximize production at the lowest cost and driving industry leading growth, margins and returns,” Lesar added.

“Today’s outcome is disappointing because of our strong belief in the vast potential of the business combination to deliver benefits for shareholders, customers and both companies’ employees,” said Baker Hughes Chairman and CEO Martin Craighead. “This was an extremely complex, global transaction and, ultimately, a solution could not be found to satisfy the antitrust concerns of regulators, both in the United States and abroad.”

The two Houston-based companies first announced their mega-deal more than 18 months ago in November 2014 when oil and gas prices were around $70 a barrel. The deal would have made the new Halliburton company comparable in size to Paris-based Schlumberger, the world’s largest oilfield service conglomerate. All three oilfield operators provide everything necessary to help oil and gas companies like ExxonMobil, Shell and BP find, evaluate, drill, produce and transport petroleum products.

In the merger agreement, Halliburton had proposed to divest businesses that generated up to $7.5 billion to satisfy U.S. regulators and expected to close the deal by the second half of 2015.

However, since the merger was first announced, international crude prices have plummeted to historic lows, forcing both companies to downsize their global operations and lay off thousands of workers.

Both Halliburton and Baker Hughes also played key roles in the infant development of the Fayetteville Shale play by offering the hydraulic fracturing, or “fracking” technology, that helped the unconventional play become one of most productive dry natural gas fields in the U.S. Since the decline of the Arkansas play and the falling price of natural gas, company officials have been mum about job cuts in the region.

Baker Hughes, which would have been folded into Halliburton after the proposed merger was completed, will now have to regroup and continue as a standalone company.

Halliburton has scheduled a conference to discuss the termination of the merger agreement on Tuesday, May 3, 2016, at 9 a.m. Eastern Time.