A £22billion mega-merger of two global energy service giants creates new opportunities but also a potential threat to Scottish oil and gas jobs, an industry expert said yesterday.
US firms Halliburton and Baker Hughes together employ many thousands of people in the north-east.
A combination of the two through a takeover of Baker Hughes by Halliburton will create more than a match for market leader Schlumberger in terms of annual revenue, although US-based Schlumberger’s market value – currently £78.3billion – would still be about twice as big.
As reported on Saturday, Halliburton’s move to acquire a rival comes as falling oil prices drives consolidation in the energy service market.
While the deal has been approved by the boards of both Halliburton and Baker Hughes, it is still subject to shareholder and regulatory approvals and both firms insist it is too early to speculate on the potential impact on jobs,
However, reports in the US yesterday said there would inevitably be cuts across the Atlantic.
The takeover is expected to complete in the second half of next year, creating an enlarged business employing more than 136,000 people in more than 80 countries.
A joint statement by Halliburton and Baker Hughes confirming the tie-up said it would provide “substantial efficiencies of scale and geographic scope, particularly in the eastern hemisphere”.
Halliburton chief executive Dave Lesar said the combined business would be more resilient and able to offer a wider suite of products globally, adding: “Stronger in any market condition is better. We are in a cyclical business.”
Houston-based Halliburton is ready to divest businesses generating total revenue of £4.8billion to satisfy regulators and will pay Baker Hughes £2.24billion if the deal is not cleared.
Halliburton currently has more than 2,700 employees in the UK, including in excess of 1,600 in the Aberdeen area.
A spokeswoman for Baker Hughes was unable to say how many people it employs at its many sites in the north-east.
But the figure runs to thousands and the firm’s annual 10K race has become one of the area’s biggest athletic events.
Andrew Reid, the Aberdeen-based chief executive of energy consultancy Douglas-Westwood, said: “The public announcement by Halliburton suggested that some $2billion (£1.28billion) in annual cost savings should be achieved.
“What this means in reality is hard to determine but suggests they will look to consolidate facilities, reduce people and asset movement, in addition to decreasing manufacturing costs and corporate overheads.
“This said, while there is evidently product and service cross-over, the merger will present an opportunity for the combined business to provide a more universal and greater depth of offering.
“This may allow them to service the customer base more effectively and, importantly, more efficiently at a time when the market is in demand for more cost-effective solutions.”
Mr Reid added: “Both Baker Hughes and Halliburton have the majority of their respective business in North America, although Baker Hughes is somewhat bigger in the international arena.
“I would suspect that part of the rationale of the merger is to strengthen and grow the combined group’s non-American revenues.”
Talks between the two companies started over a month ago and came to a head on Friday when Halliburton threatened to replace Baker Hughes’ board after its initial offer was rejected.
US securities litigation firm Levi and Korsinsky (L&K) is now investigating Baker Hughes’ board in connection with the takeover, which will see investors get 1.12 Halliburton shares and $19.00 in cash for each Baker Hughes share.
L&K said: “The investigation concerns whether the board of Baker Hughes breached their fiduciary duties to stockholders by failing to adequately shop the company before agreeing to enter into this transaction, and whether Halliburton…is underpaying for Baker Hughes shares.”
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