Oilfield Services Weekly Recap: Halliburton’s Macondo Settlement, Baker Hughes Deals

Halliburton’s Deepwater Horizon Settlement

Halliburton (NYSE:HAL) – the cementing contractor for BP (NYSE:BP) on the Deepwater Horizon oil rig that caused the largest U.S. offshore oil spill – saw its legal issues ease this week. On September 2, the company announced that it had reached a $1.1 billion settlement with businesses, local governments and residents of the Gulf coast, who experienced losses from the oil spill.  On September 4, a U.S. District Judge cleared the company of  gross negligence in its role in causing the spill, although the company was not completely cleared of blame, with the judge assigning the company 3 percent responsibility for the incident. ^[1]  The developments should largely end Halliburton’s financial exposure to the Macondo incident  and could ease the legal overhang on the company’s stock. Halliburton also issued a statement noting that the settlement and the ruling meant that the case was “essentially over” for the company. ^[2]

• Trefis has a $75 price estimate for Halliburton, which is about 13% ahead of the current market price.

• We estimate the company’s FY 2014 EPS at $3.98 compared to a consensus estimate of around $4.04 according to Reuters.

Baker Hughes Closes Pipeline Services Acquisition; Aker Subsea Alliance Approved

Baker Hughes (NYSE:BHI) announced on Tuesday that it had completed its previously announced purchase of Weatherford International’s pipeline and specialty services businesses. With the growing importance of midstream energy infrastructure, Baker Hughes has been seeing strong demand for its pipeline services business, which primarily offers services such as pre-commissioning and commissioning for pipelines and process plants besides pipeline inspection and maintenance services.  The deal, which is valued at about $250 million, will expand the company’s business,  bringing onboard over 700 new process and pipeline specialists. According to Baker Hughes’ CEO, the acquisition would also add subsea pipeline commissioning services and new ultrasonic in-line inspection technologies to the company’s portfolio. ((Baker Hughes Acquires Weatherford’s Pipeline and Specialty Services Business, Baker Hughes, September 2014))

Separately, the company said that it had received the necessary regulatory approvals for the Subsea Production Alliance with Aker Solutions (OSE:AKSO). In April, the two companies agreed to form an alliance to develop technology for production solutions that would boost output, increase recovery rates and reduce the costs for subsea fields. ^[3] The deal would allow Baker Hughes to offer subsea customers more integrated solutions that combine its strength in well completions and artificial-lift technology with Aker Solutions’ expertise in subsea production and processing systems (related: Baker Hughes’ Aker Solutions Alliance Highlights The Importance Of Subsea Technologies).

• Trefis has a $75 price estimate for Baker Hughes, which is about 10% ahead of the current market price.

• We estimate the company’s FY 2014 EPS at around $4.09, compared to a consensus estimate of around $4.19 according to Reuters.

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1. Halliburton, Transocean Cleared of Gross Negligence, Bloomberg, September 2014 [↩]
2. U.S. Court Rules on Macondo Liability, Halliburton, September 2014 [↩]
3. Baker Hughes and Aker Solutions Receive Regulatory Approvals for Subsea Production Alliance, Baker Hughes, September 2014 [↩]