Halliburton Co. and Baker Hughes, two of the veterans in the oil industry and the world's largest oil companies are in discussions for a merger that would combine two of the largest companies in the energy industry amidst falling oil prices sending the oil market into downturn.
Should the merger push through, Halliburton is "turning a foe into a friend," eliminating competition, and making it easier for both companies to cope with the sustained market decline.
Halliburton seeks the technological expertise of Baker Hughes to develop its aging wells while Halliburton also get a part of Baker Hughes' oil tools business.
"The two gorillas in the room are getting together," said Ed Hirs, who lectures on energy economics at the University of Houston.
"Halliburton and Baker Hughes would have been competing more strenuously to maintain market share in the downturn, but this will make that easier."
Halliburton's market value increased to $46 billion as its stocks rose 1.1 percent to $53.79 a share in New York, while Baker Hughes also rose 15 percent to $58.75 gaining a market value of $46 billion.
Halliburton, the world's second biggest oilfield services provider approached Baker Hughes, the world's third several weeks ago. And if negotiations are successful, the deal would be announced as soon as next week.
Combined, the companies would dominate the $25 billion U.S. onshore fracking market with a whopping 39 percent market share, more than double the size of its next competitor and world's number one oilfield services provider, Schlumberger, according to Spears & Associates.
Schlumberger's grip outside oil market in the United States and Canada would be weakened by the merger. Schlumberger's $8.3 billion sales in the third quarter would be twice as much as that of Halliburton's alone, but a combined Halliburton-Baker hughes would be less than one third of the two companies.
