Merger questions proliferate
Halliburton Co. (ticker: HAL) announced that the company will delay the first quarter earnings call, raising speculation that something is amiss in the proposed merger with Baker Hughes.
Halliburton’s earnings release has been delayed until May 3, from the original schedule of April 25. In the company’s press release, the upcoming merger deadline of April 30, 2016, was cited as the reason for the delay. Halliburton and Baker Hughes had previously agreed to, “Extend the time period under the merger agreement to obtain regulatory approvals to no later than April 30, 2016, after which the parties may continue to seek relevant regulatory approvals or either of the parties may terminate the merger agreement,” according to Halliburton’s press release.
The delay could be a potential indication that the merger is in jeopardy and one or both of the companies will choose to terminate the agreement once the deadline passes. The merger was initially announced in November 2014, and has come under the scrutiny of the U.S. Justice Department who has filed lawsuits against the two companies over anti-trust concerns.
Another possibility is a divestiture in the works to appease regulators. An asset sale would move closer to the requests of regulators who feel that the merger would have a major effect on competition in the oil service industry. The November 2014 agreement calls for Halliburton to pay Baker Hughes $3.5 billion if it walked away from the deal.
Preliminary Results and Job Cuts
Halliburton is the largest hydraulic fracturing service provider in the world, the company provided an operations update as part of the release. The company announced preliminary first-quarter results indicating sales had fallen 17% to $4.2 billion, compared to a 21% decline in the worldwide rig count. Halliburton reported an operating loss of $39 million in North America, its largest region, on revenue of $1.8 billion, they also reported a $2.1 billion restructuring charge for asset write-offs and severance costs, according to the company statement.
Halliburton reduced its headcount by more than 6,000 during the first quarter. It is to be noted that following the weakness in oil prices since late 2014, the company cut almost one third of its jobs.
“Life has changed in the energy industry, especially in North America, and over the past several quarters we have taken the steps to adapt to that fact,” said Dave Lesar, Halliburton’s chairman and CEO. “Operators globally are under immense pressure, and many of our North America customers are fighting to maintain some value for their shareholders. Our goal is to work with those customers to get through these tough times.”
