Schlumberger (SLB) announced Tuesday that it will sell its North American fracking business amid the slow recovery in oil prices.
The No. 1 oilfield services company will combine its OneStim unit with Liberty Oilfield Services (LBRT) for a 37% stake in the combined company. The transaction is expected to close in the fourth quarter of 2020.
The announcement comes as U.S. oil prices remain range-bound around $40 per barrel amid an anemic recovery.
Oil prices crashed to historic lows in April as Covid-19 lockdowns slammed demand, forcing producers to stash crude in storage units that were rapidly nearing capacity. Those excess inventory fears have subsided but still weigh on prices while demand stays slow.
Travel sill hasn't rebounded after some lockdowns eased. Air passenger numbers are down 70% year over year during the typically busy summer travel season.
Schlumberger shares fell 1.35% to close at 18.63 on the stock market today, while Liberty Oilfield soared 35.7%. Halliburton (HAL) edged up 0.8% and Baker Hughes (BKR) fell 2.8%.
Low Oil Prices Pressuring U.S. Shale
As oil prices remain stagnant, Schlumberger faces a U.S. fracking market that continues to suffer, with more shale companies expected to seek bankruptcy protection. In April, Whiting Petroleum (WLL) filed for bankruptcy.
In the first seven months of the year, more than 30 exploration-and-production companies in North America have filed for bankruptcy protection, according to law firm Haynes and Boone, the Wall Street Journal reported.
But more pain is yet to come as consulting firm Rystad Energy sees 150 more firms filing for bankruptcy through 2022, unless oil prices rise.
Oil majors are also feeling the pressure. Exxon Mobil (XOM) was booted from the Dow Jones Industrial Average after over 90 years on the key index. The Dow Jones has shifted away from industrial stocks and toward technology firms in recent years.
Exxon had grand plans to produce 1 million barrels per day in the Permian Basin as early as 2024. But in its second-quarter report, Exxon said its rig count in the Permian fell by 30 in Q2, with a further decline of 10-15 more rigs seen by the end of the year.
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