U.S. launches antitrust inquiry of fracking firms

Posted Friday, Jul. 26, 2013  comments  Print Reprints

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Halliburton and Baker Hughes, two of the largest providers of hydraulic-fracturing services, said the Justice Department is seeking documents for an antitrust investigation related to their business, also known as pressure pumping.

Fort Worth-based FTS International, which has billed itself as the No. 4 provider of pressure-pumping services in the U.S., said Thursday that it “has not been contacted by the U.S. Justice Department and, to the best of our knowledge, FTSI is not the subject of any investigation.”

Schlumberger, generally regarded as the second-largest pressure-pumping company, declined to comment.

“The antitrust division is investigating the possibility of anti-competitive practices involving pressure-pumping services performed on oil and gas wells,” Justice Department spokeswoman Gina Talamona said.

Halliburton is No. 1 in revenue, with nearly 29 percent of the market in 2012, according to a Barclays Capital report this month that cited figures from Spears & Associates, an oil field services consulting firm. Schlumberger had 21 percent, and Baker Hughes almost 4 percent, according to the report.

FTS said last year that it believed it was close to the size of Baker Hughes in what is estimated to be a $30 billion annual business.

Hydraulic fracturing has boomed as the industry has used the technique to extract oil and gas from shale formations. It’s expensive, generally costing more than it does to drill the well. Prices peaked in 2011 but have fallen since. Perhaps for that reason, the investigation surprised some industry observers.

“With 54 frack players in the U.S. market, probably half of which are new entrants in the last five years, the idea of a noncompetitive market is absurd,” said Alex Robart, principal at PacWest Consulting Partners in Houston. Prices charged for U.S. fracking services slid 14 percent in 2012 and are expected to fall 6 percent this year, according to PacWest.

Halliburton received a Civil Investigative Demand from the Justice Department during the second quarter and is providing responses, Beverly Blohm Stafford, a spokeswoman for the Houston-based company, said in an email Thursday.

“We understand there have been other participants in the industry who have received similar correspondence from the DOJ, and we do not believe that we are being singled out for any particular scrutiny,” Stafford wrote.

Baker Hughes got a May 30 demand from the department, covering the prior two years of information, the Houston-based company said in a regulatory filing. It said it can’t predict what action regulators might take.

Staff writer Jim Fuquay contributed to this report, which includes material from Bloomberg News and The Associated Press.

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