EXCLUSIVE-Oilfield services firm Patterson-UTI explores split -sources
By David French
NEW YORK, June 13 (Reuters) - Patterson-UTI Energy Inc PTEN.O is exploring the potential divestment of its pressure pumping business, a deal that could be worth around $1 billion and break up the U.S. oilfield services firm, people familiar with the matter said on Thursday.
Patterson-UTI has been seeking to streamline its business after coming under pressure from its clients, oil and gas exploration companies that are scaling back on new projects to preserve more cash to return to their shareholders.
Houston-based Patterson-UTI will work with an investment bank on shedding the pressure pumping division, which is most likely to be structured as a merger with another publicly listed or privately-owned services company, the three sources said.
Patterson-UTI did not immediately respond to a request for comment. The sources asked not to be identified because the matter is confidential.
Having already undertaken significant cost cuts in the wake of the 2014-2016 downturn in oil prices, dealmaking is one of the few tools left for services firms to boost the value of their stock.
Pressure pumping facilitates the process within the shale industry of injecting large amounts of chemicals, sand and water into the ground to break apart the rock and release the hydrocarbons trapped within the different layers.
Patterson-UTI had 15 active spreads - the term for the collection of equipment used by pressure pumpers on one site - early in the second quarter, down from 20 spreads at the end of 2018, as the company sought to reduce costs, Chief Executive William Hendricks said on its first-quarter earnings call.
"We remain disciplined and have been selective in the work we are pursuing as we believe incurring the rents here on our equipment at low pricing levels is not a good use of our capital," Hendricks added.
Consolidation in the pressure pumping space has been expected for years. The largest oilfield services firms, Halliburton Co HAL.N, Schlumberger SLB.N and Baker Hughes BHGE.N, control half of the U.S. onshore market, leaving a swathe of small and mid-sized companies to compete for the rest.
Patterson-UTI's pressure pumping business is the seventh-largest in the U.S. onshore sector, with 4.7% market share, according to data from consultancy Rystad Energy.
Its pressure-pumping fleet - which has 1.6 million fracturing horsepower, the common measurement for pressure pumping capacity - mostly operates in Texas, as well as the Mid-Continent and Appalachian regions, according to the company's 2018 annual report.
As well as pressure pumping, Patterson-UTI has a large land drilling business which operates in the U.S. and western Canada.
(Reporting by David French in New York Editing by Phil Berlowitz)
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.