Halliburton and Baker Hughes Merger: What a Drag

The merger that has been going on forever in the energy sector has been extended yet again.

The deal between Halliburton Company and Bakers Hughes is still hanging on by a thread as the regulatory authorities have extended their decision making process. The regulatory authority that has been causing problems in the current deal is ACCC – Australian Competition & Consumer Commission. The deal has not been completed solely because of the ACCC as it has extended the announcement of the decision to December 2015. The oil and gas major company had initially planned on finalizing and closing the deal before the end of the current year but due to the extension made by the Australian regulatory authority, the deal seems like quite a challenge for the company. A request by both of the energy companies have been made to the United States Department of Justice (DoJ).According to the request, they want the Department of Justice to postpone its review and close it as early as possible by the December 2015. The crude oil prices, since July of2014 have dropped by as much as 50% due to which all of the oil service providers have suffered with their share price and prices per gallons. In a year, the energy major has fallen as much as 21.51% and the other energy company that Halliburton is merging with Baker Hughes has dropped by 19.35%. The crude oil prices are not the only prices in the energy business that have fallen in a year’s time, the oil production levels has fallen significantly in that time period as well. Both the companies need to take advantage of economies of scale along with probably lowering average costs to manage their expenses and in order to cut costs. There is apparently a conflict of interest among the regulatory and the energy giants. As for the regulatory authority the deal brings an added responsibility of regulating the social benefits of the deal along with its cost while for the energy service providers, there’s a good commercial prospect. One of the energy service providers, Halliburton is considered as the second largest energy company while Baker Hughes is almost on the third. If the merger is a success, this could bring a huge new entity to the market that will be a major leader and it will decrease the shares of the smaller energy companies. On the trading session that was held on Monday, Halliburton’s stock increase by 0.92%, which added the company’s shares to the gainers list. During the session, the highest level to which the share price of the energy company was seen at $38.45 and $38.35 at the lower level.