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.

Chesapeake Energy Corporation Plans To Sell Off Assets

The oil digging company is to carry out a major plan to sell of its assets to cover the losses it has so far made due to the downturn in the energy sector.

Chesapeake Energy Corporation has recently announced that it will be doing a major selloff of its assets soon, which is being taken as a much needed step by the oil giant. The energy sector on a global level has been experiencing some major downs lately which have made all the related companies in the industry think of quick strategies to overcome the losses they experience over the course of time. In the same way, the oil service providers have also carried out some important steps to cover the losses, among which selling off its assets has emerged to be an important one by the giant.

Following the decrease in oil prices, the decrease in the services provided by Chesapeake has also been observed. According to related report, the oil company is currently working towards cutting down its costs along with observation of suspension of dividend payment to save itself in this difficult time. However, the strong earnings report that was recently reported by the oil digging giant cannot be ignored, as it managed to beat estimations by a huge difference.

The estimate for EPS was made at -$0.136 by the analysts on the Street, but Chesapeake stock reported the earnings per share to come around -$0.050 which was much better than the expected loss. However, the revenue reported by the company almost missed the predictions but managed to sustain its value on the index. The giant might seem to be doing well on the front, it cannot be denied that there are some persistent issues erupting from the oil services provider’s end which majorly can be seen in the capital structure on which the whole business plan of the oil diggers stand.

Furthermore, analysts at the Credit Suisse equity giant have advised the company to start working on deleveraging its structure, which is the only solution that can be thought of that will help the oil giant the most. This is why the company has decided to start selling off its assets to begin levering off the $10 billion debt it is currently in.

This debt will not be handled only by selling assets but by also cut down on excessive spending and to carry out more projects in joint collaborations with other companies. The oil company believes that these are some of the major steps it can take to sustain the downing position it has been experiencing for some time now. As per report, it is also looking to sell off major parts of its assets to make sure it does not fail as an energy giant in the industry.