The two Houston-based companies announced their intentions back in November 2014, but the plan to fold Baker Hughes into Halliburton has only gotten worse, with the oil price in freefall, a US rig fleet that is almost one third of the size in late 2014, and now new woes with European regulators.
European Union anti-trust regulators last week opened a new in-depth investigation into the merger after having previously rejected the first deal once.
Now, the US Department of Justice has reportedly asked Halliburton to go beyond its threshold of selling assets with $7.5 billion in 2013 revenue before agreeing to the merger combination.
That was the figure Halliburton said it was prepared to part with to gain regulatory clearance, but it expected the required divestitures to be less.
It seems the DOJ, concerned with the potential of two big gorillas controlling the market – Schlumberger and Halliburton – wants greater concessions, and with a self-imposed deadline of April ticking, it appears the deal is close to breaking point.
It is understood that in January Halliburton offered to sell up to $US10 billion in assets, but that plan has yet to be accepted, and the market’s collapse means that potential buyers, such as GE or Weatherford International, have the upper hand and will be seeking to pay considerably less than the sellers would like.
Halliburton reportedly plans to divest Baker Hughes's offshore completions fluids division in order to appease antitrust regulators.
There’s a lot of pressure on Halliburton to get the deal done, with a break fee of $3.5 billion payable if it walks away.
Even if Halliburton can sweet talk the DOJ, the EU could be a tougher nut to crack.
EU antitrust regulators have just halted their investigation entirely, Reuters reported last week, because Halliburton and Baker Hughes failed to provide critical information.
It means a decision that was due on June 23 is likely to slip into July.
The service companies say they are intending to “provide the additional information as expeditiously as possible”.
The deal has been approved by regulators in Canada, Colombia, Ecuador, Kazakhstan, Russia, South Africa and Turkey, but has been rejected in Australia.
Brazil is yet to make a decision.
Australia is reportedly looking for an alternative buyer of divested assets in order to create stronger competition in its local markets.
The Baker Hughes-Halliburton merger was initially expected to close in the second half of 2015.
The news comes as Halliburton has just laid off another 5000 workers, having already axed around one quarter of its global workforce since 2014.
The company is also dealing with corruption issues in Nigeria and Angola.
Yesterday the Nigerian government confirmed it was launching a comprehensive probe into the controversial Halliburton bribery case in which top Nigerian politicians allegedly received huge bribes in the region of N66 billion ($470 million) between 1994 and 1998 from five major companies that were awarded $6 billion for the construction of gas trains in Bonny Island.
Halliburton paid a fine to avoid prosecution, but the issue has been raised again recently.
At the same time the company has been forced to pay a $305,000 fine for working with an Angolan oil and gas consortium whose members include a company owned by the Cuban government, the US Treasury said last week.
The company did nearly $1.2 million in business with the consortium in early 2011 but should have known that the work was illegal because the Cuban state owned oil company, Cupet, held a 5% stake, and at the time US companies were not allowed to conduct business with Cuban companies.