Liberty acquires Schlumberger's Hydraulic Fracturing Division (OneStim): The Frac Sand Perspective
In one of the most monumental transactions in the hydraulic fracturing industry to date, Schlumberger (one of the largest oilfield services companies in the world) is selling OneStim, its North American pressure pumping business line to Liberty Oilfield Services Inc in exchange for a 37% equity stake in the proforma entity. The deal is expected to close in Q4 and with a proforma market capitalization of $1.2 billion and a proforma revenue stream of $5.2 billion. After this transaction is executed, investment bank Evercore confirmed that Liberty will become the third-largest oilfield service company in North America. The strategy behind the deal has become a hot topic of debate, seeing as how the hydraulic fracturing industry has been decimated by crude oil demand concerns amid the global coronavirus pandemic.
In an article by Barron’s, Liberty CEO Christopher Wright was quoted saying that most operators are striving for “a maintenance cap-ex or flat production profile in 2021 versus year-end 2020 exit production rate … This [transaction] implies significant growth in fracking activity from today’s depressed levels to reaching around 200 active frack fleets sometime in 2021”. Moreover, analyst James West from Evercore attributes the deal to a future trending towards a few specialized players such as Liberty dominating the hydraulic fracturing industry.
In addition to increasing the size and scale of its hydraulic fracturing fleet, there are some key factors that will likely shape the future of Liberty Oilfield Services in terms of its relationship with oilfield products – particularly frac sand.
Some key questions we will address in this week’s upcoming frac sand advisory report:
- Will Liberty become more competitive as it intensifies its focus on hydraulic fracturing with the addition of both Northern White and Permian frac sand mines?
- How many tons per year of nameplate capacity will Liberty have ownership over?
- How will the business and supply chain relationships between Liberty, E&P companies, and frac sand suppliers change following the corporate acquisition of OneStim?