Halliburton in advanced talks to acquire Summit ESP Inc

The U.S. No. 2 oil producer is looking to fill a gap in its artificial lift business.

According to sources familiar with the matter at hand, U.S. oil giant Halliburton Co is said to be in the midst of advanced talks to acquire Summit ESP Inc, a fast-growing U.S. oilfield equipment supplier which is backed by George Kaiser, the billionaire banker.

The development comes in the wake of the oilfield services company being rebuffed in its two earlier attempts to acquire similar products.

The sources spoke on condition of anonymity since the discussions are not yet public.

Tulsa, Oklahoma-based Summit ESP produces pumps that are used to maintain oil well pressure to help augment oil and gas production in aging wells. These pressure pumps are increasingly being used in the oil and gas industry to help prolong the life of shale wells.

Founded in 2011, Summit ESP is led by executives who have earlier held senior posts at Baker Hughes. The company has expanded its footprint rapidly in the United States and Canada. In May, the company announced that it had installed its 8,000th electric submersible pump (ESP), an increase of 1,000 since November 2016.

As per Frost & Sullivan, a market research company, ESPs command a worldwide business of nearly $5 billion a year. The main players in this segment are Schlumberger NV , Baker Hughes and Weatherford International PLC.

As per Anand Gnanamoorthy, industry manager at Frost & Sullivan, Halliburton, which has a small ESP business, “is trying to catch up to Schlumberger and Weatherford”.

He went on to add, ESPs typically cost in the range of $50,000 and $200,000 for a complete system.

As per one of the sources, Summit wants to quickly reach a deal in order to pre-empt the announcement of Baker Hughes’ closing on its merger with General Electric Co, which is expected at the middle of this year.

As per Spears & Associates, a market research company, Summit ESP’s total turnover in 2016 grossed nearly $180 million, a decline of 10% from 2015.

After initial talks with Summit last year, Halliburton shifted its focus on reaching an agreement with Novomet Oil Services Holdings, a Russian supplier of electric submersible pumps.

In December 2016, Halliburton had disclosed it had sought the permission of the Russian government to go ahead with its 100% acquisition of Novomet. The deal however was shot down by Russia’s Federal Antimonopoly Service.

Halliburton’s Chief Executive, Jeff Miller told analysts twice this year that the company is looking to fill a gap in its artificial lift business through mergers and acquisition.

As per a source familiar with the matter, the Russian’s took an unfavorable view of the deal out of strategic concerns of a U.S. company owning a domestic supplier whose gear keep Russian oil wells running.

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