November 14:
Acadiana observers are taking a wait-and-see approach to news that oil service industry giants Halliburton and Baker Hughes — both have big presences here — are discussing a possible merger.
"If we reacted every time something like that happened, we'd drive ourselves crazy," Lafayette City-Parish President Joey Durel said. "You can't stop it. You can't do anything about it."
In fact, you can't always predict it.
Don Briggs, president of the Louisiana Oil & Gas Association, who writes an energy column for The Daily Advertiser, said he was "really surprised" that Halliburton, the No. 2 oil services company, has been in talks with Baker Hughes, the No. 3 company.
"Normally I get wind of things like that," Briggs said. "They keep those things pretty tight when they do mergers. But it's a really huge merger. That's like Exxon and Shell buying each other out."
The merger talks were first revealed by The Wall Street Journal on Thursday. For its part, Baker Hughes released a statement Thursday saying only that no deal was guaranteed.
But the talks alone were a big deal to investors, who sent Baker Hughes stock prices soaring by some 16 percent Thursday, closing at $59.89 per share Friday. Halliburton enjoyed about a 1 percent stock price increase Thursday, and 2 percent Friday to close at $55.08.
Mark Smith, head of the Management Department at the B.I. Moody III College of Business at the University of Louisiana at Lafayette, suggested that even if the two companies
eventually agree to merge, government regulators may not permit such a massive deal. The two companies merged might overtake No. 1 oil services company Schlumberger in revenue and hold decided advantages over that company in North America.
"With mergers in general, you typically look for monopolies," Smith said, prompting the government to ask, "Is this going to restrain trade? Will it reduce competition?"
Mergers also sometimes result in reductions in workforce, he said, as the merging companies seek efficiencies in staff that cause them to pare down employment.
"In general, bigger businesses, when they buy smaller companies, lay people off. It reduces duplication," he said.
Baker Hughes employs some 1,523 people in Acadiana, Halliburton about 1,027.
Baker Hughes has sites in Broussard, Lafayette, New Iberia and St. Martinville.
Halliburton opened a $65 million, 200,000-square-foot completion tools manufacturing facility in Lafayette in August 2012, accepting a $2 million incentives package from the state. As part of that agreement, Halliburton was required to add 150 jobs, a number it has exceeded.
"By all accounts, Halliburton has been delighted with its new facility in Lafayette as well as the workforce there. The company currently is exceeding its employment commitments by a substantial margin," Stephen Moret, secretary of Louisiana Economic Development, said Friday.
Moret said because of how cooperative endeavor agreements are structured, Halliburton would be mandated to keep that workforce obligation in Lafayette.
"We fully expect Halliburton will continue to meet its commitments for its state-of-the-art manufacturing facility in Lafayette, particularly after the significant investment the company made in the facility," he said in an emailed message. "If for some reason that
doesn't happen, the company would owe LED a proportional reimbursement of incentives it received."
Halliburton has Louisiana locations in Berwick, Broussard, Cameron, Covington, Dulac, Fourchon, Houma, Larose, Morgan City and New Iberia.
Smith said the merger talks come at a time when the price of oil and gas has slipped to
under $80 a barrel, although oil rallied Friday by $1.61, its best one-day gain since September. The price drop may slow the rapid growth of oil and gas company construction in Lafayette, at least for now, he said.
"I don't want it to slow down, but I think it will," he said. "As the price of oil goes down, it become less economical to drill in more places."
Moret said that mergers don't always deliver bad news to a community; it depends on the circumstances. In some cases, mergers can result in a net gain in jobs for a well-positioned
community.
"If the proposed transaction moves forward, LED will assertively engage with company executives to work toward the best possible outcome for Lafayette and Louisiana," he said.
Source: www.theadvertiser.com/story/news/local/acadiana/2014/11/14/merger-talk-leaves-acadiana-waiting-developments/19053693/
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