Major shale energy service firms merge for scale, cost savings

By Luke Geiver | June 18, 2019

C&J Energy Services and Keane Group Inc. will merge in a all-stock deal of equals. By the end of 2019, the combined entities will have a new name and ticker symbol along with a new ranking amongst its oilfield service company peers. After the two firms combine, the new entity will be in the top four of all energy service categories.

Both C&J and Keane said the move will help diversify reach across multiple North American shale basins while reducing overhead costs and material costs. Early estimates show the new company will save roughly $100 million through the combination.

In the all-stock deal, Keane will issue roughly 1.6 shares per outstanding share of C&J common stock. A cash dividend of $1.00 per share will also be issued to C&J shareholders. The company will be considered a 50-50 joint venture, with leaders from both firms taking on new executive roles for the combined energy service team.

Future revenues for the combined company will rest heavily on the Permian. Nearly 43 percent of all revenue is expected from the Permian, followed by 21 percent from the Marcellus, 13 percent in the Eagle Ford and 12 percent from the Bakken. Hydraulic fracturing, at 66 percent, will drive revenue growth from the service side, followed by 15 percent from wireline and pump down services.

Once complete, the merged company will have the following assets:

-2.3 million hydraulic HHP

-50 frac fleets

-81 pump down units

-940 fluids management trucks

-28 coiled tubing units

-139 cementing units

-158 wireline trucks

The only energy service firms larger than the merged C&J Energy and Keane entity are Halliburton, Schlumberger and Baker Hughes a GE Company. Based on early numbers, the merged companies believe they will generate roughly 1.9 times more revenue per year than the next closest peer company.

Both entities have a history of acquiring other companies. In March 2016, Keane acquired the U.S. assets of Canadian-based energy service firm Trican Well Services. In July 2017, C&J acquired RockPile Energy Services, followed by O-Tex Pumping in 2017. In July 2018, Keane acquired pressure pumping company RSI.

"With two strong teams, enhanced and diversified operations, a strong balance sheet, ample liquidity, attractive free cash flow and a legacy of successful R&D, the combined company will be well positioned to further invest in technology and innovation, as well as the career development of our employees to drive sustainable growth in our dynamic industry,” said Robert Drummond, CEO of Keane.