Baker Hughes, the world’s third-largest provider of hydraulic-fracturing services, said the U.S. Justice Department is seeking documents for an antitrust investigation related to the fracturing market.
The company received a Civil Investigative Demand, or CID, from the department on May 30 and is working to provide the requested documents and information on its pressure-pumping services, Houston-based Baker Hughes said in a regulatory filing this week. The request covers two years of information from May 29, 2011 through the date of the demand, according to the company.
The pressure-pumping technique known as fracking involves blasting water mixed with sand and chemicals underground to free trapped hydrocarbons from shale formations. The U.S. fracturing market, the world’s largest, peaked in the second half of 2011 as prices soared with surging demand from the shale boom.
As more equipment and competitors poured into the market, as much as a 29 percent oversupply of equipment developed by the fourth quarter of last year, according to PacWest Consulting Partners LLC, a Houston-based industry adviser. The oversupply intensified as natural gas prices slumped amid a supply glut and demand for work dropped, the consultant said.
“With 54 frack players in the U.S. market, probably half of which are new entrants in the last 5 years, the idea of a non-competitive market is absurd,” Alex Robart, principal at PacWest, said this week.
Prices charged for U.S. fracturing services slid 14 percent in 2012 and are expected to fall another 6 percent this year, according to PacWest.
The investigation is a surprise, Jud Bailey, an analyst at International Strategy & Investment Group in Houston, said. He expressed doubt about investigators’ ability to prove antitrust activity.
“It doesn’t seem to hold much water,” said Bailey, who rates the shares the equivalent of a buy and owns none.
Baker Hughes said it can’t predict what action, if any, might be taken in the future by the Justice Department or other government authorities because of the investigation.
Christine Mathers, a Baker Hughes spokeswoman, said in an e-mail she wasn’t able to immediately comment. Joao Felix, a spokesman, declined to comment on whether Schlumberger Ltd., the largest oilfield-services provider, received a Civil Investigative Demand.
Halliburton Co., the second-largest services provider, didn’t respond to phone calls and e-mails seeking comment.
Gina Talamona, a Justice Department spokeswoman, didn’t immediately respond to e-mail and phone messages seeking comment on the probe.