Yet at the same time National Oilwell Varco has flagged plans to chase new acquisitions.
Varco, the largest US maker of oil field equipment, is seen by many as one of the most likely to benefit from assets shed from Halliburton and Baker Hughes in an attempt to convince regulators that the market will continue to remain competitive.
But the decision to stop assessment by European Union antitrust regulators for the second time this year is yet another sign that the EU is suspicious that the $US35 billion ($A45.6 billion) merger may reduce competition and innovation in more than 30 product markets, both onshore and offshore.
The European Commission said the companies have yet to provide an important piece of information.
Once the information is provided the clock will restart on the process.
To address US competition concerns, Halliburton proposed a new set of divestitures in January to regulators, with plans to sell assets of Halliburton and Baker Hughes with combined 2013 revenue of $5.2 billion.
Last month the US Department of Justice has asked Halliburton to go beyond its threshold of selling assets with $7.5 billion in 2013 revenue before agreeing to the merger combination.
It is understood that in January Halliburton offered to sell up to $10 billion in assets, but that plan has yet to be accepted, and the market’s collapse means that potential buyers, such as GE or Weatherford International, have the upper hand in any forced sales process.
Halliburton has yet to make a formal divestiture offer to the European Commission, which is believed to be one of the key sticking points.
Iberia Capital Partners analyst Robert MacKenzie now believes the estimate of the deal going through to 40-50%, due to the lengthy regulatory process, although there’s a lot of pressure on Halliburton to get the deal done, with a break fee of $3.5 billion payable if it walks away.
Varco said this week it is looking at assets in the billion-dollar range, after being largely absent from the mergers and acquisitions space since it spent $2.4 billion in cash to buy Robbins & Myers two years ago.
CEO Clay Williams told the Scotia Howard Weil Energy Conference this week that Varco has liquidity and access to capital, and despite posting its biggest quarterly loss since 2000, the company has with $US2.1 billion in cash and $US3.6 billion in undrawn capacity on its revolving credit facility with which to go shopping.
Moody’s Investors Service downgraded Varco’s senior unsecured debt ratings last week and gave the equipment maker a stable outlook.
The agency said that while demand for the company’s products and services tied to new offshore drilling and land rig construction will remain weak, revenue from products and services tied to ongoing production activity should provide a meaningful base level of ongoing cash flow.
The Halliburton-Baker Hughes saga has now been running for more than 18 months, and has a self-imposed deadline of April.
The deal has been approved by regulators in Canada, Colombia, Ecuador, Kazakhstan, Russia, South Africa and Turkey, but has been rejected in Australia.
Brazil is yet to make a decision.
Australia is reportedly looking for an alternative buyer of divested assets in order to create stronger competition in its local markets.
