FSUOGM: Halliburton's former Russian business eyes acquisitions

Russian oilfield services company Burservice, which acquired the local operations of US-based Halliburton, is exploring mergers and acquisitions, including a potential purchase of Nafta Drilling, the Moscow-based Kommersant newspaper reported on December 16.

Nafta Drilling, which operates in the Khanty-Mansiysk region, specialises in exploration and production drilling.

Burservice has filed a formal application with Russia’s Federal Antimonopoly Service (FAS) to acquire Nafta Drilling, according to FAS records. Neither company has commented on the potential transaction.

Established in 2018, Nafta Drilling manages production bases in Nefteyugansk and Pytyakh. It has drilled 35,000 metres at the Urnenskoye and Zapadno-Epasskoye fields in Tyumen and counts Gazprom Neft and Rosneft among its clients. Despite its achievements, Nafta’s revenue fell by 25.6% in 2023 to RUB2.18bn ($21mn), while net profit stood at RUB112.7mn.

Burservice inherited Halliburton’s Russian assets in 2022 after the US company ceased operations in response to sanctions. Before its exit, Halliburton held a 2% share of Russia’s oilfield services market, a position matched by Baker Hughes, while Schlumberger controlled 8%, according to Vygon Consulting.

Burservice itself reported a robust 79% revenue increase in 2023 to RUB39.5bn, with net profits rising 15.6% to RUB12.03bn. Its facilities and offices span cities such as Nizhnevartovsk, Novy Urengoy and Nefteyugansk, serving key clients including Gazprom Neft, Lukoil and Novatek.

Industry analysts suggested to Kommersant that the acquisition of Nafta could include contracts, infrastructure, drilling rigs and personnel. Sources indicate the deal may primarily target drilling contracts for Gazpromneft-Noyabrskneftegaz, a subsidiary of Gazprom Neft operating in the Yamal-Nenets and Khanty-Mansi regions.

According to Kasatkin Consulting, the Russian oilfield services market is expected to reach RUB2.29 trillion in 2024, up 1.9% year on year. Independent oilfield service providers account for half the market, with drilling comprising the largest segment at 37%. Analysts forecast annual growth of 4% in the overall market and 5% in the drilling segment through 2026, supported by rising demand driven by increasingly complex extraction conditions and technological gaps.

Despite growth prospects, the oilfield services sector faces challenges, including a severe workforce shortage. Dmitry Kasatkin, managing partner of Kasatkin Consulting, predicts market consolidation in response to high interest rates and external pressures. However, he noted to Kommersant that vertically integrated oil companies prefer a competitive services market rather than absorbing independent providers.

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