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Halliburton, Schlumberger Accused in Fracking Price Suit

Halliburton Co. signage is displayed on the Dual-Fuel Q10 Pumping Unit (fracturing pump) outside of the company's facility in Houston, Texas. Photographer: Aaron M. Sprecher/Bloomberg
Halliburton Co. signage is displayed on the Dual-Fuel Q10 Pumping Unit (fracturing pump) outside of the company's facility in Houston, Texas. Photographer: Aaron M. Sprecher/Bloomberg

Aug. 2 (Bloomberg) -- Halliburton Co., Schlumberger Ltd and Baker Hughes Inc. were sued over claims they conspired to raise prices and crush oilfield service competitors in the booming U.S. market for hydraulic fracturing services.

The allegations against units of the companies are pegged to the U.S. Justice Department’s July 25 announcement that it is investigating the “possibility of anticompetitive practices” in the hydraulic fracturing, or fracking, sector of the oilfield services industry, according to the proposed class-action, or group, suit filed in federal court in Corpus Christi, Texas.

“Defendants colluded to restrict and manipulate supply in order to increase prices and market share” to levels the firms enjoyed before the fracking boom attracted independent competitors who depressed prices, Robert C. Hilliard, the attorney for Cherry Canyon Resources LP, a Texas oil and gas partnership, said in the July 31 filing. “They succeeded.”

The suit seeks unspecified treble damages.

The three companies are the largest publicly trading fracking service providers and jointly control about 60 percent of the U.S. market, according to the suit. Cherry Canyon sued on behalf of all customers who bought fracking services from the defendants since May 29, 2011.

Market Share

Halliburton and Baker Hughes, both based in Houston, disclosed they are targets of the federal investigation within hours of the Justice Department’s announcement. Schlumberger, which is based in Houston and Paris, hasn’t publicly disclosed whether it’s a target of the probe.

About 90 percent of all U.S. onshore wells now require some degree of hydraulic fracturing, in which water and minerals are injected into a well under pressure to boost its rate of oil or gas production, according to the complaint.

Although there are many smaller fracking companies, defendants’ prices and market share have increased while the independent companies’ market share has decreased, Hilliard said in the filing.

Joao Felix, a spokesman at Schlumberger, declined to comment on the suit. Beverly Stafford, a spokeswoman at Halliburton, and Erica Bundick, a spokeswoman at Baker Hughes, didn’t immediately return phone or e-mail messages yesterday seeking comment on the complaint.

The case is Cherry Canyon Resources LP v. Halliburton Co., 2:13-cv-00238, U.S. District Court, Southern District of Texas (Corpus Christi).

To contact the reporter on this story: Laurel Brubaker Calkins in Houston at laurel@calkins.us.com.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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