By Arathy S Nair and Liz Hampton
(Reuters) - Oilfield services firm Schlumberger <SLB.N> agreed to sell its North American shale fracking business to rival Liberty Oilfield Services <LBTR.N>, unloading a unit that underperformed during the shale bust.
The sale comes less than three years after Schlumberger sought to expand in hydraulic fracturing through a $430 million purchase of a rival's fracking equipment. That bet soured as shale-oil producers cut drilling on weak oil demand and prices.
Schlumberger will take a 37% stake in Liberty, and the projected revenue would make Denver-based Liberty the third-largest U.S. oilfield services firm by sales.
This year's shale downturn hit fracking services, with firms including BJ Services and Calfrac Well Services filing for protection from creditors.
Liberty, which will pick up advanced hydraulic equipment and two West Texas frack sand mines, sees little customer overlap between the fracking operations, Liberty Chief Executive Officer Chris Wright said.
"The technology portfolio is truly exceptional. That's a huge part," he said. Fracking will recover to over 200 active fleets by next year, he forecast, up from around 76 last month.
Schlumberger has been retrenching, pulling out of businesses and cutting thousands of employees to halt losses. CEO Olivier Le Peuch had pledged to pare its North American hydraulic fracturing portfolio.
Schlumberger and Liberty had combined fracking revenue of roughly $1.5 billion in the first quarter of 2019, but that fell to below $200 million in the second quarter of this year, according to oilfield consultancy Spears & Associates.
"This transaction should help the combined entity capture market share," wrote James West, a managing director at investment firm Evercore ISI, amid a consolidating fracking sector.
Liberty closed up $2.30, or 36% at $8.75, while Schlumberger fell 1.35% to close at $18.63.
The combined company will have a market capitalization of $1.2 billion, and 2019 revenue would have been $5.2 billion.
The deal is expected to close in the fourth quarter and Liberty will continue to be led by its current management team.
(Reporting by Arathy S Nair and Shruti Sonal in Bengaluru and Liz Hampton in Denver; Editing by Arun Koyyur, Paul Simao and David Gregorio)