(Reuters) - U.S. oilfield firm Intrepid Directional Drilling Specialists acquired the directional drilling business of well survey firm Gyrodata, the companies said on Thursday, in a deal to expand operations as service companies vie for business amid a steep decline in activity.
Oil markets have been reeling since early March as coronavirus-related lockdowns crush fuel demand. As crude prices in many fields fall below their cost of production, spending on oilfield services is anticipated to fall by 21% this year.
Neither company would disclose the value of the deal, which doubles the size of closely held Midland, Texas-based Intrepid’s directional drilling business and expands its footprint in U.S. shale fields and in Latin America.
“We are excited to begin the consolidation process in our segment of the industry. There needs to be and I believe there will be more consolidation,” said Clint Leazer, president of Intrepid.
Leazer said his firm will pursue additional acquisitions.
The two discussed the deal several months ago and pressed on amid the oil-market drop and coronavirus pandemic that will increase the hurdles of combining the operations.
Global customer spending on directional drilling, which helped launch the shale boom, could decline by about 30% this year over last, according to oilfield consultancy Spears & Associates. In the U.S. land market, spending will decline from $2.9 billion in 2019 to $1.2 billion in 2020, according to Spears.
“The biggest directional service company probably doesn’t have much more than 10% of the market. You have a bunch who are each pursuing one to two percent of the market,” said Richard Spears, vice president of Spears & Associates.
He estimated there are about 100 companies vying for directional drilling contracts.
Rival Payzone Directional Services shut its doors shortly after Saudi Arabia and Russia last month launched a price war that helped send oil plunging.
U.S. oil futures were trading around $17 a barrel on Thursday.
Houston-based Gyrodata said the divestiture allows it to focus on its core surveying business, according to CEO Robert Trainer.
Other oilfield companies, including Baker Hughes, are moving to exit non-core units to refocus operations in response to the collapse in oil prices.
Reporting by Liz Hampton; Editing by Will Dunham