Keane Group Inc and C&J Energy Services Inc are set to merge in an all-stock deal that will create a new U.S. oilfield services company worth around $1.5 billion (£1.2 billion), three people familiar with the matter said on Monday.
The deal underscores the consolidation under way in the oil and gas industry, as exploration and production companies cut back on spending on new projects to return more money to their shareholders. This puts pressure on services providers to gain scale, so that they have more negotiating power and can save on costs by eliminating overlap.
The transaction between Keane and C&J, which will be presented to investors as a merger of equals, is set to be unveiled later on Monday, the sources said, asking not to be identified ahead of the official announcement. Keane and C&J could not be reached for comment outside normal business hours.
U.S. oil and gas producers are reluctant to commission new projects, preferring to instead return that cash to shareholders, which, in turn, is weighing on services firms such as Keane and C&J.