History of Halliburton and Baker Hughes
“Oil services providers Halliburton and Baker Hughes called off a $35 billion merger that stirred opposition from officials in the US and overseas, the companies said. The Justice Department sued last month to block the deal over antitrust concerns. The merger agreement calls for Halliburton to pay Baker Hughes $3.5 billion in the case of a breakup.” – API, May 2, 2016, from the New York Times.
The merger, also a victim of the worldwide collapse of oil prices, would have brought together more than a century of oilfield service technologies from three petroleum industry pioneers.
The two historic oil and natural gas industry companies market products and services in more than 80 countries – competing mainly with Schlumberger, a company founded in France in 1926.
All specialize in maximizing oil and natural gas production throughout the life of a reservoir.
Baker Hughes employs 62,000 while Halliburton Company reports a workforce of 80,000 dedicated to “locating hydrocarbons and managing geological data, to drilling and formation evaluation, well construction and completion, and optimizing production through the life of the field.”
Following the $34.6 billion merger – if approved by the U.S. Department of Justice – the combined energy service company’s shareholders should acknowledge the three genius entrepreneurs who made it possible long ago.
Erle P. Halliburton
Erle Palmer Halliburton moved to the booming Healdton oilfield in Oklahoma, in 1919 after working in Burkburnett, Texas. He established the New Method Oil Well Cementing Company in Duncan and experimented with technologies to improve oil well production.
Water intrusion hampered many wells, requiring time and expense for pumping out. Water, he noted in a 1920 patent application, “has caused the abandonment of many wells which would have developed a profitable output.”
Awarded a U.S. patent the next year for his “Method and Means for Cementing Oil Wells,” the 28-year-old inventor was just beginning. The cementing innovation – at first resisted by some oilfield skeptics – isolated the various down-hole zones, guarded against collapse of the casing and permitted control of the well throughout its producing life.
Halliburton’s well cementing process revolutionized how oil and natural gas wells were completed. He went on to patent much of today’s cementing technology – including the jet mixer, the remixer and the float collar, guide shoe and plug system, bulk cementing, multiple-stage cementing, advanced pump technology and offshore cementing technology.
In 1938, Halliburton Oil Well Cementing Company moved offshore with a barge-mounted unit cementing a well off the Louisiana coast. In 1949, Halliburton and Stanolind Oil Company completed a well near Duncan, Oklahoma – the first commercial application of hydraulic fracturing.
“Halliburton was ever the tinkerer. He owned nearly 50 patents,” notes William Pike, former editor-in-chief of E&P magazine. “Most are oilfield, and specifically cementing related, but the number includes patents for an airplane control, an opposed piston pump, a respirator, an airplane tire and a metallic suitcase.”
Pike adds that Halliburton’s only real service company competitor for decades was Carl Baker of Baker Oil Tools. Read more in Halliburton cements Wells.
R.C. “Carl” Baker Sr.
Baker International was founded by Reuben Carlton “Carl” Baker Sr. of Coalinga, California, who among other inventions patented an innovative cable-tool drill bit in 1903 after founding the Coalinga Oil Company.
“While drilling around Coalinga, Baker encountered hard rock layers that made it difficult to get casing down a freshly drilled hole,” notes a Coalinga historian. “To solve the problem, he developed an offset bit for cable-tool drilling that enabled him to drill a hole larger than the casing.”
Baker also patented a “Gas Trap for Oil Wells” in 1908, a “Pump-Plunger” in 1914, and a “Shoe Guide for Well Casings” in 1920.
Coalinga was “every inch a boom town and Mr. Baker would become a major player in the town’s growth,” reports the Baker Museum. Baker organized small oil companies, a bank and the local power company.
After drilling wells in the Kern River oilfield, Baker added another technological innovation in 1907 when he patented the Baker Casing Shoe, a device ensuring uninterrupted flow of oil through a well.
By 1913 Baker organized the Baker Casing Shoe Company (renamed Baker Tools two years later). He opened his first manufacturing plant in Coalinga.
The R.C. Baker Memorial Museum was the 1917 machine shop and office of Baker Casing Shoe. When Baker Tools headquarters moved to Los Angeles in the 1930s, the building remained a company machine shop. It was donated by Baker to Coalinga in 1959 and opened as a museum in 1961.
Carl Baker Sr. died in 1957 at age 85 – after receiving more than 150 U.S. patents in his lifetime. “Though Mr. Baker never advanced beyond the third grade, he possessed an incredible understanding of mechanical and hydraulic systems,” notes the Coalinga museum.
Baker Tools became Baker International in 1976 and Baker Hughes after the 1987 merger with Hughes Tool Company.
Howard R. Hughes Sr.
The Hughes Tool Company began in 1908 as the Sharp-Hughes Tool Company founded by Walter B. Sharp and Howard R. Hughes, Sr. “Fishtail” rotary drill bits became obsolete in 1909 when they introduced a dual-cone roller bit patented by Hughes.
The business partners developed a bit “designed to enable rotary drilling in harder, deeper formations than was possible with earlier fishtail bits,” according to a Hughes historian. They conducted secret tests on a drilling rig in Goose Creek, Texas.
Although several inventors tried to develop better rotary drill bit technologies, Sharp-Hughes Tool Company was the first to bring it to American oilfields. Drilling times fell dramatically, saving petroleum companies huge amounts of money.
The Society of Petroleum Engineers has noted that about the same time Hughes developed his bit, Granville A. Humason of Shreveport, Louisiana, patented the first cross-roller rock bit, the forerunner of the Reed cross-roller bit.
Biographers note that Hughes met Granville Humason in a Shreveport bar, where Humason sold his roller bit rights to Hughes for $150. The University of Texas’ Center for American History has a rare 1951 recording of Humason’s recollections of that chance meeting. Humason recalls he spent $50 of his sale proceeds at the bar during the balance of the evening.
After Sharp died in 1912, his widow Estelle Sharp sold her 50 percent share in the company to Hughes. It became Hughes Tool in 1915. Despite legal action between Hughes Tool and the Reed Roller Bit Company that occurred in the late 1920s, Hughes prevailed – and his oilfield service company prospered.
By 1934, Hughes Tool engineers design and patented the three-cone roller bit, an enduring design that remains much the same today. Hughes’ exclusive patent lasted until 1951, which allowed his Texas company to grow worldwide. More innovations (and mergers) would follow.
Frank Christensen and George Christensen had developed the earliest diamond bit in the 1941 and introduced diamond bits to oilfields in 1946, beginning with the Rangley field of Colorado. The long-lasting tungsten carbide tooth came into use in the early 1950s.
After Baker International acquired Hughes Tool Company in 1987, Baker Hughes acquired the Eastman Christensen Company three years later. Eastman was a world leader in directional drilling.
When Howard Hughes Sr. died in 1924, he left three-quarters of his company to Howard Hughes Jr., then a student at Rice University. The younger Hughes added to the success of Hughes Tool while becoming one of the richest men in the world. His many legacies include founding Hughes Aircraft Company and the Howard Hughes Medical Institute.
Learn more oilfield history in Making Hole – Drilling Technology.
Service Company Competition
A major competitor for any energy service company, today’s Schlumberger Limited can trace its roots to Caen, France. In 1912, brothers Conrad and Marcel began making geophysical measurements that recorded a map of equipotential curves (similar to contour lines on a map). Using very basic equipment, their field experiments led to invention of a downhole electronic “logging tool” in 1927.
After successfully developing an electrical four-probe surface approach for mineral exploration, the brothers lowered another electric tool into a well. They record a single lateral-resistivity curve at fixed points in the well’s borehole and graphically plotted the results against depth – creating first electric well log of geologic formations.
Meanwhile another service company in Oklahoma, the Reda Pump Company had been founded by Armais Arutunoff, a close friend of Frank Phllips. By 1938, an estimated two percent of all the oil produced in the United States with artifical lift, was lifted by an Arutunoff pump. Learn more in Inventing the Electric Submersible Pump (also see All Pumped Up – Oilfield Technology).
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