C & J Energy Services has entered into a deal to buy out the fracking business of Nabors Industries Ltd for $2.86 billion in stock and cash, joining the list of U.S. firms that have shifted their addresses to tax havens.
The Hamilton, Bermuda-based Nabors will be paid $940 million cash and receive 62.5 million shares of C& J. The new firm, known as C&J Energy Services Ltd will operate from C&J’s offices in Houston while being registered in Bermuda, where no taxes are levied.
Other energy firms that have done so include Weatherford International Plc, Transocean Ltd, Noble Corp and Ensco Plc. Nabors was incorporated in Bermuda in 2002, though its operations are overseen from its offices in Houston, reported Bloomberg.
C&J has been charged an effective tax rate of around 37 percent over the last four years. This compares to Nabors’ rate of 19 percent between 2010 and 2012, with no taxes in 2013.
“As we continue to grow and generate revenue, being offshore can bring our tax rate down,” said C&J founder and Chief Executive Officer Josh Comstock.
C&J has the 13th largest truck fleet used in fracking or hydraulic fracturing, a method of extracting oil and natural gas by pumping a mixture of chemicals, water and sand into underground rocks. Merging with Nabors’, which has the sixth-largest fracking services division in the United States, will expand C&J’s scale of operations considerably.
The merger comes at a time when the cost of fracking services has been declining due to oversupply of fracking equipment. It is widely expected that the prices will remain stagnant in North America this year before accelerating in certain U.S. regions early next year.
The speed with which U.S. firms have shifted their addresses offshore to lower tax liabilities has attracted the attention of the Congress, which is considering banning such deals. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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