Oil-field services company Halliburton Company (NYSE:HAL) has inked an important deal with environmental solution provider Nuverra Environmental Solutions Inc (NYSE:NES) to advance its water treatment and recycling solution. The service, which is called H2O Forward, has the potential to be a real game-changer for the industry, as well as pose a significant competitive risk to Nuverra Environmental Solutions Inc (NYSE:NES). But, with these two now joining forces, everyone wins.
Water usage is a well-documented problem for the oil and gas industry; each well that's fracked requires millions of gallons of water. One of the biggest issues with the process is that some of the water that is pumped down in the well eventually comes back up, along with harmful chemicals. That water then needs to be disposed of in an environmentally responsible manner, which typically involves it being trucked away so that it can be pumped down into a disposal well. It's not an ideal solution, which is compounded by the fact that oil and gas producers still need access to fresh water to frack the next well.
These are some of the many reasons why the fracking process has so many enemies, which has led to its outright ban in places like New York state and France. Further, the millions of gallons of water required to frack each well makes it difficult to use the process in more arid climates. If the team of Halliburton Company (NYSE:HAL) and Nuverra Environmental Solutions Inc (NYSE:NES) can find success with this project, it could make fracking a more palpable option for many opposed to the process.
With H2O Forward, the produced water is recycled on site, which enables oil and gas producers to use substantially less fresh water. That's a real game-changer for the industry, but it also poses a competitive threat to Nuverra, which is building a business around treating and recycling fracked water offsite.
In the deal, both companies will work together to offer the H2O Forward Service to oil and gas companies working to develop the Bakken. Once a customer signs on to the service, Halliburton Company (NYSE:HAL) will conduct the fracking operations while Nuverra will provide the logistics, transportation, storage, and overall fluids management. If successful, the project could provide additional opportunities for both companies as H2O Forward moves to additional shale plays.