NEW YORK (Reuters) – 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, 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.

U.S. energy firms reduced the number of oil rigs operating in the week to June 14, bringing the total count down to 788, the lowest since February 2018, General Electric Co’s Baker Hughes energy services firm said in its closely-followed report last week.

Keane and C&J are both headquartered in Houston. They have market capitalizations of $733 million and $708 million, respectively.

The two companies focus on well completion services for oil and gas companies. This involves preparing the well hole for the production of hydrocarbons after it has been drilled, such as running tubing into the ground to prevent it from resealing.

More deals in the oilfield services industry are likely. On Friday, Reuters reported Patterson-UTI Energy was considering the divestment of its pressure pumping business.