• 5 hours Oil Prices Rise After U.S. API Reports Strong Crude Inventory Draw
  • 6 hours Oil Gains Spur Growth In Canada’s Oil Cities
  • 7 hours China To Take 5% Of Rosneft’s Output In New Deal
  • 7 hours UAE Oil Giant Seeks Partnership For Possible IPO
  • 8 hours Planting Trees Could Cut Emissions As Much As Quitting Oil
  • 9 hours VW Fails To Secure Critical Commodity For EVs
  • 10 hours Enbridge Pipeline Expansion Finally Approved
  • 11 hours Iraqi Forces Seize Control Of North Oil Co Fields In Kirkuk
  • 12 hours OPEC Oil Deal Compliance Falls To 86%
  • 1 day U.S. Oil Production To Increase in November As Rig Count Falls
  • 1 day Gazprom Neft Unhappy With OPEC-Russia Production Cut Deal
  • 1 day Disputed Venezuelan Vote Could Lead To More Sanctions, Clashes
  • 1 day EU Urges U.S. Congress To Protect Iran Nuclear Deal
  • 1 day Oil Rig Explosion In Louisiana Leaves 7 Injured, 1 Still Missing
  • 1 day Aramco Says No Plans To Shelve IPO
  • 4 days Trump Passes Iran Nuclear Deal Back to Congress
  • 4 days Texas Shutters More Coal-Fired Plants
  • 4 days Oil Trading Firm Expects Unprecedented U.S. Crude Exports
  • 4 days UK’s FCA Met With Aramco Prior To Proposing Listing Rule Change
  • 4 days Chevron Quits Australian Deepwater Oil Exploration
  • 5 days Europe Braces For End Of Iran Nuclear Deal
  • 5 days Renewable Energy Startup Powering Native American Protest Camp
  • 5 days Husky Energy Set To Restart Pipeline
  • 5 days Russia, Morocco Sign String Of Energy And Military Deals
  • 5 days Norway Looks To Cut Some Of Its Generous Tax Breaks For EVs
  • 5 days China Set To Continue Crude Oil Buying Spree, IEA Says
  • 5 days India Needs Help To Boost Oil Production
  • 5 days Shell Buys One Of Europe’s Largest EV Charging Networks
  • 5 days Oil Throwback: BP Is Bringing Back The Amoco Brand
  • 5 days Libyan Oil Output Covers 25% Of 2017 Budget Needs
  • 5 days District Judge Rules Dakota Access Can Continue Operating
  • 6 days Surprise Oil Inventory Build Shocks Markets
  • 6 days France’s Biggest Listed Bank To Stop Funding Shale, Oil Sands Projects
  • 6 days Syria’s Kurds Aim To Control Oil-Rich Areas
  • 6 days Chinese Teapots Create $5B JV To Compete With State Firms
  • 6 days Oil M&A Deals Set To Rise
  • 6 days South Sudan Tightens Oil Industry Security
  • 7 days Over 1 Million Bpd Remain Offline In Gulf Of Mexico
  • 7 days Turkmenistan To Spend $93-Billion On Oil And Gas Sector
  • 7 days Indian Hydrocarbon Projects Get $300 Billion Boost Over 10 Years
Alt Text

Rising OPEC Production Weighs On Oil Prices

After seeing a slight drop…

Alt Text

Draw In Crude Inventories Lifts Oil Prices

Oil prices reversed course on…

Schlumberger To Retake Oil Services Crown With New Deal

Schlumberger To Retake Oil Services Crown With New Deal

Schlumberger Ltd.’s move to buy nearly half of Eurasia Drilling Co. (EDC), Russia’s largest oil drilling concern, will cost it about $1.7 billion and perhaps a few sleepless nights over the prospect that Western sanctions may eventually apply to the new acquisition. But the American oil services giant also just may have found a genuine bargain.

Houston-based Schlumberger’s decision to buy 45.65 percent of EDC comes at a time when the European Union and the United States have imposed stiff economic sanctions on Russia for its support of separatist fighters in neighboring Ukraine.

Under the sanctions, Western energy companies may not help specific Russian companies explore for oil in the Arctic, in deep water or in underground shale. But neither EDC nor its largest shareholders, CEO Alexander Djaparidze and Alexander Putilov, are targets of the sanctions so far.

Related: Energy Sector Outlook for 2015

Still, if the East-West tensions don’t ease, the sanctions could expand, as they already have in the past year. Then there’s the 50 percent-plus plunge in oil prices over the past seven months, contributing to the risk Schlumberger faces in buying such a large stake in EDC.

Despite this low price, Russian companies are still producing oil prodigiously, even though they face the risk that many wells, especially older ones, may cease to be profitable if prices keep falling and/or stay low for a long period before stabilizing.

And that’s where Schlumberger may emerge victorious: Low prices for oil make ancillary energy companies such as EDC more affordable. For example, on Nov. 17, 2014, US-based Halliburton Co. announced that it would buy its rival oilfield serves company Baker Hughes Inc. for $35 billion, potentially allowing it to surpass Schlumberger as the world’s largest oil services concern.

Now Schlumberger could leap-frog over Halliburton by buying EDC and reclaim its primacy, and do so at a bargain price. The value of EDC’s shares fell by around 60 percent in 2014 because of the Western sanctions imposed on its two biggest oil customers in Russia, Gaspromneft and Lukoil. The company is also hurting because of lower oil prices and the plunging value of the ruble.

Related: By Buying Baker Hughes, Halliburton Aims To Dominate US Fracking

And on Jan. 19, the Russian driller reported a 19 percent year-on-year decline in the volume of its drilling operations in 2014. Further, it said, its drilling for the fourth quarter of 2014 had dropped 16 percent below the same period of 2013.

Because of these multiple facets of EDC’s devaluation, Schlumberger will pay only $22 per share of EDC and take the company private, according to the deal announced Jan. 20. But even that low price is 81 percent higher than the current value of EDC stock. The US company will also have the option to buy out the rest of EDC shares within a two-year window that opens when the current deal closes.

If Schlumberger ends up buying all of EDC’s stock, it will have turned a long strategic alliance into outright ownership of the largest onshore drilling company in Russia.

By Andy Tully of Oilprice.com

More Top Reads From Oilprice.com:




Back to homepage


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News