A merger of Schlumberger Ltd. and Cameron International Corp., if approved, could mean savings not only for a new company, but also for its customers at a time of low oil prices where every penny seems to count.
Schlumberger, the world's largest oilfield services company, said Aug. 26 that it will pay about $12.71 billion in stock and cash to acquire Cameron, a leader in manufacturing oilfield equipment. Each Cameron shareholder would get 0.716 shares of Schlumberger stock and $14.44 for each Cameron share.
The payment for each Cameron stock would be worth 56 percent more than it is worth today, meaning the total value of the merger would be $14.8 billion. Together, the two companies had pro forma revenue of $59 billion in 2014.
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The boards of both companies have approved the merger, but it still needs approval from Cameron's shareholders and regulatory agencies. But an antitrust challenge is unlikely because the acquisition of Cameron is a move by Schlumberger to diversify, not to eliminate a rival company, according to Matt Marietta, an analyst with the investment bank Stephens Inc.
Schlumberger, based in Paris, provides essential services to companies drilling for oil. Houston-based Cameron, which provides equipment for these efforts, is probably best known as the company that manufactured the blowout preventer on the Deepwater Horizon rig off the Louisiana Coast. The rig exploded in 2010, killing 11 workers and causing the biggest oil spill in U.S. history.
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The deal could benefit not only the merged company but also its customers. A combined Schlumberger-Cameron could streamline its operations and thus reduce expenses at a time when oil prices and profits are stubbornly low. The new entity also could offer bundled services to its customers at prices below what they would have paid by dealing with separate companies for services and parts.
"This agreement with Cameron opens new and broader opportunities for Schlumberger," Schlumberger Chairman and CEO Paal Kibsgaard said in a statement. "We believe that the next industry technical breakthrough will be achieved through integration of Schlumberger's reservoir and well technologies with Cameron's leadership in surface, drilling, processing and flow control technologies."
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The Schlumberger-Cameron deal is the latest recent merger in the oil industry, beset by low prices and eager to limit expenses. Already this year, Halliburton Co. agreed to pay $35 billion to acquire its smaller oilfield services rival Baker Hughes Inc. And Royal Dutch Shell proposes to pay $70 billion for the British gas major BG Group.
This isn't the first time Schlumberger and Cameron have done business together. In 2012 the two companies set up a joint venture called OneSubsea to develop the next generation of offshore oil wells designed to operate more than two miles below the water's surface. The initiative combined Schlumberger's expertise in oil reservoirs with Cameron's equipment production.
Now it appears the two companies want to elaborate on that relationship, said Alain Parent, an analyst at the French investment bank Natixis. "They must feel that there is definitely an opportunity there," he told Bloomberg. "They want to go one step further after the joint venture.''
By Andy Tully Of Oilprice.com
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Andy Tully is a veteran news reporter who is now the news editor for Oilprice.com More