Schlumberger to buy Cameron in multibillion-dollar deal

Schlumberger, the world’s largest oilfield-services provider, will buy Houston’s Cameron International Corp. in a deal that will allow the company to offer more services in more locations.

Schlumberger, which offers a wide variety of products and services focusing on sub-surface operations, said it expects to get “syngeries” of $300 million in the first year of the merger, doubling that by the second year. Cameron is an oil-field equipment market that assembles blowout preventers and other rig equipment for surface operations.

Initially, the savings will be related to “reducing operating costs, streamlining supply chains and improving manufacturing processes.”

On a conference call, Paal Kibsgaard, chairman and CEO of Schlumberger, said there is virtually no overlap between the two companies products and that he expects to close the deal in the first quarter of 2016. He said he doesn’t expect to divest any part of Cameron’s business.

Kibsgaard said: “As we continue to seek new ways to drive total system performance, in the areas of both drilling and production, it has become very clear to us there is huge potential in a much closer integration between the surface and subsurface parts of both the drilling and production systems . . . So in summary, the industrial logic of this transaction is to create technology-driven growth by integrating Schlumberger’s leading reservoir and well technology with Cameron’s leading wellhead and surface technology into the industry’s first complete drilling and production system, fully enabled by our unique expertise in instrumentation, data processing and system integration.”

Market watchers were quick to speculate that the deal could signal the beginning of a large consolidation in the energy industry. Previously, many buyers and sellers haven’t been able to reach deals as valuations have fluctuated along with oil prices.

“This is a sign that Schlumberger sees a market bottom,” Matt Marietta, a Houston-based analyst for Stephens Inc. who rates the stock a buy and owns none, told Bloomberg News. “Schlumberger didn’t have to agree to it this week. They could have waited for things to worsen. It can probably bring some confidence back to energy investors that we are approaching a bottom.”

During the second quarter, oil and gas companies inked 47 mergers and acquisitions totaling $38.8 billion, according to numbers from PricewaterhouseCoopers. That’s only a modest increase from the 39 deals worth $34.5 billion in the first quarter, and a decline from the 65 transactions worth $48.9 million in the second quarter of 2014.

“With oil prices now at lower levels, oilfield services companies that deliver innovative technology and greater integration while improving efficiency, which our customers increasingly demand, will outperform the market,” Kibsgaard said in a statement. “This agreement with Cameron opens new and broader opportunities for Schlumberger.”

The deal follows the planned merger of two Houston-based oil field services giants: Halliburton Co. and Baker Hughes.

The Cameron purchase is diversification into oilfield equipment supply rather than consolidation of a rival service company so it is unlikely to face an antitrust challenge, Marietta said.

Cameron and Schlumberger are already partners in a joint venture. In a research note, Tudor Pickering Holt Energy said the deal continues Schlumberger’s pattern of buying out its joint-venture partners. The move, Tudor Pickering said, “hightlights the intrinsic value we see for oilfield manufacturing businesses.”

Cameron shareholders will get .716 shares of Schlumberger as well as $14.44 in cash for each share. That is a 37 percent premium to Tuesday’s closing share price of Cameron stock. The companies put the total value of the deal at $14.8 billion, which includes the assumption of $1.1 billion in debt.

The deal, the companies said, means Schlumberger will have “pore-to-pipeline” products and services offering. This move comes as producers are wringing discounts from service providers amid low oil prices.

Schlumberger, which has its headquarters in Paris, Houston and The Hague, has more than 100,000 employees worldwide. Cameron has more than 24,000 employees. In Houston, Schlumberger had more than 12,000 employees and Cameron had around 4,400, according to a Chronicle survey published in June.

Josh Cain and Collin Eaton contributed to this report.

SHOW MORE