Schlumberger to acquire rival Cameron for $14.8bn

OREANDA-NEWS. August 27, 2015.  Oilfield services giant Schlumberger is acquiring smaller rival Cameron for \\$14.8bn, possibly ushering in a wave of consolidation in the oil and gas industry following a double dip in crude prices to six-year lows.

Late last year, the second-biggest services company Halliburton agreed to acquire Baker Hughes for \\$34.6bn in a bid to gain an edge on the world's biggest Schlumberger. That deal was the first major industry merger as oil prices began to plummet.

Aside from Shell's move to buy BG for \\$70bn in April, M&A activity has been largely limited to oil and gas acreage and midstream assets such as pipelines and storage facilities.

A recovery in crude prices in the second quarter from near six-year lows touched earlier in the year kept valuations high. But after prices resumed their free fall, most company executives and industry watchers expect the market to remain lower for longer, potentially kicking off M&A activity as companies struggle to fund exploration and repay debt.

"Earlier this year, there was probably a thought that this was a temporary correction and hence the view, you know, I am not interested in doing a whole lot," managing director of institutional research at Simmons & Co Pearce Hammond told Argus. "But now I think it is settling in that this is not going to be a quick recovery. And accordingly there could be more motivation to do things than there was before."

Schlumberger expects pretax cost savings of about \\$300mn and \\$600mn in the first and second year, respectively, from the deal. Initially, that will come from a reduction in operating costs, streamlining supply chains, and improving manufacturing processes.

The transaction combines two complementary technology portfolios into a "pore-to-pipeline" products and services offering to the global oil and gas industry, Schlumberger said.

On a pro forma basis, the combined company had 2014 revenues of \\$59bn.

"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, Schlumberger's chief executive Paal Kibsgaard said. "In addition, we will achieve significant efficiency gains through lowering operating costs, streamlining supply chains, and improving manufacturing processes."