Schlumberger to Buy Cameron International for $12.7 Billion -- 5th Update
27 August 2015 - 12:43AM
Dow Jones News
By Lisa Beilfuss
Schlumberger Ltd. on Wednesday said it agreed to buy Cameron
International Corp. for about $12.74 billion in cash and stock, the
latest move by the world's biggest oil-field services company as
the industry struggles with lower prices and rising supply.
The price tag values Houston-based Cameron--which makes drilling
equipment and supplies maintenance equipment to pipelines,
refineries and wells--at $66.36 a share, a 56.3% premium to
Tuesday's closing price. Amid the downturn in the energy sector,
Cameron shares had fallen 42% over the past 12 months, but they
surged 42% to $60.37 in early trading Wednesday.
Cameron shareholders will receive $14.44 in cash and 0.716
Schlumberger shares for each share of Cameron. After completion,
Cameron holders will own about 10% of the combined company.
The enterprise value of the deal, which is $14.8 billion,
includes the assumption of $1.1 billion in debt, according to a
Schlumberger spokesman.
With oil prices now at lower levels, Schlumberger Chief
Executive Paal Kibsgaard said, "this agreement with Cameron opens
new and broader opportunities for Schlumberger."
For Schlumberger, which formed a joint venture with Cameron
called OneSubsea in 2012, it is "a natural progression," said
Oppenheimer analyst James Schumm. "With oil prices near 10-year
lows and the offshore and subsea space out of favor as a result of
the onshore shale boom, sentiment is very poor." But the timing of
the deal will prove to be solid, according to Mr. Schumm, who
believes offshore and subsea production will continue to play an
increasingly important role in the future.
"The deal is right in the Schlumberger playbook in terms of
timing, but I don't think it signals a shift in Schlumberger's view
on the market," said J.P. Morgan analyst Sean Meakim, noting that
Cameron's shares have held up better than most of its peers during
the downturn, but fell about 20% in the past few weeks as the
broader market sold off.
In a note this week, analysts at Raymond James said the latest
outlook for drilling activity in the U.S. translates into a much
longer downturn than anticipated and a lack of recovery next year.
An estimate for West Texas Intermediate crude at $55 through 2016
implies a 7% reduction in exploration and production, according to
the analysts, resulting in "meaningfully lower earnings estimates"
across the sector.
Weaker conditions have prompted some consolidation in the
industry, with the Schlumberger-Cameron tie up the latest example.
This summer, Energy Transfer Equity LP offered to buy Williams
Cos., and a partnership controlled by refiner Marathon Petroleum
Corp. announced plans to acquire MarkWest Energy Partners LP for
$15.8 billion.
Those deals followed Royal Dutch Shell PLC's nearly $70 billion
offer for Britain's BG Group PLC and Halliburton's $35 billion deal
to acquire smaller oil-field services rival Baker Hughes Inc.
Last month, Halliburton and Baker Hughes agreed to extend until
at least Nov. 25 the Justice Department's antitrust review period
of their merger. The companies are the number two and three
oil-field servicers, respectively.
Paris-based Schlumberger said it expects to complete the Cameron
acquisition in the first quarter of 2016, subject to approval by
Cameron shareholders as well as regulatory clearance. According to
Oppenheimer's Mr. Schumm, "there is not much in the way of
overlapping businesses," suggesting the antitrust review won't be
"overly difficult."
Schlumberger said it anticipates pretax synergies of about $300
million in the first year and $600 million in the second year after
the deal closes. The transaction will add to per-share profit by
the end of the first year, Schlumberger said.
On a pro forma basis, the combined company had 2014 revenue of
$59 billion.
Cameron, perhaps best known as the maker of a piece of safety
equipment that helped trigger the 2010 Deepwater Horizon disaster,
settled with BP PLC for $250 million in 2011. The company later
benefited from new regulations on oil wells as companies upgraded
their equipment in the wake of the disaster.
Schlumberger shares, down 35% over the last 12 months, slipped
1% in early trading.
Meanwhile, the news helped lift shares across the oil equipment,
services and distribution sector: Stock in National Oilwell Varco
Inc. jumped 6.2%, while shares of Weatherford International PLC
increased 4%. Shares in both Williams Cos. and Spectra Energy added
3%. Broader markets climbed about 1.8% in early trading.
"We expect shares of beaten-down capital equipment names to
benefit from a near-term pop as investors speculate which names
could be acquired next," said J.P. Morgan's Mr. Meakim.
Write to Lisa Beilfuss at lisa.beilfuss@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
August 26, 2015 10:28 ET (14:28 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
Schlumberger (NYSE:SLB)
Historical Stock Chart
From Apr 2024 to May 2024
Schlumberger (NYSE:SLB)
Historical Stock Chart
From May 2023 to May 2024