26Aug

Schlumberger to Buy Cameron – What does this Mean for A&D?

The world’s largest oilfield service company, Schlumberger Ltd., and one of the largest providers of oilfield equipment, Cameron International Corp., announced today in a joint press release that the parties have executed an Agreement and Plan of Merger under which Schlumberger will buy Cameron in an all-stock deal valued at $14.8 billion.

The parties held a teleconference this morning, as announced in their 8K filing. Under the Merger Agreement, Schlumberger Holdings will acquire Cameron in a transaction in which Rain Merger Sub LLC, a Delaware limited liability company and a direct wholly-owned subsidiary of Schlumberger Holdings, will merge with and into Cameron, with Cameron as the surviving entity, and with Schlumberger Holdings acquiring all of the stock of Cameron.

The two companies had previously entered into a joint venture to combine their subsea businesses in November 2012 with a focus of deeper offshore drilling.

This deal follows the $34.6 Billion megamerger between Halliburton and Baker Hughes.  That deal, which was announced last November, has faced scrutiny from the Justice Department over potential antitrust concerns. However, some experts are indicating that the Schlumberger Cameron merger is unlikely to face similar challenges. For example, in a Bloomberg interview, Stephens Inc. analyst Matt Marietta indicated that he believed there would be no antitrust challenges, as “The Cameron purchase is diversification into oilfield equipment supply rather than consolidation of a rival service company.”

What does this mean for A&D?

If you’re like me, you’re waiting for that deal that will break the proverbial camel’s back and start a wave of O&G deal flow. There have been only a handful of recent deals.  By and large, deal-activity has been stagnant from late 2014 through the date of this article, totaling a mere $4.18 Billion in 2015, down 92% from last year’s deal volume. Acquisition and divestiture activity is slowly picking up, mostly in the midstream sector. Many experts, and companies, are continuing to predict an impending wave of A&D activity. There have been several reports that deal activity might pick up if oil prices stayed low, others predicting an increase in activity if prices plunged further, and other reports have predicted a wave of A&D once a few big deals are finally closed.

Some experts believe the Schlumberger-Cameron deal could be a start for building investor confidence. Stephens Inc. analyst Matt Marietta told Bloomberg that this deal could improve market confidence in the energy industry.  “This is a sign that Schlumberger sees a market bottom,” Marietta said, “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.”

Houston Chronicle reported that some companies are in trouble with their creditors who now consider their loans substandard and have cut back on providing additional capital. As reported in The Deal this week, some are predicting the impending lender redetermination period as a “tipping point” which could force many companies to make moves.

If you want to read more about the Schlumberger/Cameral deal, Claire Poole had a great article on the topic over at TheStreet.com.

Austin Brister
Austin represents oil and gas exploration and production companies and landowners in a wide variety of complex commercial litigation matters, including contract and property disputes, royalty disputes, breach of lease cases, lease termination/perpetuation disputes, and an array of other issues in the upstream oil and gas sector. Austin has prosecuted and defended claims in state courts and federal courts. Austin strives to find practical business solutions to complex issues, but if necessary, he works hard to implement effective strategies in the courthouse.
Austin Brister

2 comments


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  1. Not so sure I agree with Marietta’s statement about reaching a “market bottom.” I see the appeal: if Schlumberger is putting up cash, then it must be ok to come out of the bomb shelter. This could be a reckless approach, however, to timing one’s move. I don’t think we’ve seen the worst of it. Though we may be bracing for it, we’ve yet to feel Iran’s ramp up in production, OPEC members haven’t pretended to play along yet and U.S. national election campaigns have just started. If Schlumberger waited till next quarter, they might have found themselves bidding against another service giant for Cameron (and maybe there were indeed other contenders). In the long run, these supply gluts have always had a greater correlation coefficient in price movement. Marietta’s comments are so vague and short sighted. Companies like Schlumberger aren’t in the habit of randomly acquiring stuff just purely as a response to commodity price conditions. Cameron was weak, and Schlumberger had the cash and EPS reliability to pull off what is likely a move toward horizontally integrating as a service giant in response to the HalliBaker show earlier this year. Cameron was nearly doubling down on international, subsea projects since 2012. There level of exposure to international plays was at an all-time high at year-end 2014. They were touting agreements with major operators to provide equipment and materials for huge capital projects which have nearly all been postponed by now. They took a very significant loss in foreign currency translations, as the currencies in these countries were weakening significantly against the U.S. dollar. Companies like Cameron can’t survive by letting a bunch of 25,000 psi blowout preventers sit in the shelf collecting dust. Cameron’s commitment to major capital projects in international subsea operations left them precariously undiversified by the end of 2014, and the earnings potential in those plays collapsed with the commodity prices. They needed a way out in 2015, and the writing was on the wall. To say that Schlumberger’s move here is a signal that things are going to turn around is a lazy statement, only good for distracting ourselves from the hard truth that the worst is yet to come. Make moves while you can.

    • Johnny, thanks for commenting! Awesome writing, and excellent point of view by the way. I really need to get you to write on here with me sometime. Would you be interested? I’m going to be trying to publish on here twice a week for the next few months. We have a new marketing expert that will be helping push our content out, and we already have contacts at places such as Lexology, Law360, oilprice.com (who has connections with CNN Money and a few other BIG networks), and a few other places that are interested in syndicating my content. I think if we co-wrote an article, it could do really well. Of course, I’m not sure if Chevron would have any issues with you writing, but we could always leave the Chevron info out, and make it clear that these are our personal views.

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