Schlumberger-Cameron purchase may spawn more Norway M&A / News / The Foreigner

The Foreigner Schlumberger-Cameron purchase may spawn more Norway M&A. Some USD 3bn will get oil service company leaders thinking about following suit on the Mergers and Acquisitions front, an analyst thinks. Schlumberger Ltd [NYSE:SLB], the world’s largest oilfield service company, has announced it would buy Cameron International Corp. [NYSE:CAM] for USD 12.7bn in cash and stock. The news has created speculations on the Oslo Stock Exchange (OSE), Norway’s Finansavisen reports.

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Schlumberger-Cameron purchase may spawn more Norway M&A

Published on Thursday, 27th August, 2015 at 13:59 under the news category, by Michael Sandelson   .
Last Updated on 27th August 2015 at 14:16.

Some USD 3bn will get oil service company leaders thinking about following suit on the Mergers and Acquisitions front, an analyst thinks.



Schlumberger Ltd [NYSE:SLB], the world’s largest oilfield service company, has announced it would buy Cameron International Corp. [NYSE:CAM] for USD 12.7bn in cash and stock.

The news has created speculations on the Oslo Stock Exchange (OSE), Norway’s Finansavisen reports.

Tord Aasen Augestad, analyst at Oslo-based Arctic Securities tells the publication he believes that this huge transaction “will force top executives in all oil service companies to consider M&A to meet competition from Schlumberger.”

Norway companies Aker Solutions [OSE:AKSO], Akastor [OSE:AKA], and Subsea 7 [OSE:SUBC] saw their values increase by close of business, Wednesday.

Ending the day on 31.06, 10.35, and 64.2, respectively, their respective percentage gains were 7.47, 0.97, and 3.55 (rounded up).

“Aker Solutions is a direct competitor to Cameron International’s OneSubsea, over which Schlumberger has now secured full control,” says Mr Augestad.

Must make a move

Aker Solutions announced in 2014 that it was to split into two new companies – Aker Solutions for its Subsea, Umbilicals, Engineering and Maintenance, Modifications and Operations (MMO), and Akastor for its other units including Drilling Technologies, Aker Oilfield Services, and Process Systems.

“The thought behind dividing Aker Solutions was to streamline the company and make it attractive for a future sale,” the analyst states.

Who do you think might buy Aker Solutions?

“Top of my list for Aker would be Halliburton [NYSE:HAL] given the recent Halliburton-Baker Hughes [NYSE:BHI] deal,” Mr Augestad tells The Foreigner.

“That M&A is currently going through a tough antitrust process in the US and if it passes, which I think it eventually will, Halliburton will have to answer their investor audience and other stakeholders as to how they will attack the position Schlumberger has now taken regarding bundling services and equipment.

“One answer will be to do the same as what Schlumberger has done, though this won’t necessarily be the solution. It would be hard though, to dismiss what the best oil service company in the world has done.”

Mr Augestad expresses uncertainty about which company might purchase Subsea 7.

“I would have said OneSubsea/Cameron a week ago, but at this point in time I'm not sure. Some might say Schlumberger, but I think that’s rather unlikely given the capital intensity of the SURF (Subsea Umbilicals, Risers and Flowlines) business,” he says.

Production down, prices up

Yesterday’s stock exchange rises for Aker and Subsea7 came following Monday’s general OSE decline. What’s the outlook?

“The overall oilfield services outlook is still quite grim, especially with the latest drop in oil prices. Oil companies are still experiencing cash flow constraints, and we’re still seeing projects getting postponed.”

“We’ve been in this current postponement era for two years now; some projects will come back, some already have. Those yet to return will emerge in a different format and will pull through,” comments Mr Augestad.

He adds that the current situation is rather like that of 1999-2003, with eventually declining production for oil companies due to them reducing their CAPEX (Capital Expenditure).

“This is likely to lead oil prices being higher in the long run, and the only thing to do when production declines is to commission new projects.”

“There’s no reason to dismiss the entire oil industry yet, even though it will eventually shut down when resources are exhausted. But we’re certainly not there yet. I think we’ll see oil prices rise again on the back of declining production,” Mr Augestad remarks.

According to him, the buying side (CAPEX) might turn in 2017, “which isn’t too far away.”

“The best buys are to be found when uncertainty is at its highest - which might prove to be right now.”

 Which other companies look promising on the M&A side?

“I’d say that Akastor – which arose from Aker Solutions’ announcement in 2014 that it is to split into two companies – and MHWirth (previous Aker MH) are the most prominent ones. I don’t see the Schlumberger-Subsea 7 link being that strong.”

This weaker tie-up is due to Subsea 7 being very capital-intensive with a lot of subsea construction vessels, explains Mr Augestad.

“I don’t think Schlumberger is very interested in getting that on their balance sheet, although they could be interested in the engineering capacity of Subsea 7,” he concludes.



Published on Thursday, 27th August, 2015 at 13:59 under the news category, by Michael Sandelson   .
Last updated on 27th August 2015 at 14:16.

This post has the following tags: oil, gas, ma.





  
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