Cameron and Schlumberger Form Subsea Joint Venture

   By Alison Sider 
 

HOUSTON--Cameron International Corp. (CAM) and Schlumberger Ltd. (SLB) said Thursday they will join forces to develop and manufacture products for the subsea oil and gas market.

Schlumberger, the world's largest oilfield services company, will pay Cameron $600 million for contributing its subsea division to the new venture, called OneSubsea. Schlumberger will contribute some of its businesses, including Framo, an engineering company that makes pumps used in subsea oil and gas drililng, which Schlumberger acquired last year.

The deal reflects growing enthusiasm for offshore oil and gas drilling around the world--the segment has been a bright spot for oilfield services companies in recent quarters. The subsea sector has been dominated by smaller, specialized players, including Cameron. The joint venture announced Thursday is a way for the bigger oilfield services companies to have a bite of the subsea apple.

Cameron will own 60% of the new venture and will manage it. Schlumberger will own the other 40%.

Cameron executives said during a conference call that the deal was "game-changing."

"This takes our subsea business to a place we could not get to on its own and helps the Framo business get to a place it could not get to on its own. This is truly--you're adding two plus two and getting eight, not four," said Cameron Chief Financial Officer Chuck Sledge.

Analysts were effusive about the deal.

"What a fabulous, fabulous deal," said Credit Suisse analyst Jim Wicklund during a conference call following the announcement. "Improving recoveries from reservoirs has been the holy grail forever, and if there was a better marriage to find that holy grail, it's hard to figure out what it is."

That's because of Schlumberger's "unparalleled understanding of the reservoir" should lead to substantially better drilling results, Dahlman Rose analysts wrote in note.

Barclays analyst James West wrote that the partnership brings together the two companies' technological capabilities.

"We feel the combined technologies will allow both companies to move towards a step change in optimizing subsea processing," he wrote.

Raymond James analysts wrote in a note that the joint venture reflects the "continued strength" of the offshore oil boom.

"We see the strategic benefits for the transaction and would see the alliance as a net negative for other subsea players," they wrote.

Shares of Cameron rose 3.6% to $52.65 following the announcement. Shares of Schlumberger rose 1.16%to $68.66.

Write to Alison Sider at [e-mail]

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