The world's dominant oil services company is set to grow even larger after the biggest US merger of the year.
Merger slick move for oil services firm
The world's dominant oil services company is set to grow even larger after the biggest US merger of the year. Schlumberger, whose engineers are a common sight on oilfields across the region, confirmed on Sunday it would acquire Smith International, a drilling rival, for US$11 billion (Dh40.4bn). The company said the deal would give it access to new drilling technology that would offer oil-producing countries help in squeezing more output from each well.
Andrew Gould, the chief executive of Schlumberger, said the acquisition would lead to advancements that would allow "customers to drill more economically in demanding conditions". Schlumberger's share price has fallen 6.4 per cent to $61.57 since reports of the merger were disclosed last week on concerns that the company offered slightly too much for Smith, but analysts said that in the longer term it was good for both sides.
"If anyone was going to buy Smith, Schlumberger was the logical buyer," Dan Pickering, an analyst at Tudor Pickering Holt, told Bloomberg. "It was really integrating the bits together with fluids and the other Schlumberger product" lines. The two firms reported a total $30bn in revenues for last year, which was twice the amount of next-largest rival, Halliburton. Schlumberger's growth will be an asset in the long term, allowing it to compete more closely for major contracts that were once steered exclusively to the oil majors such as BP and ExxonMobil.
Oil services companies differ in that they operate on contract for specialised tasks and are not able to offer the majors' wide array of services, financial support and equity investment. As national oil companies become more knowledgeable and cash-rich, they are increasingly funding their oil developments with their own reserves and awarding oilfield construction contracts directly to the oil services firms.