Schlumberger Acquiring Cameron Creates a Pore-to-Pipeline"Products and Services Offering "

Schlumberger Limited and Cameron jointly announced a definitive merger agreement in which the companies will combine in a stock and cash transaction. The agreement was unanimously approved by the boards of directors of both companies.

Under the terms of the agreement, Cameron shareholders will receive 0.716 shares of Schlumberger common stock and a cash payment of $14.44 in exchange for each Cameron share.  Based on the closing stock prices of both companies on August 25, 2015, the agreement places a value of $66.36 per Cameron share, representing a 37.0% premium to Cameron's 20-day volume weighted average price of $48.45 per share, and a 56.3% premium to Cameron's most recent closing stock price of $42.47 per share.  Upon closing, Cameron shareholders will own approximately 10% of Schlumberger's outstanding shares of common stock.

Schlumberger expects to realize pretax synergies of approximately $300 million and $600 million in the first and second year, respectively. Initially, the synergies are primarily related to reducing operating costs, streamlining supply chains, and improving manufacturing processes, with a growing component of revenue synergies in the second year and beyond.  Schlumberger also expects the combination to be accretive to earnings per share by the end of the first year after closing.

The transaction combines two complementary technology portfolios into a "pore-to-pipeline" products and services offering to the global oil and gas industry. On a pro forma basis, the combined company had 2014 revenues of $59 billion.

The transaction is subject to Cameron shareholders' approval, regulatory approvals and other customary closing conditions. It is anticipated that the closing of the transaction will occur in the first quarter of 2016.

Tim Shea, ARC Advisory Group, commented, "ARC has opined in the past that with oil prices now again at lower levels, oilfield services companies that deliver innovative technology and greater integration while improving efficiency will outperform the market.  ARC also believes that, low oil prices notwithstanding, subsea projects will comprise an ever growing share of hydrocarbon production in the future.

"The merger makes sense given the existing OneSubsea joint venture between the two companies and that the new entity will enable integration of Schlumberger's reservoir and well technologies with Cameron's leadership in surface, drilling, processing and flow control technologies.  Deep reservoir knowledge further enabled by instrumentation, software and automation, will launch a new era of complete drilling and production system performance.

"ARC believes that if oil prices continue to trade in the $40's and $50's per barrel for the remainder of 2015, this will not be the last oil & gas merger that will be announced.  There is a Chinese proverb (or was it a curse?) that says something to the affect, 'may you live in interesting times'.  Well, in light of recent stock market gyrations and other geopolitical events, these are certainly interesting times indeed."

Keywords: Manufacturing Processes, Oil & Gas, Oil Prices, Drilling, Flow Technologies, ARC Advisory Group.