Schlumberger to pay $1.7 billion for stake in Russia's biggest drilling company
As Bloomberg reports, Schlumberger Ltd (SLB), the world’s largest
oilfield services company, will pay $1.7 billion for a stake in
Russia’s biggest driller, Eurasia Drilling Co. (EDCL). With this move, Schlumberger is
putting aside concerns about economic sanctions and the state of
the country’s economy.
According to today's statement, Schlumberger, based in Houston and Paris, will pay $22 a
share for a 46.45 percent holding in London-traded Eurasia
Drilling. The agreement allows Schlumberger to buy the rest of Eurasia Drilling’s
shares three years after the deal closes.
The transaction foresees Eurasia Drilling’s principal shareholders taking the company private and de-listing it. The deal is expected to close in the first quarter, Schlumberger said in the statement. Eurasia principal shareholders will offer $22 a share to other holders in order to de-list, an 81 percent premium to yesterday’s closing price, Eurasia Drilling said in an e-mailed statement today.
With this deal, Schlumberger is dropping concerns about economic sanctions and the state of the country’s economy. The agreement comes as the drop in the oil price is spurring consolidation in the oil services industry as demand drops and customers drive down costs.
Eurasia shares rose as much as 72 percent to $20.90 a share in London trading today.
“Its a great deal for minorities looking at the stock’s current price,” Alexei Kokin, an oil and gas analyst at UralSib Financial Corp., said by telephone in a conversation with Bloomberg. “If you wind back the clock and look at where the stock used to trade, it may be not so great.”
About one year ago, shares closed at a record high of $45.79. This was before the Ukraine crisis started and oil moved into a bear market. Kokin said that management may be selling because they think oil won’t get back to $100.
Alexander Djaparidze, Eurasia Drilling founder, has done deals with Schlumberger previously. In 2003, he sold Russian oil field services company PetroAlliance to Schlumberger. Djaparidze, the following year, bought drilling assets from Russia’s second-largest oil producer OAO Lukoil and founded Eurasia Drilling. Lukoil remains Eurasia’s largest customer. Outside of Russia the company provides drilling services in the Caspian Sea and in Iraq.
Russia plans to maintain oil production this year at last year’s levels even with oil prices as low as $50 a barrel, Russian Deputy Prime Minister Arkady Dvorkovich said yesterday.
