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 alison.sider@dowjones.com
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