Don’t expect Schlumberger and Cameron deal to be the last

The announcement that oilfield services giant Schlumberger is to buy Cameron International Corp. reminds me of those old Remington shaver adverts of the 1970s starring then president and CEO Victor Kiam.

He would end each advert by saying: “I liked the shaver so much, I bought the company!”

Schlumberger managed to get a good enough view of Cameron through their OneSubsea alliance to decide that they liked what they saw and, when the timing was right, announced they’d buy the company too.

The cash and stock deal is valued at almost US$15 billion and there’s hope that it will close in the first quarter of next year. That is if it can avoid some of the regulatory hurdles that Halliburton has had to endure in its proposed US$38 billion bid for Baker Hughes.

In a statement on the Schlumberger website, Paal Kibsgaard, chairman and chief executive officer says: “With oil prices now at lower levels, oilfield services companies that deliver innovative technology and greater integration while improving efficiency …will outperform the market.

“We will achieve significant efficiency gains through lowering operating costs, streamlining supply chains, and improving manufacturing processes.”

Mr Kibsgaard is echoing key messages of innovation, integration and improvements in efficiency which are being heard more and more often in an industry where the commodity price is skirting perilously close to the US$40 mark for Brent crude. We can’t do what we’ve always done any more. In the North Sea, where plain speaking is the recognised common language, the message becomes even more stark for many firms: adapt or go under.

So how many more of these mega deals can we expect to see in the current low price climate? Aside from the HalliBaker announcement, we’ve already witnessed Shell agreeing to buy gas group BG, and earlier this year there was much discussion about the future of BP as analysts searched out possible targets for Exxon.

With no sign of an upswing in commodity price any time soon, and fears of what a downturn in the Chinese economy coupled with a surge of Iranian oil into an already flooded market could mean, there is every chance that this is not the last of the big merger and aquisition deals we will see in the current cycle.

The oil and gas industry that emerges from these challenging times will look significantly different from the one that went into them. It will have to, but how great that transformation will be is still unknown.