Cameron International Corp. and Schlumberger Ltd. 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 is a way for the bigger oilfield services companies to have a bite of the subsea apple.

Raymond James analysts wrote in a note the deal 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,” the analysts wrote.

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 just as 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.”

Dahlman Rose analysts praised Schlumberger’s “unparalleled understanding of the reservoir” in a note, saying the combination should lead to substantially better drilling results.

Credit Suisse bankers worked for Cameron on the deal while Cravath, Swaine & Moore LLP were the lawyers. For Schlumberger, Goldman Sachs worked as financial adviser and Baker Botts LLP was the legal adviser.

Shares of Cameron rose 3.2% to $52.41 following the announcement while shares of Schlumberger rose 1.1 % to $68.55.

(c) 2012 Dow Jones & Company, Inc.

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