Oilfield services giant
) and flow equipment and services specialists
Cameron International Corporation
) have announced the formation of OneSubsea - a joint venture
(JV) between the subsea units of both the companies to capitalize
on the growing demand for deepwater drilling.
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The main purpose of the JV is to integrate the advanced reservoir
knowledge as well as wellbore expertise with industry leading
subsea capabilities to provide superior yield, efficiency and
stability throughout the life of the field. It will also be
responsible for producing and upgrading products, systems and
services for the oil and gas market.
The rise in oil prices in the recent times has encouraged oil
majors to increase spending on exploration activities and enter
newer territories like the Arctic and West Africa. These attempts
entail new methods to access oil. Schlumberger believes that
around 200 such fields will be commissioned worldwide over the
next four years. The operational subsea well count is likely to
reach 11,000 by 2020.
Production equipments used for subsea operations are placed on
the sea floor and developed such that it can endure strong ocean
currents and harsh temperatures. Thus, the JV intends to increase
recovery from these reservoirs through development of advance
Per the terms of the agreement, Cameron will contribute its
existing subsea division in return for $600 million from
Schlumberger. On the other hand, Schlumberger will contribute
Framo, Surveillance, Flow Assurance and Power and Controls
Schlumberger and Cameron have a respective 60% and 40% stake in
the joint venture. Cameron, the operator of the venture, will be
accountable for financial reporting purposes.
Schlumberger's interest in the JV will be recorded by Cameron in
its financial statements as minority interest.
OneSubsea is expected to concentrate on research and engineering
investment along with merging ongoing complementary projects at
both parent companies. The joint venture created is
advantageously positioned to offer comprehensive subsea
production systems as well as assist their clients to improve
yield and recovery from their subsea developments.
The transaction is subject to regulatory consent as well as other
customary closing conditions.
Both Schlumberger and Cameron carry Zacks #3 Ranks (short-term
Hold rating). Longer term, we maintain our Neutral recommendation
on both the companies.