In an attempt to focus on its core business of providing services for rigs, Schlumberger Limited (SLB) is selling its rig management business to Calgary-based Saxon Energy Services that it partly owns.
Per the deal, Saxon has purchased the Schlumberger Rig Management Group comprising units in Oman, Pakistan and Venezuela. Saxon would absorb 14 land drilling rigs as well as their crew as it expands into the Middle East.
The agreement is expected to strengthen the ties of the two companies in well construction and other rig services, at the same time helping Schlumberger come out of a non-core business. With the closure of this transaction, Saxon will add nearly 1100 people to its workforce and expand its rig fleet to 95.
As the world’s largest oilfield services company, Schlumberger had bought Saxon along with a private equity firm First Reserve in 2008 with the aim of increasing the parents’ presence in Latin America. Currently, Schlumberger and First Reserve each have a 49.5% interest respectively, while management holds the remaining 1% in Saxon.
The Saxon-Schlumberger partnership dates back to the time when they were already partners in Mexico and Colombia prior to the $560 million takeover in 2008. Saxon also has drilling and workover rigs operating in Canada, the United States, Venezuela, Peru and Ecuador.
Moreover, Saxon will continue to provide technical drilling contracting support to existing Schlumberger joint ventures and operations in Saudi Arabia, Algeria, Iraq and Venezuela (Lake Maracaibo).
Schlumberger has been shedding its offshore drilling rigs over the past decade. In 1999, Schlumberger sold 44 rigs of Sedco Forex (offshore subsidiary of Schlumberger) to Transocean Ltd. (RIG) followed by a couple more to Noble Corporation (NE) four years later.
Schlumberger has a Zacks #4 Rank, which is equivalent to a Sell rating for a period of one to three months. For the long term, we maintain a Neutral rating on the company.
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