Schlumberger Completes Wilson International Deal; Reduces Footprint in Distribution

by Trefis Team
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Schlumberger Limited
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Oilfield services player Schlumberger (NYSE:SLB) announced that it had finalized a deal to sell its distributions business under Wilson International Inc. [1] National Oilwell Varco (NYSE:NOV), will be acquiring Wilson, which distributes industrial products such as pipes, valves and safety products. The exact terms of the deal were not disclosed, but analysts had earlier estimated that the sale of Wison and of the 56% stake held by Schlumberger in CE Franklin could raise the oil services provider around $800 million. (See: Schlumberger Looking to Sell Distribution Business) Schlumberger acquired Wilson as a part of its $11.3 take-over of oilfield services player Smith in 2010. Schlumberger competes with players like Halliburton (NYSE:HAL) and Baker Hughes (NYSE:BHI).

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Distributions business

Schlumberger forayed in to the distributions business when it acquired a 56% stake in CE Franklin and the operations of Wilson in 2010. The company reported the results from this line of business were reported separately from the its main operations of providing exploration and production services. The distributions business was mainly concentrated in the North American market, providing clients with industrial tools and logistics services. While the deal may impact the company’s overall revenues, the impact on Schlumberger’s leading position in the oilfield services industry is expected to be minimal. Schlumberger’s industrial services division provides clients in energy and industrial sectors with products such as pipes and valves. It also offers warehouse management, inventory management and vendor integration services to customers.

According to sources National Oilwell Varco will complete the purchase by paying out in cash. [2] This should boost Schlumberger’s cash position which is already very healthy. Although margins in the North American geo-segment are likely to suffer in Q1 2012 because of lower gas exploration and a shift towards oil based drilling, we expect the company to deliver robust results overall.

We have a $100 price estimate Schlumberger, which is at a 45% premium to its current stock price.

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Notes:
  1. Schlumberger Announces Agreement to Sell Wilson International Inc., Business Wire []
  2. Schlumberger sells Wilson unit to National Oilwell Varco, Reuters []
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