Schlumberger (NYSE:SLB) purchased a minority stake in China’s Anton Oilfield Services group. In a deal that could be valued around $82 million according to estimates based on Anton’s trading price, Schlumberger bought a 20.1% in the company.  The deal could indicate Schlumberger’s attempts to consolidate its presence in the Asia and Middle East geography. Schlumberger and Anton have cooperated in the past on drilling fluids and well cementing services. China is taking several steps to exploit its unconventional gas resources and purchasing a stake in Antonoil could help Schlumberger ride on a possible push into shale gas that is expected over the next few years.
We have a $93 price estimate for Schlumberger, which is at a 40% premium to its current market price.
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China’s growing demand for energy is pushing the country to exploit its local oil and gas reserves. Demand for natural gas is expected to soar over the next few years as the government looks to cut dependence on coal. China is looking to exploit its local unconventional reserves to meet some of this demand. (See: Schlumberger Could Pump Big Profits From China Shale) The country’s shale gas reserves are estimated to be higher than the total shale reserves in the U.S.
China has announced plans to ramp up shale production over the next few years and has already started production from test wells in Sichaun. Schlumberger’s purchase of a stake in Anton could help the company benefit from a major shale gas boom, if the industry is able to replicate its success in the U.S. Shale exploration has boosted the rig count in the U.S. and could result in higher growth in Asia and the Middle East over the future.
Schlumberger’s minority stake will not enable it to take part in the management of Antonoil.  Schlumberger purchased 423.4 million shares of about a 20.1% stake in the company in the deal. The two companies had already entered into a strategic cooperation agreement in 2010. The purchase will help Schlumberger benefit from a possible jump in exploration and production activity in Asia and the Middle East.Notes:
- Anton Oilfield Sells 20% Stake to Schlumberger for $82 Million, Bloomberg [↩] [↩]