Schlumberger Limited (SLB) announced that it will acquire the remaining shares of Framo Engineering AS from Frank Mohn AS that gives a boost to its subsea footprint. The closing of the transaction is subject to regulatory approval and the company did not reveal any financial details.
Norway-based, privately-owned Framo Engineering is the leading supplier of multiphase subsea pump and meter. It is mainly engaged in developing, manufacturing as well as selling products and services relating to multiphase pumps and subsea pump-systems, multiphase metering systems, and swivels and marine systems.
The latest deal adds 47.25% to Schlumberger’s share in Frank Mohn to its initial holding of 52.75%. Framo’s focus on the development of new technology for oil and gas production from subsea wells, mainly in the promising deepwater market, entitles Schlumberger to make an important stride in the space of subsea technologies and solutions development. This will in turn enhance hydrocarbon recovery as well as reduce subsea costs.
Moreover, the U.S. oil service provider will be able to cater to its customers more efficiently by blending its subsea flow assurance and surveillance capabilities with Framo’s extensive subsea multiphase boosting and metering capabilities.
Houston, Texas-based Schlumberger is a leading oilfield services company, providing technology, project management and information services to the global oil and gas industry.
For 2011, the company holds a positive outlook based on increased activity, along with higher technology needs for exploration, deepwater operations and tight gas activity, particularly outside North America. We believe Schlumberger should benefit from its oil-driven international growth prospects and near-term North American performance.
However, the oilfield services sector’s biggest player continues to feel pressure from depressed natural gas prices, the expected curtailment in incremental drilling projects and intense competition in the market from peers like Halliburton Company (HAL) and Baker Hughes Inc. (BHI).
As such, we see the stock performing in line with the broader market and prefer to remain on the sidelines. Hence, we maintain our long-term Neutral stance on the stock.
