Three oil and gas and LNG feed-gas services companies Schlumberger, Aker Solutions and Subsea 7 join up
The leading Western subsea oil and gas field services companies Schlumberger, Aker Solutions and Subsea 7 plan to join forces to form a separate joint venture to deliver a step change in subsea production economics as energy exploration and production is set to gather pace amid the supply crisis.
The three companies propose to help customers unlock reserves, reduce time to first oil and lower development costs while simultaneously delivering on their decarbonization objectives.
The proposed joint venture will comprise the subsea businesses of Schlumberger and Aker Solutions, with Subsea 7 purchasing 10 percent of the joint venture for $306.5 million.
“This combination brings together deep reservoir domain and engineering design expertise, an extensive field-proven subsea production and processing technology portfolio, world-class manufacturing scale and capabilities, and a comprehensive suite of life-of-field solutions to customers all over the world,” said a statement.
It added that the transaction was subject to regulatory approvals as well as other customary closing conditions and is expected to close during the second half of 2023.
Following completion of the transaction, Schlumberger will own 70 percent of the joint venture, with Aker and Subsea 7 owning 20 percent and 10 percent respectively.
Transaction details
The Board of Directors of the joint venture will consist of three representatives from Schlumberger, two from Aker and one from Subsea 7.
The new joint venture will form part of the Subsea Integration Alliance, currently an unincorporated alliance between Schlumberger and Subsea 7.
The alliance will be extended by 10 years from the transaction completion date.
“This joint venture will bring together world-class businesses that are uniquely positioned to provide subsea technologies to help our customers improve recovery and reduce overall subsea development costs,” said Olivier Le Peuch, Chief Executive of Schlumberger, whose main offices are in Paris and Houston.
“Customers will benefit from enhanced services that leverage digital and technology innovation to drive improved performance while increasing energy efficiency and reducing CO2 emissions,” added Le Peuch.
Schlumberger CEO Peuch had forecast in January 2022 that a super-cycle may be underway for natural gas and oil markets.
Kjetel Digre, CEO of Norway-based Aker Solutions, said that by combining strong and complimentary competence and technologies, this compelling combination will deliver an industry step-change that will benefit all involved and the customers.
Economics case
“The offshore market activity is increasing, and this joint venture will drive enhanced offerings both in terms of subsea production economic,” added Digre.
John Evans, CEO of Subsea 7, said he was excited to build on the highly successful alliance with Schlumberger and partnership with Aker Solutions.
“This new joint venture is a critical step as we collaborate on the integrated subsea projects that drive maximum value for our customers,” added Evans for Subsea 7, headquartered in London and domiciled in Luxembourg.
Other transaction details show that Aker will receive $306.5M from Schlumberger which will be settled in the form of shares in Schlumberger.
The shares will be settled based on the volume-weighted average trading price of Schlumberger shares in the 10 business days preceding the closing of the transaction and are subject to a lock-up period of a minimum of 180 days.
Subsea 7 will purchase a 10 percent interest in the joint venture from Aker Solutions for $306.5M, which will be settled in cash.
Of this, 50 percent will be settled upon closing of the transaction and the remainder will be settled, with interest, by June 30, 2024.
Aker will receive $87.5M in proceeds from a vendor note from the joint venture. Of this, at least 50 percent will be paid, with interest, one year after the transaction closes and the remainder within two years.
CEO of leading oil field services company says super-cycle may be underway for natural gas and oil
Schlumberger oil field services company Chief Executive Olivier Le Peuch said a super-cycle may be underway for natural gas and oil markets as the firm reported fourth-quarter revenue of $6.22 billion, an increase of 6 percent sequentially and 13 percent year-on-year.
The Houston, Texas-based company, listed on the New York Stock Exchange, said fourth-quarter cash flow from operations was $1.93Bln and full-year revenue was $22.9Bln.
The company reported net income of $587 million, an increase of 90 percent from the $309M reported in the same three months of 2020.
“The macro environment is increasingly supportive of a potential super-cycle with both onshore and offshore market growth well beyond 2022,” Le Peuch told analysts during a conference call on the earnings statement.
He stated that Schlumberger expected oil demand to exceed pre-pandemic levels by the end of 2022, with growth in 2023 and beyond.
“Some characteristics of the cycle have accelerated and some have been accentuated in the recent months,” added the CEO.
Energy intensity
He explained that the first sign is the outlook of economic GDP growth and that concerning the oil intensity and energy intensity that will drive the oil demand beyond the previous peak.
“So the first is the macro demand situation is set to be favorable for the next few years. Secondly, I think the supply demand imbalance and the supply, I would almost call it tardiness that we are facing, is pointing not only to an uplift on to the commodity price, but also is pointing to the return to investment across the broad portfolio of our customers,” said Le Peuch.
The CEO added that North America was still and would remain structurally smaller than in the previous cycle due to the capital discipline but also due to the crunch of supply, including on the services side.
“Secondly, I think the international underinvestment for the last few years, actually, the last down cycle, combined with the dip in the last two years is creating conditions for unnecessary injection of short-cycle capital and then long cycle capital investment to respond to the supply,” stated Le Peuch.
“So we are seeing growth in North America, we are seeing a rebound - a visible rebound in short and long cycle investments, internationally,” he explained.
Market share
“And I will insist on the long cycle because I believe that both oil capacity is being looked upon and by some OPEC member to secure future supply market share, but also the international and majors are investing into their advantaged offshore basins and we are seeing not only infill-drilling, but we are seeing FIDs for offshore that are accelerating going forward,” added Le Peuch.
“So it's a mix of offshore rebound, solid including deepwater, international short cycle and oil capacity in land. And finally, solid growth in North America. So these are unique conditions that are tightening the capacity and that are creating the underlying pricing improvement condition,” declared the CEO.
Le Peuch said Schlumberger was well placed to benefit from the coming surge.
“Strengthening activity, accelerating digital sales, and outstanding free cash flow performance combined to deliver another quarter of remarkable financial results to close the year with great momentum,” he added.
“These financial results conclude an exceptional year of financial performance for Schlumberger, at a pivotal time for the company and in our industry at large,” he said.
“We restored our North America pre-tax operating margin to double-digits and expanded our international margin, both exceeding pre-pandemic 2019 levels,” said Le Peuch.
