In previous articles for my Foolish friends, I've referred to oilfield services giant Schlumberger
The added poundage will likely come from a purchase of Smith International
As is the case with most of the larger services companies these days, much of the companies' business comes from overseas, where they frequently work with large state-owned oil companies that prefer service companies that are able to provide them with a full package of assistance. Indeed, a desire for a greater breadth of services was largely the reason that Baker Hughes
While the product and service overlap between Schlumberger and Smith is minimal, outside of directional drilling and well logging, most observers anticipate a thorough antitrust examination. In addition, it appears possible that Schlumberger could end up jettisoning Smith's Wilson distribution business, because it doesn't fit the structure of the rest of the combined company.
Schlumberger CEO Andrew Gould noted when the acquisition was formally announced, "Smith's drilling techniques, other products and expertise complement our own, while the geographical footprint of Schlumberger means we can extend our joint offerings worldwide".
This won't be the first time the two companies have joined forces. Smith owns 60% of M-I Swaco, the leading supplier of drilling fluids engineering systems. Swaco was responsible for essentially half of Smith's revenues last year. The other 40% of the venture is owned by Schlumberger.
So we'll await the closure of the biggest U.S. merger this year. In the meantime, I strongly suggest that Foolish investors with a taste for energy keep a close eye on Schlumberger.
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