Schlumberger buys rest of WesternGeco

Acquisition of Baker Hughes’ 30 percent interest in $2.4 billion deal puts Schlumberger firmly at top of seismic industry

Ray Tyson

For Petroleum News

Schlumberger will be firmly at the head of the world’s largest seismic company based on Baker Hughes’ agreement to sell its 30 percent minority stake in WesternGeco to the oilfield services giant for $2.4 billion in cash. The deal was expected to close by the end of April.

Schlumberger already owned 70 percent of WesternGeco, the outcome of a blockbuster merger between two big seismic companies, Schlumberger’s Geco-Prakla and Baker Hughes’ Western Atlas. The joint venture was formed in 2000, an economic low point for the seismic industry.

Baker Hughes praised WesternGeco’s financial performance and management over the past several quarters, but Schlumberger’s offer evidently was just too good to turn down.

“The $2.4 billion sales price provides us with an excellent point to exit our minority ownership position,” Chad Deaton, Baker Hughes’ chairman and chief executive officer, said in an April 21 statement.

Baker Hughes, the world’s number three oilfield services company behind Schlumberger and Halliburton, said it expected to record a pre-tax gain on the sale of about $1.74 billion, or after-tax $1.05 billion, subject to closing adjustments.

Baker Hughes said it planned to use net cash proceeds from the sale of its interest in WesternGeco to repurchase up to $1.8 billion of company stock, which the board of directors authorized in light of the sale.

“We maintain our intention to return cash in excess of our needs to our stockholders through our stock repurchase program,” Deaton said.

WesternGeco provides worldwide reservoir imaging, monitoring and development services, with extensive seismic crews and data processing centers, as well as the world’s largest multi-client seismic library.

Like most of their peers who are benefiting from an exceptionally strong commodity price environment, Baker Hughes and Schlumberger each registered a huge increase in 2006 first-quarter revenues and profits.

Schlumberger’s profit for the 2006 first quarter rose to $722.5 million, or 59 cents per share, from $523.4 million, or 43 cents per share, a year earlier. Operating revenues rose to $4.24 billion from $3.16 billion.

Baker Hughes reported a profit of $319 million for this year’s first quarter, or 93 cents per share, on revenues of $2.1 billion. That compares to a 2005 first-quarter profit of $178.4 million, or 53 cents per share, on $1.6 billion in revenues.