BP’s calamity in the Gulf of Mexico so dominates the oil industry outlook that other developments can be obscured. An Anglo-Norwegian merger in the oilfield services sector is one. Acergy and Subsea 7 are combining to create a $5.4bn company that will be the largest in its particular field – undersea engineering. Though not related to BP’s woes, this merger could be a harbinger of a strategic shift in oilfield services, where the need is for bigger operators to work in ever more difficult conditions. With the immediate outlook for deepwater drilling uncertain, and the industry bracing for the inevitable fallout from the Gulf incident, now seems like a good time to get together.
Acergy and Subsea 7 have tried to combine before, most recently in 2008. Personnel issues may have delayed the combination until this week. Kristian Siem, founder and chairman of Subsea 7, owns 33 per cent and will have a roughly 20 per cent stake in the merged group, which he will also chair. That allows Jean Cahuzac, chief executive of Acergy – operationally the stronger of the two partners – to take the CEO’s role at the merged group. Acergy shareholders will have 54 per cent of the bigger company, which will be known as Subsea 7.
Management is promising cost and revenue synergies of $100m annually from 2012. But will those synergies materialise? The oilfield services sector is highly concentrated. In the subsea engineering division there are only two other big operators – Technip and Saipem. The merged Acergy and Subsea 7 will have an order backlog of $5.3bn. Acergy is strong in west Africa, Subsea 7 in Brazil, important exploration locations. Achieving the promised synergies will depend on how well the new company can manage its combined fleet. The combination will make it a more formidable competitor, but it will do little to immediately improve the earnings or operating visibility of the sector.
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