Schlumberger Limited. (NYSE:SLB)’s Deal With Eurasia Questioned


Issues have emerged in Russia that could delay or prevent Schlumberger Limited. (NYSE:SLB) from closing a deal with Eurasia. Earlier this year, Schlumberger made a $1.7 billion offer to take a stake in Eurasia, also expressing willingness to acquire the rest of the company. Eurasia is Russia’s largest oil-services company. However, as it turns out, Russia’s Federal Security Service, also known as FSB, is expressing some reservations over the deal.

Chances are that the Schlumberger’s deal with Eurasia may delay to close or even fail to happen at all as politics creep into the transaction. In January, Schlumberger expressed interest in taking a 46% stake in Russia’s Eurasia at the cost of $1.7 billion. Moreover, Schlumberger also said it could acquire the rest of the stake in Eurasia to take over the whole company.

Concerning of Western influence

The deal to acquire a stake in Eurasia and later come back for more may be sweet for some, but not FSB. According to people familiar with the debate around the transaction, the issue of concern is the amount of influence that Schlumberger Limited. (NYSE:SLB) might end up having in Russia’s oil-services sector. The FSB is clearly worried that if Schlumberger does acquire the stake that it wants (46%) and later acquire the rest of Eurasia, the company might end up having too much influence in the oil-services market in Russia.

Schlumberger is based in both Houston, Texas, U.S. and Paris, France.

Politics in the deal

At a recent conference call, Eurasia’s VP, Tom O’Gallagher, said that the issues around their deal with Schlumberger are much more political than they are practical.

Russia is currently at odds with the U.S. and the European Union over its military activities in Ukraine. The country has been slapped with several economic sanctions, including a ban on the export of certain drilling technology.

Given the existing tension between Russia and the U.S/EU, FSB seems to fear that acquisition of Eurasia might expose Russia to more economic problems.

For the deal between Schlumberger Limited. (NYSE:SLB) and Eurasia to go through, the approval of Russia’s commission on foreign investment will be required. FSB has representation in the commission.

Neha Gupta

Neha Gupta has been in the financial space for over six years now. Gupta earned her MBA degree from Symbiosis Centre of Distance Learning in 2009 and her passion for finance led her to pursue Chartered Financial Analyst (CFA) course. She has successfully completed Level II of her CFA. She is a veteran in article writing, which is depicted in her numerous pieces published on SeekingAlpha, Nextiphonenews, InsiderMonkey, MarketWatch, and Techinsider. Her crisp and eloquent writing finds its best place in Researchcows, where emphasis is given on developing rich content for various websites, products, business plans, trainings, and book writing.

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