Page 7 - Euroil Week 46 2019

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Saipem, Subsea 7 eye merger
ITALY
The merger could create the world’s fourth-largest oilfield services company.
ITALIAN subsea engineering group Saipem is reportedly considering a merger with its UK rival Subsea 7, a move that would mark one of the European oil service industry’s biggest-ever deals.
Saipem sees the merger as a means of weath- ering an industry downturn, Bloomberg cited sources as saying on November 14. Saipem, whose main shareholder is Italian oil giant Eni, has a market value of $4.9bn, according to the news agency, while Subsea 7 is worth $3.3bn. This is not the first time the pair have discussed a merger and no final decisions have been made, the sources said.
Oilfield service providers have been strug- gling since the collapse in crude oil prices five years ago, as their customers have slashed costs to stay in the black. The market recovered some- what in 2018, with prices peaking at above $80 per barrel in October of that year, in part thanks to efforts by OPEC and other major oil produc- ers to rebalance supply with demand. But prices have since slumped again, falling 28% over the past year.
Companies in the services sector have been looking to join together in order to cut costs, diversify and become more competitive. Subsea 7 launched a failed bid last year to buy struggling US player McDermott International, now on the brink of bankruptcy, for $2bn. Since then it has
made several smaller acquisitions, including the purchase of Norwegian tech provider 4Subsea in October.
Other companies have followed a similar strategy, with General Electric merging its oil- field services with Baker Hughes in 2017, and Wood Group snapping up fellow UK player Amec Foster Wheeler for almost $3bn in stock that same year.
Both Saipem and Subsea 7 both have strong standing in the subsea umbilicals, risers and flowlines (SURF) segment, according to Rystad Energy’s head of oilfield service research, Audun Martinsen.
“A deal would create a truly global oilfield service giant with over $12.4bn in revenue. The combined entity would have the world’s largest fleet of subsea installation vessels and be the largest provider of SURF services, with a market share of close to 40%,” Martinsen said in a research note. “In addition, Saipem has a diverse portfolio including large-di- ameter pipeline installation vessels, offshore drilling rigs, one of the world’s biggest crane vessels and numerous offshore fabrication yards.”
The new company would be the fourth-larg- est oilfield services provider in the world, after Schlumberger, Haliburton and Baker Huges, according to Rystad. ™
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