Schlumberger (SLB), the US-based oil service giant, has entered into a deal to acquire Cameron International (CAM) for $14.8 billion. The acquisition of Cameron, which manufactures oil rig equipment, is a significant opportunity for SLB in the medium term. Oil companies in both the US and the UK are expected to pursue similar consolidation.
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With the fall in oil prices continuing for quite a while now, most large oil companies have implemented massive cuts in their spending and costs. Markets expect the oil sector to stabilize in the next 12 to 18 months, if not sooner. The UK-based WEIR Group (WEIR), which is engaged in industrial machinery, can gain from the SLB-CAM mega-deal, since the oil and gas services sector is closely related to the industrial machinery sector.
Petrofac (PFC) returned 3.52% on August 26. The PFC’s interim reports released this week confirmed profits as forecasted for 2015, and the “hold” rating resulted in a rise in its share price. Such small companies like Petrofac with a market capitalization $3.02 billion become attractive takeover targets for giant companies like BP (BP) in the current environment. Aggreko rated the company as “buy” on August 26. The graph above shows the stock movement of PFC since July 2015.
The stocks at the bottom of the iShares MSCI United Kingdom ETF (EWU) were Fresnillo (FRES), followed by Standard Chartered (STAN), and Randgold Resources (RRS). Their respective yields on August 26 were -7.04%, -5.06%, and -4.60%. RBC Capital downgraded Fresnillo’s rating to “sector performer.” Deutsche Bank and JP Morgan rated STAN as “sell” and “overweight,” respectively. The revised rating caused a fall in the share price of STAN.
In the next article, we’ll look at how the Chinese market turmoil is affecting the UK.