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Has the Cameron Acquisition Changed Schlumberger’s Outlook?

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How much did Cameron Group contribute in 2Q16?

Schlumberger’s (SLB) acquisition of Cameron International has added to its product and service portfolio. The Cameron Group contributed revenue of $1.5 billion to SLB in 2Q16. Compared to 1Q16, this was a 6% revenue fall.

Following its acquisition on April 1, 2016, the newly added segment saw a 1.3% improvement in its operating margin compared to one quarter earlier. To know more about the acquisition, read Wedding Season in Energy OFS: SLB’s Proposed Acquisition of CAM.

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Finding trends in Cameron’s performance

  • Revenue fall: Falling project backlog and the further slowdown in US land
  • Margin improvement: Strong project execution, offset in part by the effects of the activity slowdown in US land

Will Cameron’s backlog affect Schlumberger?

Schlumberger’s Cameron Group is being negatively affected by the falling book-to-bill ratio. In 2Q16, its backlog fell to $3.7 billion, or 11% lower than in 1Q16. This translated to a book-to-bill ratio of 0.68x. Falling backlog could reduce SLB’s revenue in the coming quarter.

Schlumberger makes up 0.58% of the iShares S&P 500 ETF (IVV). For investors looking for exposure to the energy sector, energy makes up 1.9% of IVV. Helmerich & Payne’s (HP) revenue as a percentage of backlog was 18.3% in 2Q16.

Business scopes after SLB’s integration with Cameron

  • Cameron’s Valves & Measurement and Processing could benefit from SLB’s vast geographical reach.
  • Schlumberger’s subsurface capabilities will integrate with Cameron’s surface pressure control and processing capabilities.
  • As part of the integration, SLB has started over 30 new technology development programs.
  • According to management’s estimates, SLB is on track to achieve $300 million worth of synergies from the Cameron acquisition in year one and $600 million in year two.

In the next article, we’ll discuss Schlumberger’s performance in different geographies.

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