A Rare Win-Win Scenario For Weatherford And Schlumberger

Courtesy of Benzinga.

Weatherford International Plc (NYSE: WFT) is forming the OneStim joint venture with Schlumberger Limited. (NYSE: SLB), which would focus on the unconventional completions market in North America. “We view the transaction as a rare win-win situation,” Deutsche Bank’s Mike Urban said in a report.

Weatherford would bring in the much-needed cash for deleveraging, “while retaining exposure to the accelerating cyclical recovery in NAM,” Schlumberger would gain scale in a critical growth market without having to add capacity, Urban pointed out.

JV Deal Is A Positive

While reiterating a Buy rating and price target of $8 for Weatherford, the analyst mentioned that the deal represented a “significant positive” for the company. He added that the deal was a “modest positive” for Buy-rated Schlumberger.

According to the deal, Weatherford would receive $535 million. This may have been disappointing for some. Urban mentioned, however, that the joint venture seems to be “the best possible outcome for the company.” He explained that Weatherford has immediate liquidity needs and the deal would help the company “retain upside to a rapidly improving market from assets that are currently sitting idle and, if sold entirely, would offer no ongoing benefit.”

The analyst further highlighted that Schlumberger had bought out most of its major joint ventures.

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