Houston-based Cameron International Corp. (NYSE: CAM) is a company known for their capability in developing equipment and tools for offshore drilling operations. On Monday, the firm announced a deal to sell their offshore jack-up rig business. The deal was finalized with a subsidiary of Singapore’s Keppel Offshore & Marine and estimated to be worth $100 million. The details of the sale centered around Cameron’s drilling portion of their overall business. The drilling segment primarily consisted of the sale and servicing of equipment used to seal wells completely shut.
These rigs are located around the world in areas where shallow water drilling take place. The CEO of Keppel, Chow Yew Yuen, stated that the timely acquisition of the Letourneau rigs was made for strategic purposes for the Singapore-based company. The acquisition of these rigs will allow Keppel to significantly broaden their capabilities in this highly competitive marketplace. The rigs themselves have legs that reach the floor of the ocean and only focus in water that goes down a few hundred feet. In addition to the acquisition of existing jack-ups rigs, Keppel will also acquire their designs, kits, components and systems currently being used by Cameron.
As the price of oil continues to slump, there is less of a demand for these types of rigs. The contractors that operate the rigs are eager to cut their budgets in any way possible and even cold-stack their rigs. The Keppel deal is proof that there are still energy companies that are willing to take on offshore projects because of future gains that are not apparent in the current market. Yuen said as much when he acknowledged that the deal was based on the company’s long-term business goals.
The added benefit of the deal will also give Keppel complete access to a variety of customers that will require help with the upkeep of Cameron’s 100 Letourneau rigs that operate around the world. This is beneficial since fleet owners are looking to extend the life of existing equipment due to the decline in oil prices. Owners are reluctant to start new rig projects due to the low oil prices. Yuen has realized the role his company can now play in the repairing and the upgrading of fleets that are currently in operation.
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Those who have been following news regarding Cameron International Corp. will remember that just last week Schlumberger Ltd. (NYSE: SLB) announced a bid to acquire Cameron for $14.8 billion. Several analysts have since commented on the deal saying that Schlumberger is planning the merge to take advantage of cheap subsea technology.
Many will remember that in 1955 Cameron was the first to launch a modern mobile offshore jack-up rig that was called the Scorpion. Since then the company has modified its designs to operate in deep water and more rigorous locations.