DealZone

Schlumberger’s stock is down, while shares of Smith are up 8 percent. Is Schlumberger’s $11.34 billion all-stock deal for Smith International a bet on gas, a sign of more consolidation to come, overpriced, or a shrewd move?

Here’s what is being said on the Web:

Schlumberger sees gas drill growth in Smith deal (Reuters)
“No doubt, in the long-term, shale gas is going to be one of the big new energy sources in the U.S. and overseas,” Schlumberger Chief Executive Officer Andrew Gould said, “and the capacity to serve that market in North America is of great interest to me.”

Behind Schlumberger’s Smith Deal: A Big Gas Bet (NYT)
“Schlumberger’s $11 billion takeover of smaller rival Smith Industries seems to be a big bet on unconventional natural gas production in the United States,” reports The New York Times.

Drilling Complexity Drives $11B Schlumberger-Smith Deal (WSJ)
“The acquisition underscores the growing difficulty of tapping hard-to-reach oil and natural gas deposits — both in offshore, deepwater developments and in service-intensive shale-rock formations, where well costs are high. It also signals how competition among oilfield service providers for more intricate projects is heating up.” – WSJ

Did Schlumberger Overpay for Smith International? (WSJ)
“Citigroup: “We expect a loud chorus of analysts to claim that Schlumberger is overpaying for Smith. In our view, they are wrong.” – WSJ

If the bottom of the cycle has arrived for the oil and gas services business, then Baker Hughes‘ $5.5 billion stock-and-cash deal to buy smaller rival BJ Services may well be the beginning of a broad consolidation in the industry. 

The premium is hardly as juicy as one might expect at 16 percent, given the deal seems such a perfect fit. BJ has a network of faster-growing international operations, while Baker is mostly focused on the big U.S. market. Plus, BJ has attractive high-pressure pumping technology.

But a look at the state of the market shows the urge to merge will probably keep pressure on premiums. Natgas futures are at seven-year lows on soaring inventories and sinking demand, weather forecasters see a mild winter ahead, and economic green shoots are still only at the sprout stage. Just this morning, OPEC voiced concern about rising oil stocks, hinting ominously that it may have to do something about that.