American “Schlumberger” reached agreement to buy controlling stake in Russian “Eurasia Drilling”

Eurasia Drilling
Eurasia Drilling

American oilfield services concern Schlumberger reached an agreement to buy controlling stake in one of the largest drilling companies in Russia — Eurasia Drilling. In 2015, the company had already negotiated the deal, but the deal failed at the time.

Shareholders of Eurasia Drilling on 20 July agreed to sell 51 percent stake in the company. The buyer will be the American oilfield services company Schlumberger, as per statement on the website of Eurasia Drilling. Eurasia Drilling CEO Alexander Dzhaparidze said that companies have a decade of experience in their business relations, and in 2011, Schlumberger and Eurasia Drilling have signed an agreement on strategic partnership.

The report notes that the transaction should be approved Federal Antimonopoly Service. The FAS representative told that the service has not yet received the petition from the buyer.

Eurasia Drilling is one of the largest drilling companies in Russia, in 2016 its share in this market was 16%. The main client of the company is LUKOIL, other big customers — “Gazprom Neft” and “Rosneft”. According to the latest public data (2014), the company is controlled by its CEO Alexander Dzhaparidze.

Two years ago an American company tried to purchase the Eurasia Drilling. The parties agreed on the terms of the transaction in January 2015: Schlumberger had to pay $1.7 billion for a 45.65% stake  in Eurasia Drilling and the option to buy the remaining shares after three years. However, the deal was submitted for consideration the governmental Commission on Foreign Investments, which delayed the decision for a few months. In the end, Schlumberger did not wait for approval from the Russian authorities and the deal never took place. In October 2015, Eurasia Drilling announced the delisting from the London stock exchange, buying shares from minority shareholders for $11.75 per share. In the framework of the transaction with Schlumberger, it was planned that the shares of the minority shareholders will be redeemed for $22. Part of minority shareholders, including UCP of Ilya Sherbovich and East Capital fund, did not agree with the redemption price at the time of delisting and appealed to the Court of the Cayman Islands (where Eurasia Drilling is registered). The Court’s decision is expected in Autumn 2017.

In early June, during the St. Petersburg International Economic Forum it was announced that Eurasia Drilling will receive direct investments from the Russian-Chinese Investment Fund (RCIF), the Russian Direct Investment Fund (RDIF) and also the leading funds from the Middle East. Details of the agreement between the parties was not disclosed. In March, Reuters reported that the State Fund Mudabala from UAE and RCIF are interested in buying 13-15% of the new shares in Eurasia Drilling. Negotiations on the deal continue, as per the company report from July, EDC is planning to conclude a final agreement with investors “in the near future.”

 

3 Comments

  1. The Minister of Natural Resources Sergey Donskoy demanded that the American Schlumberger provides warranties on work in projects at risk of new sanctions. Schlumberger deal to buy 51% in oilfield services company Eurasia Drilling Company (EDC) can be blocked “EDC is working on sites of strategic nature and that are of great significance to the State. It is necessary that it does not spread risks, which will affect the work in these areas”, — explained Mr. Donskoy.

  2. EDC entered into a settlement agreement with a group of disgruntled minority shareholders led by UCP Fund of Ilya Sherbovich. EDC has agreed to increase the price of purchase of shares from these minority shareholders, although, according to lawyer there are threats of lawsuits from other investors who agreed to sell their securities at the previous price which was obviously lower. And the continuation of the dispute could further complicate a new attempt by Schlumberger to buy control in EDC.

  3. According to FAS – Schlumberger settled legal nuances regarding the rapid transfer of control to EDC Russian management in the event of toughening sanctions against Russia. These nuances have been the subject of negotiations in recent months.

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