Baker Hughes, Schlumberger Merge Seismic Exploration Divisions

Baker Hughes' Western Geophysical division is to be combined with Schlumberger Ltd.'s Geco-Prakla to form a new joint venture seismic oil and gas exploration company, Western Geco. A memorandum of understanding to that effect was signed today (31 May 2000).

Andrew Gould, executive vice president of Schlumberger Oilfield Services, said the deal was a natural alignment of two seismic companies with complementary markets, technologies, and cultural values.

The venture will own the seismic acquisition assets, data processing assets, seismic libraries, and other assets of the two businesses, the companies said in a joint statement.

Schlumberger, the world's second-largest oil services company, will own 70% of the new company, Western Geco, while Baker Hughes, the third-largest oil services company in the world, will hold a 30% interest.

Schlumberger, which has dual headquarters in Paris and New York, will pay Houston-based Baker Hughes about US$500 million in cash, according to their agreement. Baker Hughes says it will use the money to reduce its debt and to trim its working capital by about $100 million.

Western GECO would have had pro forma 1999 revenue of about $1.5 billion, according to the companies. Gary Jones, president of Western Geophysical, will be president of the venture.

"This new venture combining Geco-Prakla and Western Geophysical is expected to permit the implementation of substantial cost savings, resulting in better results than would be possible for the companies operating separately," Gould said. "These cost savings would support the development and innovation necessary to help seismic maintain its role as a key contributor to the oil industry's process of lowering the cost of finding and producing oil and gas."

The deal is expected to close before year-end and is subject to a definitive agreement as well as regulatory and board approvals.

Edited by Dev George