Saipem is considering a merger with rival Subsea 7, a move that could be one of the largest deals ever in the European oilfield service sector. Citing people with knowledge of the matter, Bloomberg reported that Saipem is seeking to bulk up and weather an industry downturn. Subsea 7 has a market value of around $3.3 billion.
No final decisions have been made, and there is no certainty that a transaction will take place, according to the report.
Rystad Energy said the deal would create a “truly global oilfield service giant” with more than $12.4 billion in revenue. The combined entity would have the world’s largest fleet of subsea installation vessels and would be the largest provider of SURF (subsea umbilicals, risers, and flowlines) services, with a market share of close to 40%. It would be the fourth-largest oilfield service company after Schlumberger, Halliburton, and Baker Hughes.
Audun Martinsen, head of oilfield service research at Rystad Energy, said that this proposed move is a direct response to recent developments on several fronts in the oilfield service sector.
“We are seeing clear signs of consolidation, diversification, and alliance formation in the sector. Oilfield service companies are looking to strengthen their market share in core markets and also develop new lines of business. Both Saipem and Subsea 7 have stated goals of decarbonization in order to become greener energy service companies,” he said.
Martinsen said that Subsea 7 could gain exposure to onshore engineering and construction, where Saipem has a “solid track record”, thus reducing its dependence on upstream oil and gas activities. Also, a potential merger could affect the ways in which oilfield service companies and exploration and production (E&P) companies structure subsea contracts.
“The integrated contracts offering has pushed more risk over to the suppliers during the downturn, and has been a success story for E&P companies thus far, but the tables may turn now that the subsea industry is facing a rising tide of new projects,” he said.