Liberty Oilfield Services: A Brilliant Play For Schlumberger's Assets

Sep. 03, 2020 8:22 AM ETLiberty Energy Inc. (LBRT), SLB17 Comments


  • The management team at Liberty Oilfield Services announced the acquisition of significant assets from Schlumberger.
  • This move looks brilliant at first glance and should be attractive in the long run.
  • Investors should applaud this decision, while Schlumberger looks to be getting the weak end of the deal.
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The management team at Liberty Oilfield Services (NYSE:LBRT) just struck a big deal with Schlumberger (NYSE:SLB) that should permit it to add significant value to its shareholders moving forward. This maneuver involves a merger of sorts that results in Schlumberger owning a sizable minority of what should be considered the new Liberty Oilfield Services. Due to the pressure facing the fracking industry, investors should consider that the future may not look as bright as the past has been, but the data provided makes the deal appealing no matter how you stack it. At the end of the day, it looks like Liberty will walk away with the lion's share of value. This should prove incredibly bullish for the business, even after taking into consideration the fact that units of the firm surged 35.7% in response to the development.

A look at the transaction

The transaction between Liberty and Schlumberger is fairly straightforward. Schlumberger is creating a new entity, transferring its OneStim assets into that entity, and transferring ownership of said entity to Liberty. In exchange Liberty is issuing to Schlumberger 66.3 million of its Class A shares. This works out to a 37% interest in Liberty that Schlumberger will end up having. Immediately upon completion of the transaction, which management believes will occur in the fourth quarter this year, Liberty believes that it can achieve around $125 million worth of synergies. This is quite odd since synergies generally take months, if not years, to achieve, but management said the rapidity of these synergies will be chalked up to the absence of corporate overhead expenses that the assets currently involve that won't be coming over with them from Schlumberger. Other incremental synergies that management predicted would be "significant" can be realized in the future as well.

*Taken from Liberty Oilfield Services

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This article was written by

Daniel Jones profile picture
Robust cash flow analyses of oil and gas companies

Daniel is an avid and active professional investor. He runs Crude Value Insights, a value-oriented newsletter aimed at analyzing the cash flows and assessing the value of companies in the oil and gas space. His primary focus is on finding businesses that are trading at a significant discount to their intrinsic value by employing a combination of Benjamin Graham's investment philosophy and a contrarian approach to the market and the securities therein.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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