Schlumberger Ltd. on Wednesday signed a memorandum of understanding with Baker Hughes Inc. to form a joint venture of the two companies' seismic units, to be called Western GECO.
Schlumberger and Baker Hughes said they would combine the seismic fleets, data processing assets, surveys, and other assets of Schlumberger's Geco-Prakla and Baker Hughes's Western Geophysical unit to form the venture. Terms of the agreement also call for Schlumberger to pay Baker Hughes $500 million in cash.
Substantial cost savings should be realized through the venture, said Andrew Gould, executive vice-president of Schlumberger Oilfield Services. "This is a natural alignment of two quality seismic companies with complementary markets, technologies, and cultural values," Gould added. These cost savings will support the development and innovation needed "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 Western GECO venture is expected to result in improved efficiencies in data processing and land and marine data acquisition that can benefit our customers,'' Baker Hughes Chairman, CEO, and Pres. Joe B. Foster said. "The new venture would have strong R&D funding, an excellent workforce, and superior seismic acquisition and data processing technology. It would reflect a combination of Western Geophysical's strengths in execution of acquisition surveys�particularly on land�and data processing, and Geco-Prakla's marine acquisition capabilities, R&D, engineering, and manufacturing strengths. In addition, upon completion of the venture, our customers would have access to an expanded, world-class, multiclient seismic data library."
The Western GECO seismic venture would have pro forma 1999 revenues of about $1.5 billion. Schlumberger would hold a 70% interest in the venture, while Baker Hughes would own the remaining 30%. Gary Jones, current president of Western Geophysical, would head up the venture.
Creation of the venture should be finalized by the end of this year, subject to completion of a definitive agreement and regulatory and board approvals.
