Market Consolidation Due To The Low Oil Price

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What's going on?

Last week, it was announced that oil services giant Schlumberger is buying oilfield equipment maker Cameron for $15 billion. Its a good example of how peril in the oil sector, due to the huge drop in the price of oil, is leading to consolidation (which essentially means companies getting combined, in some way or another).

What does this mean?

By getting combined, companies save money by making things more efficient e.g. by only paying for one head office and often can combine their respective technologies to create a better product for clients. The other angle for an acquirer like Schlumberger is that they hope that if and when the oil market becomes strong again, that as a big company they will be well positioned to capitalize on it.

Why should I care?

  1. Its not yet clear which companies will survive in the new, lower price oil environment. By making this acquisition, Schlumberger might be positioning themselves well to weather this downturn and to, hopefully for them, benefit significantly in the future. Which would, of course, be a long term positive for Schlumbergers stock price.
Originally posted as part of the Finimize daily email.

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