Transmeridian Exploration, Inc (fka TMYEQ)

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Schlumberger, First Reserve to Buy Saxon Energy (Update4)

By Dan Lonkevich

May 5 (Bloomberg) -- Schlumberger Ltd., the world's biggest oilfield contractor, and First Reserve Corp., an energy industry buyout fund, agreed to acquire Canada's Saxon Energy Services Inc. for about C$592.1 million ($583 million) to expand in South America.

Saxon shareholders will get C$7 a share, Calgary-based Saxon said in a statement today. That's a 1.9 percent premium to Saxon's closing price May 2. Saxon, had 84.59 million shares outstanding as of April 30, according to Bloomberg data.

Schlumberger, based in Houston and Paris, is seeking a bigger stake in the growing Latin American market for oilfield- services companies as oil prices surge to records. Saxon has rigs in Venezuela, Colombia, Ecuador, Peru, Mexico, the U.S. and Canada.

The company ``doesn't have a big presence in South America, so it makes terrific sense to add to their footprint,'' said David Rewcastle, an analyst at Argus Research Inc. in New York, who rates Schlumberger shares ``buy'' and doesn't own any.

Schlumberger rose $1.99, or 2 percent, to $101.62 as of 11:06 a.m. in composite trading on the New York Stock Exchange. Saxon gained 10 cents, or 1.5 percent, to C$6.97 in trading on the Toronto Stock Exchange.

``The C$7 a share price is a bit skinny,'' said Irwin Michael, who helps manage $1.25 billion at ABC Funds in Toronto including about 6.25 million shares in Saxon. ``We think it's worth C$7.50 or more.''

Higher Potential

Saxon is worth more because of record oil prices, according to Michael.

``We have a lot of faith in (Chief Executive Officer) Dale (Tremblay),'' he said in an interview. ``The earnings have yet to come through but the potential is there.''

Saxon said on May 1 its first-quarter profit fell 36 percent to $5.1 million, or 6 cents a share, from $8 million, or 10 cents a share, a year earlier. Revenue climbed 31.5 percent to $72.2 million.

Crude oil futures traded in New York have risen 91 percent in the past year. They touched a record $119.93 a barrel on April 28.

Stephen Harris, a Schlumberger spokesman, declined to comment. A spokesman for First Reserve couldn't be reached.

Saxon was advised by Thomas Weisel Partners Canada Inc.

To contact the reporter on this story: Dan Lonkevich in New York at [e-mail].

http://www.bloomberg.com/apps/news?pid=20601082&sid=aWYa9dJqr9lQ&refer=canada