Energy job cuts are ahead for Houston [Schlumberger-Smith International Merger]

Houston Chronicle ^ | 2-22-2010 | MONICA HATCHER

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Is energy merger the first domino?

Deal between Schlumberger and drill bits maker may be a catalyst for diversification among companies here

Schlumberger, the world’s largest oil field services company, announced an $11 billion merger Sunday with Houston-based drill bits maker Smith International, in a mammoth deal for the sector that could touch off a new round of mergers with the potential to reshape Houston’s corporate landscape.

With the all-stock merger, Smith International, which employed more than 3,700 people in Houston around this time last year, will be subsumed into the giant international conglomerate because of its expertise in drill bits.

“Smith’s drilling technologies, other products and expertise complement our own, while the geographical footprint of Schlumberger means we can extend our joint offerings worldwide,” Schlumberger CEO Andrew Gould said in a statement. Sclumberger’s principal offices are in Paris, Houston and The Hague.

Neither company commented directly in a conference call this morning about the number of potential job cuts. But Schlumberger Chief Financial Officer Simon Ayat said cost savings of up to $160 million next year and $320 million in 2012 would be found in the corporate structure of the two firms.

“We have a lot of overlap,” Ayat said. “We operate in many areas where we have our own structures and facilities and Smith has the same thing [in terms of] support functions.” ...............

The Schlumberger-Smith merger comes on the heels of another major industry marriage announced between Houston-based firms Baker Hughes and BJ Services.

Several analysts said the Schlumberger-Smith consolidation could dial up pressure on other large energy service firms such as Halliburton and Weatherford International to beef up their portfolios with new acquisitions. That, in turn, could affect other Houston-based firms.

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Shake ups are coming for the Houston area with the loss of the Military vehicle production facility in Sealy. Halliburton has already announced a move of some 150 employees from Duncan OK to Houston. NASA will reduce its work force as the space industry contracts...