Weatherford Selling Units to Lubrizol for $825 Million

Weatherford International, the Swiss oilfield equipment provider, intends to sell its drilling fluids and chemistry businesses to Berkshire Hathaway owned Lubrizol for $825 million in cash, plus the possibility of a potential earn out.

The sale, announced today, will give the company an additional influx of $750 million worth of cash plus depending on the company’s earnings, an additional $75 million potential once the deal closes. This deal is expected to go through before the end of the year.

Weatherford tells us that it will use the proceeds to help pay down debt. This is one of a string of moves that the company has taken in an effort to sell off their least successful businesses. The sale takes place as prices for oil have dropped below $70 for the first time in over four years.

The engineered chemistry business that is part of the company is important to the chemical cocktails used by the gas and oil industries and additives to help stimulate and drill wells. The business focused on drilling fluids will boost the oil company additives that they use during their drilling operations.

This deal will boost the cash of Weatherford from divested proceeds to $1.8 billion this year, and at the end of the year, it will likely mean that the company has $6.6 billion to $6.8 billion worth of debt. This is “substantial progress” toward the company goals to cut down the debt on its balance sheet, said the CEO of Weatherford, Bernard Duroc-Danner in a written statement.

Based out of Ohio, the buyer named Lubrizol Corp., will have a much larger footprint in the gas and oil industry once the deal is done.

“For us, it’s a decisive move into a large adjacent market space that, we believe, will value the combined technologies, fluid formulation capabilities and applications knowledge of our legacy and newly acquired businesses,” said the CEO of Lubrizol, James Hambrick, in a written statement.

The two businesses will most likely garner a combined $425 million in revenue during 2014, said an analyst at FBR Capital Markets, Thomas Curran, citing Spears & Associates.

“There is an expanding pack of general industrials/conglomerates – more numerous and diverse than most appreciate – that are executing or seriously considering acquisitions as a means of entering or expanding with certain oil field services niches,” wrote Curran in a note to his clients.

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