All the talk in financial services may now be about becoming leaner and more focused, but those that serve the oil and gas industry are nonetheless pushing ahead with efforts to be the "Citigroup" of drilling.
A takeover of mid-tier oilfield services firm Smith International Inc by Schlumberger Ltd has left analysts wondering how much the sector's top companies need to own themselves to best serve their leading clients.
"A lot of people said Citigroup was doomed to fail from day one because the fact of the matter is they were just too big," said Doug Sheridan of EnergyPoint Research Inc, which tracks customer satisfaction with oilfield services companies.
"At some point, people see what you may gain from being able to look at a menu, you more than lose because it's just not a very well run company," he added, referring to Citi's moves into insurance and other services beyond banking. "There's no reason the oil sector should be any different."
Sheridan said his research showed bundled offerings sold by oilfield services players consistently led to lower overall satisfaction scores from their clients.
But many state-run oil companies in particular, preferring to leave the ins and outs of drilling to the experts, have increasingly been demanding full-service contracts from the top players, which also include Halliburton Co and Baker Hughes Inc.
"They don't want to deal with this," Bill Conroy, Houston-based oilfield services analyst for Pritchard Capital, said of the national oil companies.
"It becomes quite similar to building a house -- you hire a general contractor," added Conroy, who noted the move toward bundled services had been in the works for a long time.
Among the big three, Baker Hughes filled a gap in pressure pumping when it moved to buy BJ Services, a deal due to close this quarter, while Halliburton has been busy bedding down its acquisitions of the past few years.
One company vying for top-tier status is Weatherford Ltd, which having bid aggressively for a bundled services contract from Pemex for the Chicontepec field, has since seen that deal complicated by politics in Mexico.
"You have the additional factor of the government influence," Conroy said, noting that Pemex problems did not "render a particular contracting structure good or bad."
A PLAY ON SHALE PLAYS
In terms of consolidation, some eyes are on Weatherford as to what it will do after scaling back its U.S. presence even as drilling for natural gas in shale rock has taken off.
"I question whether they contemplated what has now evolved in North American shale," said Conroy, who does not own any shares in Weatherford, which Pritchard rates a "buy."
Shale gas is certainly on the mind of Schlumberger Chief Executive Andrew Gould. On top of getting full control of a drilling fluids joint venture in which Smith owned 60 percent, a Smith deal would give it access to world-beating drillbits.
Hot on the heels of oil giant Exxon Mobil Corp's deal for XTO Energy, Gould saw a lot of potential for shale in North America, and ultimately beyond.
Bill Herbert, an analyst at energy-focused investment bank Simmons & Co, drew a line between Schlumberger's move and Exxon's bid, as well as last month's shale gas tie-up between Total and Chesapeake Energy.
Herbert said Schlumberger, given its size and reputation, did not really need Smith to crack a shale drilling market that is still in its early stages of development. "Apparently it does need the people, however," he added.