Schlumberger Ltd. (NYSE: SLB) is teaming up with Rockwell Automation Inc. (NYSE: ROK) to form the first fully integrated digital oilfield automation solutions provider in a new joint venture (JV), the companies said in a joint Feb. 19 release.

The JV, named Sensia, comes as oilfield services giant Schlumberger looks for ways to unlock hidden value for its shareholders, according to analysts with Tudor, Pickering, Holt & Co. (TPH).

Under the terms of the JV agreement, Sensia will operate as an independent entity, with Rockwell Automation owning 53% and Schlumberger owning 47% of the JV. Rockwell Automation will also make a $250 million payment to Schlumberger at closing, which will be funded by cash on hand.

The TPH analysts pointed to a comparison between Rockwell and Schlumberger’s stock charts to explain the latter’s rationale behind the JV deal.

“The former [Rockwell] looks like a tech stock, while the latter [Schlumberger] looks like...well...an oilfield services stock, so Schlumberger putting some of its production-oriented software and its Cameron segment’s measurement biz inside Sensia for 47% ownership [and $250 million in cash] feels like no-brainer to us,” the TPH analysts wrote in a Feb. 20 research note.

However, the analysts also warned investors not to get too hung up on a valuation uplift for Schlumberger as TPH believes the businesses Schlumberger is contributing to the Sensia JV collectively comprise “no more than a low-single-digits percentage” of the company’s consolidated revenue.

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The Sensia JV will offer scalable, cloud and edge-enabled process automation, including information and process safety solutions to help drive efficiency gains through measurement and data-driven intelligent automation, according to the companies’ press release.

“Sensia will create a leading technology provider that will further drive optimization of E&P oilfield assets,” Paal Kibsgaard, chairman and CEO of Schlumberger, said in a statement.

Further, Rockwell CEO Blake Moret said the JV will be uniquely positioned to connect disparate assets and reduce manual processes with secure, scalable solutions that are integrated into one technology platform. Moret also noted that no single provider currently offers the end-to-end solutions and technology platform that address these challenges.

“As oil and gas producers strive to improve productivity, we will bring the value of the connected enterprise to life for them,” Moret said in a statement. “Sensia will provide complete lifecycle and process automation solutions from well to terminal, including industry-leading oilfield technology and expertise.”

The companies expect Sensia will generate annual revenue of $400 million. The JV will employ roughly 1,000 team members serving customers in more than 80 countries, with global headquarters in Houston.

The Sensia management team will be led by Allan Rentcome, who will serve as CEO. Rentcome is currently director of global technology for the systems and solutions business at Rockwell Automation.

The companies said in the release that they expect to close the Sensia JV transaction by this summer, subject to regulatory approvals and other customary conditions.

Rockwell is headquartered in Milwaukee and employs roughly 23,000 people in more than 80 countries. Schlumberger operates in more than 85 countries and employs about 100,000 people. The company has principal offices in Paris, Houston, London and The Hague, and reported revenues of $32.82 billion in 2018.

Emily Patsy can be reached at epatsy@hartenergy.com.

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