Schlumberger Mulls Sale of Oilfield Tools Rental Unit

Schlumberger Ltd, the world's largest oilfield services company, is exploring the sale of its oilfield tools rental unit Thomas Tools, which could be valued at more than $600 million, according to people familiar with the matter.

An auction is already underway for Thomas Tools, which has annual earnings before interest, tax, depreciation and amortization of around $80 million, the people said this week.

Private equity firms keen to buy the unloved divisions of big conglomerates are among those that have shown interest in Thomas Tools, the people said. Boutique investment firm PPHB is advising Schlumberger (SLB) on the sale process, one of the people added.

The sources asked not to be identified because the process is confidential. A Schlumberger representative did not respond to a request for comment while PPHB declined to comment.

New Iberia, Louisiana-based Thomas Tools is a provider of oilfield rental tools, such as drill pipes, to energy exploration companies.

Founded in 1961 as a downhole tool specialty company, Thomas Tools was taken over by Houston, Texas-based Schlumberger in 2010 as part of its $11 billion acquisition of Smith International Inc.

The market for companies that provide rental equipment to the oilfield industry has become increasingly competitive, with low barriers to entry for new participants offering less sophisticated products, and customers unwilling to tie themselves up in long-term contracts.

Reuters reported earlier this year that Light Tower Rentals, a privately held peer of Thomas Tools, was exploring a sale that could have valued it at around $700 million.

Light Tower Rentals subsequently pulled the sale process for the entire company after it failed to meet its valuation expectations and borrowed $330 million in July to refinance debt and pay a dividend to its owners, private equity firm Clairvest Group Inc and the company's management.

One month later, Light Tower Rentals announced it had sold 44.2 percent of the company's equity for $100 million to new investors that included investment firms StepStone and Constitution Capital Partners LLC.

(By Greg Roumeliotis, Reporting by Greg Roumeliotis in New York; Editing by Chizu Nomiyama)