Schlumberger Ltd. will pay $1.7 billion for a stake in Eurasia Drilling Co., a bet by the world’s largest oilfield services provider that economic sanctions won’t hold back Russia’s energy industry.

Schlumberger, based in Houston and Paris, will pay $22 a share for a 46.45% holding in London-traded Eurasia Drilling, according to a statement. Schlumberger has an option to buy the rest of the company’s shares in the company three years after the deal closes.

By buying into Russia’s largest driller, Schlumberger is putting aside concerns about economic sanctions and the state of the country’s economy. The deal comes as the slide in the crude price to less than $50 a barrel is spurring consolidation in the services industry as demand for rigs drops and oil producers lean on suppliers to drive down costs.

“Schlumberger believes that the sanctions will be lifted sooner or later, and the company will be well-equipped to reap benefits from growing Russian oil field services market by then,” Alexander Kornilov, an oil and gas analyst at Alfa Bank, said by e-mail.

Eurasia shares rose as much as 72% to $20.90 a share in London trading Jan. 20.

Though U.S. and EU sanctions have targeted Russia’s oil industry, where Schlumberger has had a significant presence since the 1990s, they don’t affect the vast majority of Eurasia’s business. The measures include a ban on export licenses for technology used in production of oil from shale, as well as from Arctic offshore and deepwater areas.

Limiting Access

The industry has also been hit by measures limiting access to international capital markets for Russia’s largest companies.

The transaction foresees Eurasia Drilling’s principal shareholders taking the company private and de-listing it. The deal is expected to close in the first quarter, Schlumberger said in the statement.

In order to de-list, Eurasia’s principal shareholders will offer $22 a share to other holders, an 81% premium to yesterday’s closing price, Eurasia Drilling said in an e-mailed statement Jan. 20.

“It’s a great deal for minorities looking at the stock’s current price,” Alexei Kokin, an oil and gas analyst at UralSib Financial Corp., said by telephone. “If you wind back the clock and look at where the stock used to trade, it may be not so great.”

Record High

Shares closed at a record high of $45.79 about one year ago before the Ukraine crisis started and oil moved into a bear market. Management may be selling because they think oil won’t get back to $100, Kokin said.

Brent crude’s 55% decline to $48.39/bbl over the past year has meant trouble for services companies as producers have cut spending on drilling. OAO Lukoil, Eurasia’s largest customer, is no exception. It plans to cut spending this year due to lower oil prices, CEO Vagit Alekperov said late last year.

The drop has also spurred deals in the oil services sector. Halliburton Co., the second-largest U.S. oil services company after Schlumberger, agreed to pay about $37 billion for Baker Hughes Inc. in November.

Eurasia’s is also dealing with a dispute with OAO Rosneft, Russia’s largest oil producer, headed by Igor Sechin, a long-time ally of President Vladimir Putin. That may have led to Eurasia shareholders and management to seek a strong outside partner such as Schlumberger, Kornilov said. Rosneft reduced the amount of rigs it employed from Eurasia last year after a dispute over pricing.

Strategic Alliance

Schlumberger and Eurasia Drilling currently work under a strategic alliance formed in 2011, according to the statement.

Eurasia Drilling founder billionaire Alexander Djaparidze has done deals with Schlumberger previously. In 2003, he sold Russian oil field services company PetroAlliance to Schlumberger. Djaparidze, the following year, bought drilling assets from Russia’s second-largest oil producer OAO Lukoil and founded Eurasia Drilling.

Russia plans to maintain oil production this year at last year’s levels even with oil prices as low as $50 a barrel, Russian Deputy Prime Minister Arkady Dvorkovich said yesterday.

Eurasia outside of Russia provides drilling services in the Caspian Sea and in Iraq.

Eurasia Drilling will hold an extraordinary shareholders meeting on Feb. 16 to vote on the proposed deal. If approved, shares could be removed from the London Stock Exchange on Feb. 23, according to the Eurasia Drilling statement.