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From The Wall Street Journal

LONDON— Schlumberger Ltd. on Wednesday backed out of a $1.7 billion deal for a stake in Russia’s largest onshore drilling firm after Moscow didn’t approve the deal by a deadline imposed by the Western oil-services giant.

The collapse of the deal highlights the deteriorating relations between Russia and the West amid sanctions over Ukraine. It comes after Schlumberger warned last week that it wouldn’t extend the latest several deadlines for Russian antimonopoly officials to approve the offer.

“The proposed merger and related transaction with Schlumberger will not occur,” Eurasia Drilling Co. said in a news release.

Schlumberger didn’t respond to messages seeking comment. Last week, Schlumberger said it would instead focus on other merger-and-acquisition opportunities.

The transaction was proposed in January, accepted by EDC and originally expected to close by the end of March. Then it apparently got bogged down over concerns in Moscow that EDC’s activities could be affected by Western sanctions against Russia.

Russia’s Federal Antimonopoly Service, which was reviewing the deal, couldn’t be reached for comment on Wednesday evening.

Schlumberger’s bid would have given it a 45% stake in EDC, with an option to buy the rest of the company at a later date, an unusually large investment by a U.S.-listed company in Russia’s oil industry at a time of frosty relations between Moscow and the West. The deal would have helped strengthen the reach of the world’s largest oil services company in Russia and given it a base from which to grow in the region.

EDC operates the largest fleet of onshore drilling rigs in Russia and is vital to operations at the country’s oil fields, where companies are ramping up drilling to compensate for the recent decline in oil prices. Russia is highly dependent on oil and gas, the sales of which account for around half of its federal budget revenue.

Russia has long been a lucrative market for Schlumberger and the company still provides services to oil companies operating there even as European and American sanctions have sharply reduced Western investment in Russia in the past 18 months.

EDC said it was considering all options to support the company’s growth and development. The company plans to give a strategy update in January.