In the biggest oilfield services transaction since 2016, SLB agreed to acquire ChampionX Corp. for $7.76 billion in stock, bringing an industry leader in production chemicals into the OFS giant’s fold. ChampionX’s $420 million in net debt brings the transaction to an $8.18 billion enterprise value.
Of the $3.76 billion in revenue that ChampionX reported for 2023, 64% came from its production chemicals segment and 27% from production and automation technologies, which include artificial lift equipment and digital automation applications. The offerings of its smaller segments include polycrystalline diamond cutter inserts and fracking additives. ChampionX posted 2023 net income of $314 million. The company was the product of drilling and production technology company Apergy Corp.’s $4.39 billion acquisition of Ecolab Inc.’s upstream chemicals technology business in 2020.
“The majority of ChampionX revenue is driven by opex, which will become an increasing part of overall upstream exploration and production spend,” SLB CEO Olivier Le Peuch said in an April 2 conference call. “Deliberately increasing our exposure to the production chemicals and artificial lift markets positions us in a growing and resilient spend category into the next decade and beyond. The chemicals sector offers a steady and stable base load of activity decoupled from traditional rig count cycles and commodity prices. As assets age, chemical intensity and usage will further accelerate, and ChampionX is vertically integrated in this market with a significant manufacturing network that is well positioned to deliver on this growing demand.”
ChampionX’s products target E&Ps looking to boost recovery instead of capex.
The company formerly known as Schlumberger estimates that E&P companies spent twice as much on capex as on opex in 2010 but that by 2023 opex made up 46% of spending. By 2040, it expects opex to exceed capex as E&P companies prioritize maximizing production and recovery.
“In artificial lift, nearly 90% of all the wells require one or several forms of lift solution during their producing life,” Le Peuch said. ChampionX’s manufacturing network will help meet the rising chemical demand while its technologies would give SLB a broad lift portfolio, he added. In addition, SLB’s international reach will broaden ChampionX’s global footprint while the OFS giant leverages ChampionX’s U.S. customer relationships, operational agility and fit-for-basin technology, he said.
The transaction’s exchange rate of 0.735 SLB common shares for each ChampionX share values ChampionX at $14.70/share, a 14.7% premium based on April 1’s closing price. At closing, ChampionX shareholders will own 9% of SLB’s outstanding common shares. The transaction requires the approval of ChampionX shareholders and regulators.
Closing is expected by YE24. The transaction will be accretive to free cash flow per share in 2025 and earnings per share in 2026, SLB CFO Stephane Biguet said. SLB expects to realize annual pretax synergies of $400 million within the first three years through revenue growth and cost savings.
The SLB/ChampionX deal is the largest in the OFS sector since the short-lived merger of GE Oil & Gas and Baker Hughes, a $33.9 billion deal announced in 2016. According to Enverus M&A Analytics, four OFS M&A deals of more than $8 billion have closed since 2009. Schlumberger was the buyer in two of them: the $12.3 billion acquisition of Smith International in 2010 and the $14.8 billion acquisition of Cameron International in 2015.
Biggest deal in OFS since GE Oil & Gas briefly merged with Baker Hughes.
Even as this major deal was presumably in the works, ChampionX and SLB have recently dipped into the M&A space. ChampionX announced two deals to boost its artificial lift offering in the previous 35 days: buying Artificial Lift Performance Ltd. for an undisclosed amount then agreeing to acquire RMSpumptools Ltd. for £86 million ($108 million).
Less than a week before the ChampionX announcement, SLB agreed to contribute its carbon capture business to Aker Carbon Capture and pay NOK 4.12 billion ($380 million) to own 80% of the combined company. Le Peuch said April 2 that the transactions were not part of an effort to promote market consolidation but to grow into a key new energy business and align SLB to customer priorities.
While Biguet said ChampionX will not bring meaningful benefits until 2025, SLB will add $500 million in stock repurchases this year, raising its 2024 total target for return of capital to shareholders to $3 billion. SLB returned $2.01 billion to stockholders in 2023, with $1.32 billion in dividends and the rest in stock repurchases. In January, its directors approved a 10% increase in 2024 dividends. Biguet said the company will return $4 billion to shareholders in 2025.
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