SLB Announces ChampionX Deal

In a release sent to Rigzone on Tuesday, SLB (NYSE: SLB) announced a definitive agreement to purchase ChampionX in an all-stock transaction.

Under the terms of the deal, ChampionX shareholders will receive 0.735 shares of SLB common stock in exchange for each ChampionX share, the release noted, adding that, at the closing of the transaction, ChampionX shareholders will own approximately nine percent of SLB’s outstanding shares of common stock.

SLB stated in the release that it expects to realize annual pretax synergies of approximately $400 million within the first three years post-closing through revenue growth and cost savings.

The transaction is subject to ChampionX shareholders’ approval, regulatory approvals, and other customary closing conditions, SLB revealed, noting that the agreement was unanimously approved by the ChampionX board of directors. It is anticipated that the closing of the transaction will occur before the end of this year.

ChampionX describes itself on its website as “a global leader in chemistry solutions, artificial lift systems, and highly engineered equipment and technologies that help companies drill for and produce oil and gas safely, efficiently, and sustainably around the world”.

Important Time

“SLB’s acquisition of ChampionX comes at an important time in the industry,” SLB said in the release.

“The production phase of oil and gas operations typically comprises the majority of an asset’s life cycle from completion through decommissioning. This places a premium on service providers’ ability to help customers address challenges across the entirety of their production system,” it added.

“At the same time, there is growing demand to scale emerging technologies such as AI and autonomous operations across global operations,” it continued.

In the release, SLB CEO Olivier Le Peuch said, “our customers are seeking to maximize their assets while improving efficiency in the production and reservoir recovery phase of their operations”.

“This presents a significant opportunity for service providers who can partner with customers throughout the entire production lifecycle, offering integrated solutions and delivering differentiated value,” he added.

“The combination of ChampionX’s strong production-focused leadership throughout North America and beyond with our own international presence, unmatched technology portfolio, and history of innovation will drive tremendous value for our customers and stakeholders,” he continued.

Core Strategy, Exciting Chapter

Le Peuch went on to note in the release that SLB’s core strategy “remains centered on meeting growing energy demand while accelerating decarbonization and emissions reduction through innovation, scale, and digitalization in our core oil and gas business”.

“This acquisition will expand SLB’s presence in the less cyclical and growing production and recovery space that is closely aligned with our returns-focused, capital-light strategy,” he added.

Soma Somasundaram, the President and CEO of ChampionX, said in the release that the announcement “marks the start of an exciting next chapter for ChampionX”.

“We have been on a journey to build the best production-focused company in our sector, with a goal of unlocking energy through our differentiated products and technology as well as our strong financial engine,” Somasundaram added.

“Becoming part of SLB will give us a much broader portfolio and the resources and reach to continue to lead the industry in providing energy to the world in an economically and environmentally sustainable way,” the CEO continued.

“Our companies share a vision for the future of energy that leverages technology and innovation to solve our customers’ most complex problems and better serve the communities in which we operate,” Somasundaram went on to note.

The ChampionX CEO said in the release that he is confident that the company’s “talented employees will benefit from greater opportunities as part of a larger organization”.

“For our shareholders, the combination provides compelling value creation and the opportunity to share in significant upside from the realization of synergies, including accelerated growth opportunities given the complementary nature of the respective portfolios,” the CEO added.

“I have long admired SLB’s focus on technology and innovation, as well as its global reach, and throughout our engagement with them, I have also been impressed with their commitment to preserving and capitalizing on all that has made ChampionX successful,” Somasundaram continued.

$7B to Shareholders, ACC Deal

In the same release, SLB announced that it will return $7 billion to shareholders over the next two years. The company said it will increase its 2024 shareholder returns to a target of $3 billion as well as set a target for 2025 shareholder returns of $4 billion.

“This commitment to our shareholders for 2024 and 2025 highlights our confidence in the value this transaction will create and in our ability to continue generating strong cash flow from our broader portfolio this year and next,” Le Peuch said in the release.

In a release posted on its site on March 27, SLB announced an agreement to combine its carbon capture business with Aker Carbon Capture (ACC) “to support accelerated industrial decarbonization at scale”.

SLB revealed in that release that it will pay NOK 4.12 billion ($379.89 billion) to purchase 80 percent of Aker Carbon Capture Holding AS (ACCH), which holds the business of ACC, and that it will contribute the SLB carbon capture business to the combined entity.

SLB added in the release that it may also make additional payments of up to NOK 1.36 billion ($125.4 billion) over the next three years based on the performance of the business.

This transaction is subject to regulatory approvals and is expected to close by the end of the second quarter, SLB said in the release.

“For CCUS to have the expected impact on supporting global net-zero ambitions, it will need to scale up 100-200 times in less than three decades,” Le Peuch noted in that release.

“Crucial to this scale-up is the ability to lower capture costs, which often represent as much as 50-70 percent of the total spend of a CCUS project,” he added.

“We are excited to create this business with ACC to accelerate the deployment of carbon capture technologies that will shift the economics of carbon capture across high-emitting industrial sectors,” he continued.

Remarkable Year

In SLB’s latest results statement, which focused on the company’s fourth quarter and full year 2023 results, Le Peuch noted that the company had “concluded a remarkable year marked by widespread revenue growth, margin expansion, and exceptional free cash flow”.

“Year on year, we grew revenue and EBITDA 18 percent and 25 percent, respectively, and we delivered $4.0 billion of free cash flow - allowing us to reduce net debt by $1.4 billion and return $2.0 billion to shareholders this year through dividends and stock repurchases,” he added.

“These results showcase our continued ability to deliver superior earnings, generate impressive cash flows, and maintain a strong balance sheet,” he continued.

To contact the author, email andreas.exarheas@rigzone.com