425: Schlumberger to Acquire ChampionX in $40.59 per Share Deal, Expanding Production and Recovery Portfolio

Schlumberger (SLB) is set to acquire ChampionX in an all-stock transaction valuing ChampionX at $40.59 per share, aiming to enhance its production and recovery offerings and generate significant synergies.

Summary

• Schlumberger (SLB) plans to acquire ChampionX in an all-stock transaction.
• ChampionX shareholders will receive 0.735 shares of SLB for each ChampionX share.
• The deal values ChampionX at $40.59 per share, a 14.7% premium based on the closing price of April 1, 2024.
• Upon closing, ChampionX shareholders will own approximately 9% of SLB's outstanding shares.
• The acquisition is expected to close before the end of 2024, subject to customary closing conditions and regulatory approvals.
• SLB anticipates annual pre-tax synergies of approximately $400 million within three years, with 70-80% realized in 2026 and the remainder in 2027.
• These synergies will come from reduced operating costs, supply chain optimization, G&A savings, and revenue synergies.
• Post-acquisition, SLB's geographical mix will be 75% international and 25% North America, with expectations for the international revenue mix to increase.
• All of ChampionX's employees will become SLB employees.

Sentiment

Score: 8

Explanation: The document presents a positive outlook on the acquisition, highlighting the strategic benefits, synergy potential, and enhanced customer value. The all-stock deal structure and focus on long-term growth contribute to a favorable sentiment.

Positives

• The acquisition will enhance SLB's production and recovery portfolio.
• Customers will benefit from an enhanced portfolio, geographical reach, and technology innovation.
• The combined portfolio will provide solutions throughout the full lifecycle of the well to increase customer production, reduce overall cost of ownership, and lower carbon emissions.
• SLB expects significant synergies from the acquisition, primarily from reduced operating costs, supply chain optimization, and G&A savings.
• The acquisition will strengthen SLB's international offering while driving innovation and efficiency in North America.
• ChampionX's artificial lift portfolio is an integrated offering supported by digital capabilities that help customers optimize their lift solutions throughout the life of the well.

Risks

• The transaction is subject to customary closing conditions and regulatory requirements, which could delay or prevent the acquisition.
• There are risks associated with integrating the two businesses and achieving the anticipated synergies.
• Changes in demand for SLB's or ChampionX's products and services could impact the success of the acquisition.
• Global market, political, and economic conditions could affect the combined company's performance.
• The ability to secure government regulatory approvals on the terms expected, at all or in a timely manner is a risk.
• Failure to effectively and timely address energy transitions that could adversely affect the businesses of SLB or ChampionX is a risk.

Future Outlook

SLB expects the acquisition to enhance its production and recovery portfolio, drive innovation and efficiency, and generate significant synergies. The company anticipates strengthening its international offering and increasing its international revenue mix post-acquisition.

Management Comments

• SLB's core oil and gas business will continue to be a key engine of growth.
• Deliberately increasing our exposure to the production and recovery space will align us with a growing and resilient OpEx spend category into the next decade.
• Our intention is to leverage the best aspects of both organizations.
• We will preserve the agility and customer relationships in North America, which ChampionX is known for, and we will maximize the benefit from SLB's market reach internationally.

Industry Context

This acquisition reflects a trend in the oil and gas industry towards consolidation and a focus on enhancing production and recovery capabilities. Companies are seeking to improve efficiency, reduce costs, and lower carbon emissions through integrated solutions and technological innovation. The deal positions SLB to better compete in the production chemicals, production and automation tech, drilling technologies, and reservoir chemicals markets.

Comparison to Industry Standards

• The expected $400 million in annual pre-tax synergies within three years is a significant target, comparable to synergy expectations in other large oilfield services mergers.
• The all-stock transaction structure is common in large mergers within the oil and gas industry, allowing companies to preserve cash and share future value creation.
• The focus on production and recovery aligns with industry trends towards optimizing existing assets and extending the life of wells, similar to strategies employed by companies like Halliburton and Baker Hughes.

Stakeholder Impact

• ChampionX shareholders will receive SLB shares, participating in the combined company's future growth.
• All ChampionX employees will become SLB employees, with opportunities for career development within a larger organization.
• Customers will benefit from an enhanced portfolio of products and services.
• The acquisition is expected to create value for SLB shareholders through synergies and growth opportunities.

Next Steps

• ChampionX stockholders need to adopt the merger agreement.
• SLB and ChampionX will continue to operate independently until the transaction closes.
• A joint integration team will work across both companies until closing and beyond.
• SLB intends to file a registration statement on Form S-4 with the SEC.

Key Dates