425: SLB Advances on ChampionX Acquisition with Norwegian Authority Agreement

SLB expects to finalize proceedings with the Norwegian Competition Authority (NCA) regarding the ChampionX acquisition, based on previously proposed remedies.

Summary

• SLB announced progress with the Norwegian Competition Authority (NCA) regarding its acquisition of ChampionX.
• The NCA's Phase 2 review is expected to conclude based on previously proposed remedies.
• The NCA has confirmed that no remedy will be required regarding the production chemistry business in Norway.
• The proposed resolution includes the divestiture of ChampionX's U.S. Synthetic business, which was previously approved by U.S. regulators.
• Commercial remedies for the Quartzdyne business are also included, such as long-term supply agreements with customers.
• SLB remains committed to working with regulatory authorities to complete the transaction.
• The transaction is expected to close in Q2 or early Q3 2025.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive as the announcement indicates progress in a key regulatory hurdle for the acquisition. However, the required divestiture and commercial remedies temper the overall positive outlook.

Positives

• The Norwegian Competition Authority (NCA) is expected to finalize proceedings regarding the ChampionX acquisition.
• No remedy will be required regarding the production chemistry business in Norway.
• The divestiture of ChampionX's U.S. Synthetic business has already been approved by U.S. regulators.
• The transaction is expected to close in Q2 or early Q3 2025.

Negatives

• The divestiture of ChampionX's U.S. Synthetic business is required as part of the resolution.
• Commercial remedies for the Quartzdyne business, including long-term supply agreements with customers, are required.

Risks

• The ultimate outcome of the proposed transaction between SLB and ChampionX is uncertain.
• The effect of the announcement of the proposed transaction could cause business disruptions.
• Difficulties in retaining and hiring key personnel and employees could arise.
• Maintaining favorable business relationships with customers, suppliers, and other business partners could be challenging.
• The occurrence of any event, change, or other circumstance could give rise to the termination of the proposed transaction.
• The anticipated or actual tax treatment of the proposed transaction is uncertain.
• The ability to satisfy closing conditions to the completion of the proposed transaction is not guaranteed.
• Integrating the business successfully and achieving anticipated synergies and value creation from the proposed transaction could be difficult.
• Changes in demand for SLB's or ChampionX's products and services could occur.
• Global market, political, and economic conditions could impact the transaction.
• Securing government regulatory approvals on the terms expected, at all or in a timely manner is not guaranteed.
• The extent of growth of the oilfield services market generally, including for chemical solutions in production and midstream operations, is uncertain.
• The global macro-economic environment, including headwinds caused by inflation, rising interest rates, unfavorable currency exchange rates, and potential recessionary or depressionary conditions, could impact the transaction.
• The impact of shifts in prices or margins of the products that SLB or ChampionX sells or services that SLB or ChampionX provides could occur.
• Cyber-attacks, information security and data privacy breaches could pose a risk.
• The impact of public health crises, such as pandemics (including COVID-19) and epidemics and any related company or government policies and actions to protect the health and safety of individuals or government policies or actions to maintain the functioning of national or global economies and markets could occur.
• Trends in crude oil and natural gas prices, including trends in chemical solutions across the oil and natural gas industries, that may affect the drilling and production activity, profitability and financial stability of SLB's and ChampionX's customers and therefore the demand for, and profitability of, their products and services could occur.
• Litigation and regulatory proceedings, including any proceedings that may be instituted against SLB or ChampionX related to the proposed transaction, could pose a risk.
• Failure to effectively and timely address energy transitions that could adversely affect the businesses of SLB or ChampionX, results of operations, and cash flows of SLB or ChampionX could occur.
• Disruptions of SLB's or ChampionX's information technology systems could pose a risk.

Future Outlook

The transaction between SLB and ChampionX is expected to close in Q2 or early Q3 2025, pending regulatory approvals and satisfaction of closing conditions.

Management Comments

• SLB is pleased with this continued progress and remains committed to working closely with the NCA and other regulatory authorities to complete the transaction.

Industry Context

This announcement reflects the ongoing consolidation in the oilfield services sector, as companies seek to expand their offerings and improve efficiency. Regulatory scrutiny is a common hurdle in such large transactions, and SLB's progress with the Norwegian Competition Authority is a positive step towards closing the deal.

Comparison to Industry Standards

• The divestiture of ChampionX's U.S. Synthetic business is a common remedy required by regulators in mergers and acquisitions to prevent anti-competitive behavior, similar to divestitures required in other large industry mergers.
• Long-term supply agreements for the Quartzdyne business are also a typical commercial remedy to ensure fair competition and prevent market dominance, mirroring similar agreements in other industries facing regulatory scrutiny.

Stakeholder Impact

• Shareholders of ChampionX will receive consideration upon completion of the acquisition.
• Employees of both SLB and ChampionX may experience changes as the companies integrate.
• Customers of both companies may benefit from a broader range of products and services.
• Suppliers of both companies may see changes in their relationships as the combined entity optimizes its supply chain.

Next Steps

• Finalize proceedings with the Norwegian Competition Authority.
• Obtain remaining regulatory approvals.
• Satisfy closing conditions.
• Close the transaction in Q2 or early Q3 2025.

Key Dates

Keywords

SLB, ChampionX, acquisition, Norwegian Competition Authority, NCA, divestiture, U.S. Synthetic business, Quartzdyne business, regulatory approval, merger