In its second transaction in less than a week, SLB Ltd. agreed Tuesday to buy ChampionX Corp., considered a leader in oilfield reservoir optimization.
The all-stock merger with ChampionX, headquartered in The Woodlands north of Houston, was valued at nearly $8 billion. Once the transaction is completed, now expected by year’s end, ChampionX shareholders would own about 9% of SLB, which already is the largest oilfield services operator in the world.
The acquisition of ChampionX “comes at an important time in the industry,” SLB executives said. “The production phase of oil and gas operations typically comprises the majority of an asset’s lifecycle from completion through decommissioning. This places a premium on service providers’ ability to help customers address challenges across the entirety of their production system.
“At the same time, there is growing demand to scale emerging technologies,” including deploying artificial intelligence and autonomous operations across its global footprint.
ChampionX provides chemistry solutions, artificial lift systems, as well as engineered equipment and technologies.
More E&P Opportunities?
Exploration and production (E&P) customers are “seeking to maximize their assets, while improving efficiency in the production and reservoir recovery phase of their operations,” SLB CEO Olivier Le Peuch said. The ChampionX transaction “presents a significant opportunity” to partner with E&Ps “throughout the entire production lifecycle, offering integrated solutions and delivering differentiated value.”
During the fourth quarter conference call in January, Le Peuch had said activity in the Lower 48 was forecast to be flat this year. However, E&P customers were keen to adopt SLB’s “unique drilling technology,” honed to improve efficiencies and expand recoveries.
ChampionX CEO Soma Somasundaram said the company had been “on a journey to build the best production-focused company in our sector…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. 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.”
Increasing CCUS Business
SLB in late March said it planned to purchase an 80% stake in Norway’s Aker Carbon Capture ASA (ACC). The transaction is designed to accelerate SLB’s “industrial decarbonization at scale” business.
SLB agreed to pay ACC around $378 million for the stake. Additional payments also could be made over the next three years based on the performance of the business.
ACC provides carbon capture, utilization and sequestration (CCUS) services for the cement, waste-to-energy, natural gas-to-power and blue hydrogen sectors.
“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 said. “Crucial to this scale-up is the ability to lower capture costs, which often represent as much as 50-70% of the total spend of a CCUS project.”
Creating a business with ACC will “accelerate the deployment of carbon capture technologies that will shift the economics of carbon capture across high-emitting industrial sectors,” he said.
The ACC transaction is expected to be completed by the end of June.
Meanwhile, SLB on Tuesday also said it plans to return $7 billion to shareholders over the next two years. The commitment, Le Peuch said, “highlights our confidence” in the value of the ChampionX transaction and in “our ability to continue generating strong cash flow from our broader portfolio this year and next.”
Energy analysts reacted favorably to the purchase.
Evercore ISI’s James West in January noted that the oilfield services industry had to “respond” as their E&P customers were consolidating at a fast clip. That in turn is going to result in “the loss of market power.
“The industry is clearly finding value in combinations such as this one,” West said. Another recent merger between Dril-Quip Inc. and Innovex Downhole Solutions Inc. also has proved to be favorable, he said.
Of the ChampionX deal, Tudor, Pickering, Holt & Co.’s Matt Portillo said, “at first blush, we view the deal as a slight positive…As global assets continues to mature, chemical intensity should increase as usage is levered to total production (i.e. inclusive of water production). Additionally, offshore environments are more chemically intensive, playing to the strengths of SLB.”
