Schlumberger (SLB.N), the leading oilfield services company, announced on Tuesday its intention to acquire smaller competitor ChampionX (CHX.O) in an all-stock transaction valued at $7.75 billion, reflecting the trend of consolidation within the North American energy sector. This move comes as oilfield service providers, like energy producers, grapple with operational and pricing challenges amid reduced spending on new wells.
This acquisition marks Schlumberger’s second major purchase in a week and its largest since acquiring oilfield equipment manufacturer Cameron International for $14.8 billion in 2016. Last year, Patterson-UTI Energy and NexTier Oilfield Solutions also joined forces in an all-stock deal, creating a $5.4 billion oilfield services entity.
Schlumberger’s strategic rationale for the ChampionX acquisition is to enhance its capabilities by incorporating production chemicals and artificial lift technologies into its offerings. Analysts foresee increased utilization of production chemicals, especially as global assets mature. Additionally, the deal is expected to reinforce Schlumberger’s strength in chemically intensive offshore operations.
Under the terms of the agreement, ChampionX shareholders will receive 0.735 shares of Schlumberger common stock, or $40.59 per share, representing a premium of 14.7% over ChampionX’s recent closing price. Following the announcement, ChampionX shares surged 9% in early trading, while Schlumberger shares experienced a slight decline.
Schlumberger anticipates annual pre-tax savings of approximately $400 million within the first three years post-closure, which is expected before the end of 2024. As part of the transaction, ChampionX shareholders will own approximately 9% of Schlumberger’s outstanding shares.
Analysts view the acquisition favorably, citing its potential to expand Schlumberger’s exposure to a less cyclical and expanding global production base. This move aligns with Schlumberger’s strategy of prioritizing returns and pursuing capital-light opportunities.
Credits: reuters.com