SLB Eyes ChampionX Acquisition in a $7.8B All-Stock Deal

SLB SLB and ChampionX Corporation CHX have announced a definitive agreement for SLB to acquire ChampionX in an all-stock transaction. The agreement, which has received unanimous approval from ChampionX’s board of directors, marks a significant development in the oil and gas industry.

Strategic Alliance for Enhanced Production Solutions

Per the terms of the agreement, ChampionX’s shareholders will receive 0.735 shares of SLB common stock for each ChampionX share they own. Following the closing of the transaction, the shareholders are expected to own approximately 9% of SLB’s outstanding shares of common stock.

The acquisition comes at a pivotal time in the industry, with the production phase of oil and gas operations gaining increasing significance. Service providers are under pressure to address challenges across the entire production system while integrating emerging technologies such as AI and autonomous operations.

Strategic Rationale and Vision

Olivier Le Peuch, the CEO of SLB, emphasized the importance of the acquisition by underscoring the strategic focus on meeting increasing energy demand while advancing decarbonization and emission reduction through innovation, scale, and digitalization within the core oil and gas operations.

Le Peuch emphasized the potential for synergies between SLB and ChampionX, particularly in the less cyclical and growing production and recovery space. He expressed confidence that the combination of the two companies’ strengths would drive significant value for customers and stakeholders.

Shared Commitment to Innovation

Soma Somasundaram, president and CEO of ChampionX, echoed Le Peuch's sentiments, expressing excitement about the next chapter for ChampionX. He emphasized the shared vision of leveraging technology and innovation to solve complex problems and provide sustainable energy solutions.

Somasundaram highlighted the benefits of joining forces with SLB, citing the broader portfolio and resources that would enable ChampionX to continue leading the industry in energy provision. He also expressed confidence in the opportunities for employees and shareholders resulting from the transaction.

Anticipated Synergies and Shareholder Returns

SLB 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, with the closing expected before the end of 2024.

In addition to the acquisition announcement, SLB unveiled plans to return $7 billion to shareholders over the next two years. This commitment highlights the company's confidence in the transaction’s (potential) value creation and its ability to generate strong cash flow from its expanded portfolio.

Conclusion

The acquisition of ChampionX by SLB marks a milestone in the oil and gas industry. By combining their strengths, the two companies aim to enhance production capabilities, drive innovation and deliver sustainable energy solutions to customers worldwide. With a shared vision for the future, SLB and ChampionX are poised to shape the industry landscape and create value for stakeholders in the years to come.

Zacks Rank & Key Picks

Currently, SLB carries a Zack Rank #4 (Sell).

A couple of better-ranked stocks in the energy sector are Sunoco LP SUN and Murphy USA Inc. MUSA, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Sunoco is among the biggest motor fuel distributors in the U.S. wholesale market in terms of volumes. By distributing more than 10 fuel brands via 10,000 convenience stores under long-term distribution contracts, the partnership will continue to generate stable cash flow. 

The Zacks Consensus Estimate for SUN’s 2024 earnings per share (EPS) is pegged at $4.96. The stock has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 30 days.

Murphy USA is a leading independent retailer of motor fuel and convenience merchandise in the United States.

The Zacks Consensus Estimate for MUSA’s 2024 EPS is pegged at $26.32. The company has a Zacks Style Score of B for Growth and B for Value. It has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 30 days.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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