Schlumberger to spend $7.8 billion in stock to buy ChampionX

By Tomi Kilgore

Oil services company boosts 2023 target for shareholder returns to $3 billion

Oil services company Schlumberger Ltd. announced Tuesday an agreement to buy chemical and drilling technologies company ChampionX Corp. in an all-stock deal valued at about $7.8 billion.

Under terms of the deal, ChampionX shareholders will receive 0.735 Schlumberger shares (SLB) for each ChampionX share they own. Based on Monday's closing prices, that values ChampionX shares (CHX) at $40.59 each, or 14.7% premium.

Texas-based ChampionX had 191.1 million shares outstanding as of Jan. 26, so the deal implies a market capitalization for the company of $7.76 billion.

Because it was a stock deal, which raises concerns that current shareholders' ownership will be diluted, Schlumberger shares slumped 2.1% in midday trading, but had been down as much as 3.7% earlier in the session.

ChampionX's stock rallied 8.7%, to put it on track for the highest close since May 8, 2019.

"Our customers are seeking to maximize their assets while improving efficiency in the production and reservoir recovery phase of their operations," said Schlumberger Chief Executive Olivier Le Peuch. "This presents a significant opportunity for service providers who can partner with customers throughout the entire production lifecycle, offering integrated solutions and delivering differentiated value."

Schlumberger said it expects to realize annual synergies of about $400 million within the first three years after the deal closes, which is expected to occur before the end of 2024.

Separately, Schlumberger increased its 2024 target for shareholder returns to $3 billion from "more than $2.5 billion." For 2025, the oil services company said it is targeting shareholder returns of $4 billion.

"This commitment to our shareholders for 2024 and 2025 highlights our confidence in the value this transaction will create and in our ability to continue generating strong cash flow from our broader portfolio this year and next," Le Peuch said.

Benchmark analyst Kurt Hallead reiterated his buy rating on Schlumberger's stock, saying the deal enhances the company's "market leading position" in artificial lift, which helps extract oil and gas from wells, and makes the company the biggest in production chemicals.

Hallead added that after the deal closes, more than 75% of Schlumberger's total business will be outside of the U.S.

Schlumberger's stock has gained 3.9% year to date and ChampionX shares have climbed 31.8%, while the VanEck Oil Services ETF OIH has advanced 9.9% and the S&P 500 index has gained 8.9%.

-Tomi Kilgore

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04-02-24 1135ET

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