SLB’s planned $7.7 billion acquisition of ChampionX will speed up SLB’s expansion into the production recovery market as operators focus on minimizing production declines.
Several years ago, SLB identified production recovery in general and production chemicals specifically as an opportunity for growth, CEO Olivier Le Peuch said during SLB’s April 19 first-quarter 2024 earnings call.
“We believe first that this market will benefit from further innovation, from further integration, from further disruption,” he said.
On April 2, ChampionX and SLB announced SLB would acquire ChampionX in an all-stock deal. The deal vaults SLB into a leading position in production chemicals and solidifies its frontrunner status in artificial lift.
“In the quest for production recovery opportunities, we see that a combination of production chemicals, digital capability—including optimizing some production lift solutions—and over intervention is in their need for modernizing innovation and automation,” Le Peuch said. “And we believe that the addition of this to our portfolio, the significant talent and capability we are getting through the addition of ChampionX will help us fast track this new path of production recovery market expansion that will be a combination of opex and capex.”
The expectation is that aging assets will see a higher water cut and require production chemicals, he said.
“Coming up to the process facility, there will be an increasing need to add in more sophisticated and more technical production chemicals to the flow,” he said.
The deal, which is expected to close before the end of 2024, is expected to generate $400 million of synergies, SLB CFO Stephane Biguet said on the call.
About three-quarters of that is related to costs, while the remainder relates to internal revenue synergies, he said.
Of the 75% cost synergies, “roughly half of that is on our own SLB spend. We mentioned earlier we spend a lot on chemicals, for example, for overall operations and with the manufacturing and internalization of spend we can do with ChampionX we think we can have a great savings there,” he said.
Upcycle continuing
Analysts at EverCore ISI said SLB is “exceptionally well positioned” for the accelerating international and offshore upcycle, which remains in the early stages, and noted that revenue visibility has improved for the next several years.
Le Peuch said customer sentiment is more positive than it was six or 12 months ago. And as operators plan their projects, they are seeking partnership.
Collaboration with customers will help secure the best capital efficiency, he said. The company is looking “for integration to accelerate the product cycle to get faster to first oil, first gas.”