(Bloomberg) -- SLB agreed to acquire rival oilfield service provider ChampionX Corp. for $7.8 billion in an all-stock deal, a move that will bulk up SLB’s technology portfolio as aging shale wells prompt US drillers to spend more to keep output flowing longer. 

The deal values each ChampionX share at $40.59, a premium of nearly 15% to the April 1 closing price, according to a presentation posted on SLB’s website. 

The US is pumping more crude than ever, keeping OPEC and its allies on the defensive. But as the shale industry matures, explorers are focusing more on maintaining and boosting production long after wells have been drilled. And as consolidation among the biggest shale producers continues, service providers will have to follow suit.

SLB, the world’s biggest oilfield service provider, said in a statement that the deal will expand its presence in oil and gas production and recovery, which is less cyclical than the initial drilling phase. There’s also growing demand to scale up emerging technologies such as AI in the industry, the company said. The tie-up will boost SLB’s global reach and strengthen its position in North America, according to the presentation.

“Our customers are seeking to maximize their assets while improving efficiency in the production and reservoir recovery phase of their operations,” SLB Chief Executive Officer Olivier Le Peuch said in the statement. “This presents a significant opportunity for service providers who can partner with customers throughout the entire production lifecycle.”

Shares of SLB fell as much as 3.7% and have since pared some of those losses, while ChampionX rose more than 10% to its highest level in almost five years.

Oil producers are shifting their budget strategy, spending more on operating and maintaining wells and less on drilling and fracking, according to Rystad Energy data cited by SLB in its presentation. 

The acquisition will help SLB in two main service areas: production chemicals to keep the wells flowing, and artificial lift technology, which helps boost output after the initial surge of production has dissipated. SLB has the biggest market share in artificial lift with 21%, and ChampionX will add to that with its 5%, according to Evercore ISI, citing data from industry consultant Spears & Associates.

Read More: SLB Sees Bigger as Better for Clients, Oil Services Industry

Investors are likely to be concerned about the regulatory scrutiny this deal will attract, Scott Gruber, an analyst at Citigroup Inc., wrote Tuesday in a note to clients. In the production chemicals market, this would combine the world’s fourth- and fifth-biggest players, Gruber said, citing Spears data. The acquisition would be SLB’s biggest since it bought Smith International Inc. for $9.6 billion in 2010.

SLB, which was formerly known as Schlumberger, sold its US and Canadian fracking business in 2020 as explorers heeded investor calls to rein in spending, sparking concern that activity in the US shale patch would never revisit previous highs. 

ChampionX investors will receive 0.735 SLB share for each share of ChampionX. The companies expect the deal to close before the end of 2024, according to the statement. When the deal closes, ChampionX shareholders will own approximately 9% of SLB’s outstanding common stock.

SLB also announced it will return $7 billion to shareholders over the next two years, including a target of $3 billion for this year and $4 billion for 2025.

--With assistance from Elizabeth Elkin.

(Updates with analyst comment on regulatory concern in 9th paragraph)

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