In a bid to take the lead spot in E&P software services, Emerson (NYSE: EMR) said Oct. 16 it will pay more than half a billion dollars in a deal to buy global E&P technology company Paradigm.
Emerson agreed to purchase Houston’s Paradigm for $510 million—a price the company said represents a multiple of 13 times Paradigm’s expected 2017 EBITDA. Emerson, based in St. Louis, said the acquisition will expand its upstream portfolio and create the largest provider of E&P software solutions—independent of oilfield services companies.
The deal comes as the $3.6 billion E&P software market is down 10% from its 2015 peak, Emerson said. Wall Street rewarded the deal by boosting Emerson’s stock price by $1.04, or 1.6%, the day after the deal’s announcement to $65.48 per share.
Paradigm provides E&P subsurface software technology spanning seismic processing and imaging, interpretation and modeling, reservoir characterization and well planning and drilling. The company has more than 600 employees in 28 countries, according to its website.
With oil prices driving the need for efficiency improvements, Emerson expects Paradigm’s technology offerings to expand the company’s services to streamline E&P operations, reduce costs and improve return on investment.
Ultimately, the company said it expects to help operators achieve “top quartile performance,” which it defines as achieving operations and capital performance in the top 25% of peer-group companies.
David N. Farr, Emerson chairman and CEO, said the Paradigm acquisition is a “significant technology investment” that will meet a growing demand for an independent, global provider of E&P software solutions.
“Paradigm broadens our leadership in the upstream oil and gas market by adding a range of subsurface software tools that complement our growing automation solutions portfolio,” Farr said in a statement.
Emerson said the combination of Paradigm with its own Roxar software business will create a best-in-class, end-to-end E&P software portfolio with offerings spanning seismic processing and interpretation to production modeling.
The Paradigm acquisition would:
- Enter Emerson into the seismic mapping and geological interpretation marketplace;
- Add new formation evaluation software, including well log analysis to define reservoir properties;
- Strengthen Emerson’s dynamic modeling of reservoir characteristics and well planning; and
- Augment the company’s surface-to-subsurface well design, geosteering and well construction capabilities.
“When combined with Emerson’s Roxar Software Solutions portfolio, Paradigm expands the global upstream oil and gas capability of our Plantweb digital ecosystem, creating a more comprehensive digital portfolio for our customers from exploration to production,” Mike Train, executive president of Emerson Automation Solutions, said in a statement. “Our offering can now help customers better maximize the value of their existing investments and reach top-quartile performance.”
A global technology and engineering company, Emerson serves customers in the industrial, commercial and residential markets. The company has recently been broadening its oil and gas portfolio, including the Oct. 10 acquisition of GeoFields Inc., a global supplier of pipeline solutions software, for an undisclosed amount.
Emerson’s acquisition of Paradigm is expected to close by December, subject to various regulatory approvals, the company said.
Emily Patsy can be reached at firstname.lastname@example.org.
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