Precision Drilling Corp. is expanding its U.S. and Canadian drilling fleet by acquiring fellow Calgary player CWC Energy Services. (Source: Shutterstock.com)
Precision Drilling Corp. is acquiring fellow Canadian player CWC Energy Services, the latest deal in a flurry of oilfield services consolidation.
Precision Drilling agreed to acquire all of CWC’s common shares in a cash-and-stock deal valued at CA$141 (US$103) million, the two Calgary-based companies announced Sept. 7.
The deal includes Precision shares valued at approximately CA$88 million, CA$14 million in cash and the assumption of CWC outstanding debt. The equity prices are based on Precision’s Sept. 1 closing price on the Toronto Stock Exchange of CA$92.58 per share.
Scooping up CWC, a contract drilling and well completions provider, will grow Precision’s fleet by 62 service rigs and seven drilling rigs in Canada; and by 11 marketed drilling rigs in the U.S.
Precision said that CWC has three Canadian drilling rigs and seven U.S. drilling rigs currently deployed for customers.
Once fully integrated, Precision anticipates realizing around CA$20 million in annual operating synergies by combining with CWC. Precision has also identified around CA$20 million in excess CWC properties it anticipates selling after closing.
“With the expected synergies and by further leveraging our scale, we believe the transaction will be accretive to earnings and provide significant cash flow to drive shareholder returns and support our debt reduction strategy,” said Precision President and CEO Kevin Neveu in a news release.
The deal is expected to close in the fourth quarter, subject to approval by CWC shareholders and regulators.
“Today we announce a strategic combination with Precision which has the size and scale that will allow for expanded opportunities for our employees, enhanced services for our customers and CWC shareholder participation in one of the leading innovative companies in our industry,” said CWC President and CEO Duncan Au in a separate news release.
When the company reported second-quarter earnings in July, Precision had 58 active rigs running in Canada and 43 active rigs in the U.S.
Deleveraging
Precision said it remains on track to reduce its debt by CA$150 million this year—despite piling onto its debt load by adding another CA$40 million with the CWC acquisition.
The company previously committed to reducing its debt levels by CA$500 million between 2022 and 2025, with a goal of reaching a net debt-to-adjusted EBITDA ratio of less than 1x by year-end 2025.
Precision has paid down CA$100 million in debt through the first half of 2023, the company reported in second-quarter earnings. The firm anticipates its net debt-to-adjusted EBITDA ratio falling to between 1.25x and 1.5x by the end of the year.
Other players in the oilfield services space are seeking greater scale by combining. Patterson-UTI and NexTier Oilfield Solutions recently closed a $5.4 billion merger, creating one of North America’s largest services providers.
RELATED: Analysts: Patterson-UTI M&A May Continue After NexTier, Ulterra Deals
Patterson-UTI’s contract drilling business grew to 172 super-spec drilling rigs, while its well completions segment—which will operate under the NexTier brand—has 3.3 million horsepower of hydraulic fracturing capacity.
Before closing the NexTier merger, Patterson-UTI acquired specialized drill bit provider Ulterra Drilling Technologies in a cash-and-stock deal worth $780 million.
In late August, Expro announced plans to acquire offshore services provider PRT Offshore for total consideration of $106 million.
And services provider RPC Inc. expanded its cementing business with a roughly $80 million acquisition of Spinnaker Oilwell Services LLC.
Recommended Reading
Post Oak Backs New Permian Team, But PE Faces Uphill Fundraising Battle
2024-10-11 - As private equity begins the process of recycling inventory, likely to be divested from large-scale mergers, executives acknowledged that raising funds has become increasingly difficult.
Midstream M&A Adjusts After E&Ps’ Rampant Permian Consolidation
2024-10-18 - Scott Brown, CEO of the Midland Basin’s Canes Midstream, said he believes the Permian Basin still has plenty of runway for growth and development.
ONEOK Offers $7B in Notes to Fund EnLink, Medallion Midstream Deals
2024-09-11 - ONEOK intends to use the proceeds to fund its previously announced acquisition of Global Infrastructure Partners’ interest in midstream companies EnLink and Medallion.
Analyst: Is Jerry Jones Making a Run to Take Comstock Private?
2024-09-20 - After buying more than 13.4 million Comstock shares in August, analysts wonder if Dallas Cowboys owner Jerry Jones might split the tackles and run downhill toward a go-private buyout of the Haynesville Shale gas producer.
BP Profit Falls On Weak Oil Prices, May Slow Share Buybacks
2024-10-30 - Despite a drop in profit due to weak oil prices, BP reported strong results from its U.S. shale segment and new momentum in the Gulf of Mexico.
Comments
Add new comment
This conversation is moderated according to Hart Energy community rules. Please read the rules before joining the discussion. If you’re experiencing any technical problems, please contact our customer care team.