Patterson-UTI Energy Inc. and NexTier Oilfield Solutions Inc. announced in a joint statement that they have entered into a definitive merger agreement to combine in an all-stock “merger of equals” transaction.
Under the terms of the deal, NexTier shareholders will receive 0.7520 shares of Patterson-UTI common stock for each share of NexTier common stock owned, according to the statement, which added that the deal has been unanimously approved by boards of directors of both companies.
At closing, Patterson-UTI shareholders will own approximately 55 percent and NexTier shareholders will own approximately 45 percent of the combined company on a fully diluted basis, according to the statement, which noted that the merger is expected to be tax-free for shareholders of both companies.
Andy Hendricks, president and CEO of Patterson-UTI, will serve as president and CEO of the combined company, Robert Drummond, president and CEO of NexTier, will become vice chairman of the board of the combined company, and Curtis Huff, the current chairman of the board of Patterson-UTI, will serve as chairman of the board of the combined company, the statement revealed.
The combined company, which will be headquartered in Houston, will operate under the name Patterson-UTI Energy Inc. and will trade under the symbol PTEN. The merger is expected to close in the fourth quarter of 2023, subject to Patterson-UTI and NexTier stockholder approval, regulatory approvals and the satisfaction of other customary closing conditions.
According to the statement, the combined business will be an industry-leading provider of drilling and completion services with operations in the most active major US basins and strong free cash flow to accelerate the return of capital to shareholders. It will have an enterprise value of approximately $5.4 billion, the statement revealed.
172 Super Spec Drilling Equipment
The merger will create a leading U.S. contract drilling business with 172 “super spec” drilling rigs, as well as a leading U.S. well completion business with a deployed capacity of 45 active casings and 3.3 million horsepower. hydraulic fracturing power, the statement emphasized.
The combined company intends to target high free cash flow conversion, remain good stewards of capital and continue both companies’ practices of distributing at least 50 percent of free cash flow to shareholders, he notes the statement, adding that the transaction is expected to be increase earnings per share and free cash flow per share in 2024.
Patterson-UTI Energy Inc. would have net debt to trailing adjusted EBITDA of 0.5x on March 31, 2023, the statement said. On an annualized combined basis beginning in the first quarter of 2023, the combined company generated approximately $6.9 billion in revenue, $1.9 billion in adjusted EBITDA and improved free cash flow generation, the statement revealed joint
The merger brings together top-tier companies
In the statement, Andy Hendricks, CEO of Patterson-UTI, said, “this merger brings together two technology-driven, world-class drilling and well completion companies, creating a leading platform at the forefront of innovation.” .
“As a single company, we will have a comprehensive and significantly expanded portfolio of oilfield service offerings in the most active producing basins in the United States, along with operations in Latin America,” he added.
“With our strong combined balance sheet, ample liquidity and increased free cash flow, we will be well-positioned to continue investing in technology, innovation and people, while delivering strong cash returns to shareholders,” he continued.
Hendricks noted in the statement that NexTier shares the company’s safety culture, deep customer relationships and superior operational and financial performance.
“Together, we will better serve our employees, shareholders, customers, suppliers and the communities in which we operate. We look forward to working with the NexTier team to successfully bring our two companies together,” he said.
First American company
Robert Drummond, president and CEO of NexTier, said in the statement that “our agreement to merge with Patterson-UTI brings together two complementary organizations to create a North American drilling and completions company.”
“We believe that offering a complete set of solutions on an integrated platform will position the combined company as the partner of choice for a greater number of customers across geographies and throughout the well lifecycle,” he added.
“We are confident that together we will be able to drive efficiencies across the portfolio and unlock more value for shareholders and customers than either organization could achieve on its own,” he continued.
“NexTier and Patterson-UTI have a proven track record of integrating companies, and we are confident that combining through a merger of equals will allow us to leverage the strengths of both highly talented workforces and create opportunities exciting career opportunities for employees as we grow into a larger and more diversified platform,” said Drummond.
This agreement may be different
Mark A. Chapman, senior vice president of Intelligence for Oilfield Services (OFS) at Enverus Intelligence Research, told Rigzone that OFS consolidation often has negative implications for exploration and production companies , but added that “this deal may be different.”
“The merger of Patterson and NexTier creates a unique company with scale and quality in both drilling and pressure pumping,” Chapman said.
“We believe the agreement could make their E&P customers more efficient by consolidating drilling and completion services to a single supplier and enabling optimized schedules from crew release to crew release. Our database shows that some of Patterson’s largest clients include Mewbourne, Continental, CVX, PXD and MTDR,” he added.
Chapman also noted that Patterson and NexTier own similar people in their respective subsectors.
“Known for its extensive fleet of high-quality equipment, Patterson has established itself as a premier driller,” he said.
“NexTier has earned recognition for its fleet of pressure pumping equipment, two-thirds of which are dual-fuel capable,” he added.
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