Calgary-based oil and gas driller Precision Drilling Corporation said it would Trinidad Drilling Ltd in a deal valued at $1.03 billion, trumping a hostile bid from Ensign Energy Services.
A press release from the Canada's largest contract drilling company said: "We have entered into an arrangement agreement with Trinidad Drilling Limited pursuant to which Precision has agreed to acquire all of the issued and outstanding common shares of Trinidad on the basis of 0.445 common shares of Precision for each outstanding Trinidad Share pursuant to a plan of arrangement."
The aggregate Transaction value is approximately $1,028 million, including the assumption of approximately $477 million in Trinidad net debt. Upon completion of the Transaction, existing holders of Trinidad Shares will collectively own approximately 29% of Precision.
Kevin Neveu, President and Chief Executive Officer of Precision remarked, "This transaction creates exceptional value for both Trinidad and Precision shareholders. The combination provides a truly unique opportunity to combine two highly-focused drilling contractors that are pursuing similar growth initiatives and competitive strategies and importantly, operating similar Tier 1 assets."
"From a strategic perspective, Trinidad is a perfect fit with Precision. We can realize immediate synergies, estimated to be over $30 million, through fixed cost reductions, operational efficiencies and reduced public company costs. Over the long-term, the additional scale will further strengthen Precision’s operating leverage and positions the company to service our customers’ continued transition to High Performance drilling services with high spec AC rigs. Additionally, this combination allows us to better differentiate our service offering through our combined industry leading drilling technology initiatives and a larger operating platform."
"The incremental free cash flow generated through this combination will ensure Precision meets or exceeds our long-term debt reduction targets and improves our financial flexibility to pursue growth opportunities in the United States and in international markets."
The Precision Board has unanimously approved the Transaction and determined that the Transaction and the entry into of the Arrangement Agreement are in the best interests of Precision.
The Transaction is expected to be completed in late 2018 and is subject to TSX, court and regulatory approvals and the satisfaction of other customary closing conditions.