Earthstone Energy will acquire oil well operations sites in Texas. US Credit: Roy Luck.

US-based Nine Energy Service is to acquire downhole technology provider Magnum Oil Tools International in a cash-stock deal valued at nearly $493m.

Under the agreement, Nine will make a payment of around $334m in cash and issue five million shares of common stock valued at $159m to Magnum.

Magnum serves clients in the oil and gas industry with its downhole completion tools portfolio, which includes dissolvable and composite frac plugs, as well as several other patented consumables.

Through the transaction, Nine intends to boost its position as a provider of completion focused technology.

The acquisition is expected to give Nine a significant advantage in the dissolvable frac plug market. In addition, it will help the company become a major provider of differentiated isolation tools.

The company noted that it will benefit from Magnum’s ability to design, engineer and commercialise reliable downhole technologies.

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“We believe the combination of capabilities within Nine and Magnum creates a unique and differentiated oilfield service platform.”

Furthermore, the addition of Magnum’s portfolio of completion tools will boost Nine’s ability to help operators reduce risk and cycle times.

Nine Energy Service president and CEO Ann Fox said: “At Nine, we constantly focus on adding differentiated technology to our portfolio of completion tools to enable operators to more reliably and effectively complete the horizontal wellbores of tomorrow.

“Magnum will propel Nine to a more balanced profile of completion tools, creating excellent barriers to entry while simultaneously building a business that is less labor and less capital intensive and more free cash-flow generative.

“This will allow us to navigate a very difficult labour market and supports our approach of blending capital intensity, helping us provide more sustainable through-cycle returns for our shareholders.

“We believe the combination of capabilities within Nine and Magnum creates a unique and differentiated oilfield service platform and we will be able to leverage strengths from both sides to provide better service for our customers and accelerate profitable growth moving forward.”

Completion of the acquisition is based on the receipt of antitrust approval and the fulfilment of other closing conditions.