Canadian drilling rig contractor Precision Drilling has signed an agreement to acquire all issued and outstanding common shares of Trinidad Drilling in a C$1.028bn ($794.28m) deal.
The total consideration includes the assumption of around C$477m ($368.5m) of Trinidad’s net debt.
Under the agreement, Precision will offer 0.445 common shares for each outstanding Trinidad share.
Once the transaction is closed, existing shareholders of Trinidad will hold about 29% of Precision.
The transaction is expected to create a leading drilling company in the US and enable Precision to have a North American fleet of more than 200 active rigs and 322 total rigs. Precision will have access to Trinidad’s fleet of 141 drilling rigs including 61 high-spec AC rigs.
The combined fleet of 26 international rigs will position the company to secure more orders and drive growth.
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By GlobalDataPrecision Drilling president and CEO Kevin Neveu said: “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.”
The company expects to achieve annual synergies of more than C$30m ($23.17m) from the deal through fixed cost reductions, operational efficiencies, and reduced public company costs.
Neveu added: “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 acquisition will enable the company to have a strong position throughout the key plays in North America.
Precision intends to use incremental free cash flow generated through the transaction to meet its long-term debt reduction targets, as well as pursue growth opportunities in the US and other markets.
In August, Ensign Energy Services made a bid to acquire Trinidad for C$1.68 ($1.29) a share. Trinidad board has approved the transaction with Precision as the offer is superior to that of Ensign.
The board has advised shareholders to reject the offer made by Ensign.
The transaction is anticipated to close later this year, subject to certain closing conditions, including receipt of regulatory approvals.
