Precision bids for third-largest driller
Canada’s largest contract drilling company is moving to solidify its position with a $540-million all-share merger offer for the country’s thirdlargest driller.
But the real attraction for Precision Drilling Ltd. is Trinidad Drilling Ltd.’s “super-spec” American rig fleet as the Canadian drilling industry remains in a deep funk due to commodity price discounts and low investor confidence.
“We’ve said many times that ... acquisitions are not a priority for Precision, but in this case the value creation opportunity was too compelling for us to ignore,” said Precision CEO Kevin Neveu on a Friday conference call.
“Both Precision and Trinidad have focused on the United States and the Middle East as our primary growth geographies. This combined platform substantially reinforces our scale and market relevance in these key regions, positioning us for sustained growth and technology deployment.”
In a news release, Trinidad said shareholders should support Precision’s white knight offer and continue to reject an all-cash $470-million hostile takeover bid from Ensign Energy Services Inc., Canada’s second-largest driller, launched in August.
All three companies are based in Calgary.
Trinidad’s shares were ahead 11 cents or about six per cent at $1.95 at noon on the Toronto Stock Exchange. Precision Drilling shares were at $4.31, down 13 cents or about three per cent, and Ensign was off 40 cents or 6.3 per cent at $5.95.
The Ensign bid was made soon after Trinidad ended a strategic review process that allowed prospective buyers to examine the company. It said no suitable offers had been received.
Trinidad said the Precision bid is worth $2.11 per Trinidad share based on Precision’s 30-day volume-weighted average share price. That’s a premium of 25 per cent over the Ensign offer and 17 per cent over Trinidad’s 30-day price of $1.81, it said.
“This combination of two high-quality drilling contractors creates the thirdlargest drilling contractor in the robust U.S. market and provides a significant international growth platform,” noted Trinidad CEO Brent Conway in a news release.