Publicado: Lun, Octubre 08, 2018
Financiera | Por Marilu Caballero

Precision to acquire Trinidad in $790m deal

Precision to acquire Trinidad in $790m deal

"With an expanded global platform, Precision is well positioned to win future tenders and to leverage the combined company's fleet of 26 worldwide rigs", said the company.

The deal announced on Friday trumps a hostile bid for Trinidad that was launched in August by Calgary-based Ensign Energy Services Inc. valued at C$947 million ($720 million).

Precision Drilling Corp. announced on Friday that it is buying Trinidad Drilling Ltd. in a deal worth about $1.028 billion.

The combined company would have 398 drilling rigs if the deal closes - 170 in the USA, 26 in the Middle East and 202 in Canada, although Neveu said the plan is to immediately sell 50 rigs in Canada from both fleets.

Precision shares closed Thursday at $4.44, making the offer of 0.445 share worth about $1.98 per Trinidad common share.

That's a substantially different deal than what Ensign had proposed directly to Trinidad's shareholders on August 30, after Trinidad's board rejected its initial offer.

The deal is expected to close by the end of the year. He did note that Ensign's board - chaired by billionaire Calgary Flames owner Murray Edwards - "isn't naturally disposed to consider favourably" paying such a break fee.

"This combination of two high-quality drilling contractors creates the third-largest drilling contractor in the robust US market and provides a significant worldwide growth platform", noted Trinidad CEO Brent Conway in a news release.

"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 worldwide markets", Neveu said.

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Precision chief executive Kevin Neveu said the deal would result in C$30 million in immediate savings, "through fixed cost reductions, operational efficiencies and reduced public company costs".

Trinidad's fleet of 141 drilling rigs includes 61 high spec AC rigs that fit 90 per cent within Precision's standardization protocols and are equipped with major components that are well aligned for fleet integration. It plans to leverage its increased scale and realize long-term incremental operating efficiencies through a recently upgraded information technology infrastructure and from technical support centers in Nisku, Alberta and in Houston.

Ensign's shares fell 6 per cent following Precision's announcement to $5.94 each in mid-day trading on the Toronto Stock Exchange, while Precision's shares slid over 2 per cent to $4.33 each.

This week, Husky Energy Inc. made a hostile $6.4-billion bid for oilsands-focused rival MEG Energy Corp. marking the third hostile takeover bid in the domestic energy sector this year after Ensign's offer for Trinidad and privately held Velvet Energy Ltd.'s takeover of Iron Bridge Resources.

However, the transaction requires approval from two-thirds of votes cast by Trinidad shareholders and a simple majority of Precision shareholders at separate special meetings.

Under terms of the agreement, Trinidad may not solicit or initiate discussions regarding any other business combination or asset sale. Precision has the right to match any superior proposals within a five day period.

One of Trinidad's directors is to be appointed to the Precision board, and another Trinidad director will be nominated for election to the board.

As of October 5, Precision Drilling had eight active rigs in Saskatchewan and 11 down rigs.

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