Patterson-UTI Energy, Inc. (NASDAQ: PTEN), a prominent name in oilfield services, announced a definitive agreement on July 6, 2021, to acquire Pioneer Energy Services Corp. This strategic acquisition, valued at approximately $295 million, encompasses the retirement of Pioneer Energy Services’ existing debt. The financial consideration involves the issuance of up to 26,275,000 shares of Patterson-UTI common stock, coupled with a $30 million cash payment. The deal is anticipated to finalize in the fourth quarter of 2021, pending regulatory clearances, standard closing conditions, and the approval of Pioneer Energy Services’ stockholders.
This acquisition marks a significant step for Patterson-UTI Energy, enhancing its operational scale and service offerings within the energy sector. Key highlights and strategic rationales for this acquisition include several compelling benefits:
- Expanded Super-Spec Drilling Rig Fleet: The deal adds 16 advanced super-spec drilling rigs to Patterson-UTI’s already substantial fleet of 150 super-spec rigs in the United States. This expansion strengthens Patterson-UTI’s position as a leading drilling services provider.
- Geographic Footprint Extension: Pioneer Energy Services brings eight pad-capable rigs operating in Colombia, extending Patterson-UTI’s operational reach into international markets. This diversification reduces geographical concentration risk and opens new avenues for growth.
- Financial Accretion and Synergies: The acquisition is projected to enhance Patterson-UTI’s cash flow per share and adjusted EBITDA per share. Furthermore, it’s expected to generate annual cost synergies exceeding $15 million, improving overall financial performance.
- Customer Base Complementarity: Pioneer Energy Services’ customer portfolio aligns well with Patterson-UTI’s existing clientele, providing opportunities for cross-selling and strengthened customer relationships. This synergy allows for accelerated growth in super-spec rig deployment within a market demonstrating increasing demand.
- Enhanced Focus on Emission Reduction: A significant number of the acquired rigs are equipped to utilize natural gas as a primary fuel source. This capability bolsters Patterson-UTI’s commitment to environmentally responsible operations and caters to the growing industry emphasis on reduced emissions.
Andy Hendricks, Chief Executive Officer of Patterson-UTI, expressed enthusiasm about the acquisition, stating, “We are excited to announce this transaction, which aligns with our strategic objectives to expand our contract drilling services and enhance our technological capabilities. Pioneer Energy Services has established a high-quality fleet of 17 drilling rigs in the United States, with 16 being super-spec rigs, which will be a valuable asset to our operations. The ability of many of these rigs to use cleaner-burning natural gas is particularly important as the industry increasingly focuses on minimizing emissions.”
Hendricks further emphasized the strategic benefits, “Upon completion of this transaction, Patterson-UTI will command a fleet of 166 super-spec rigs in the United States. Notably, nearly half of these rigs will be capable of utilizing alternative power sources for reduced emissions, positioning us favorably in a market increasingly sensitive to environmental concerns. Expanding into Colombia through this acquisition, where Pioneer Energy Services has operated for 14 years with a skilled team and established infrastructure, represents a significant international growth opportunity for Patterson-UTI.” He also acknowledged the Pioneer Energy Services employees, recognizing their contribution to building a strong company and expressed eagerness to welcome them into the Patterson-UTI organization.
Transaction Structure and Timeline
Under the agreed terms, Patterson-UTI will acquire Pioneer Energy Services for a total consideration comprising up to 26,275,000 shares of Patterson-UTI common stock and $30 million in cash. The agreement stipulates that Pioneer Energy Services’ debt will be retired as part of the transaction. The number of Patterson-UTI shares may be adjusted downwards if the volume-weighted average price (VWAP) of Patterson-UTI shares exceeds $11.00 in the 10 days leading up to the closing. In such a scenario, the share issuance will be reduced by 50% of the value exceeding the $11.00 threshold per share. The transaction values Pioneer Energy Services at approximately $295 million on a cash and debt-free basis, based on the closing price of Patterson-UTI shares on July 2, 2021.
Both Patterson-UTI’s and Pioneer Energy Services’ boards of directors have unanimously approved the transaction. The closing is anticipated in the fourth quarter of 2021, contingent on securing regulatory approvals, fulfilling customary closing conditions, and obtaining the approval of Pioneer Energy Services’ stockholders. Patterson-UTI has also secured an agreement with holders representing approximately 88% of Pioneer Energy Services’ voting power to vote in favor of the acquisition, indicating strong support for the merger.
Beyond the drilling rig businesses in the U.S. and Colombia, Pioneer Energy Services also encompasses a well-regarded well service rig business. This division includes 123 service rigs and holds a leading position in the Gulf Coast region. Patterson-UTI believes this well service rig business might be better positioned within a larger, specialized well service entity or as an independent operation. Consequently, Patterson-UTI intends to divest this well service rig business following the transaction’s closure.
Investor Conference Call Details
Patterson-UTI hosted a conference call on July 6, 2021, at 8:00 a.m. Central Time to discuss the acquisition in detail with investors and analysts. Interested parties could access the conference call via dial-in numbers: (844) 494-0102 (Domestic) and (647) 253-8640 (International), using the passcode 7582880. A webcast replay is available through the Investor Relations section of Patterson-UTI’s website at investor.patenergy.com.
Advisory Roles
Gibson, Dunn & Crutcher LLP served as legal counsel to Patterson-UTI in this transaction. Pioneer Energy Services received legal counsel from Vinson & Elkins L.L.P. Simmons Energy, a division of Piper Sandler, and Tudor, Pickering, Holt & Co. acted as financial advisors to Pioneer Energy Services.
About Patterson-UTI Energy, Inc.
Patterson-UTI Energy Inc. is a leading provider of diverse oilfield services and products in the United States. Their offerings span contract drilling, pressure pumping, and directional drilling services, catering to oil and natural gas exploration and production companies. For further details, please visit www.patenergy.com.
Important Notice for Pioneer Energy Services Stockholders
In connection with the proposed acquisition, Patterson-UTI will be filing pertinent documents with the Securities and Exchange Commission (SEC), including a Registration Statement on Form S-4. This Registration Statement will incorporate a proxy statement/prospectus. Once the SEC declares the Registration Statement effective, a definitive proxy statement/prospectus will be distributed to Pioneer Energy Services stockholders. Stockholders are strongly advised to thoroughly review the proxy statement/prospectus and all related documents filed with the SEC, as these documents will contain critical information about the proposed transaction. These documents will be accessible free of charge on the SEC’s website at http://www.sec.gov. Additional information can also be found on Patterson-UTI’s website at www.patenergy.com.
Disclaimer: No Offer or Solicitation
This communication is for informational purposes only and does not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction where such offer, solicitation or sale would be unlawful prior to registration or qualification under securities laws.
Forward-Looking Statements Caution
This press release includes forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. These statements are based on Patterson-UTI’s current expectations and beliefs regarding future events and are subject to risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties are detailed in Patterson-UTI’s filings with the SEC, which are available on Patterson-UTI’s website and the SEC’s EDGAR system. Patterson-UTI undertakes no obligation to update or revise any forward-looking statements.
SOURCE PATTERSON-UTI ENERGY, INC.
