In a sign of the rising oil market, Precision Drilling (TSX: PD) has expanded its rig count via the acquisition of CWC Energy Services (TSXV: CWC). The purchase is to consist of a mix of cash and shares, with the transaction valued at $141 million.
The transaction will see Precision add 62 marketed service rigs as well as seven marketed drilling rigs in Canada, along with 11 marketed drill rigs in the US, the latter of which includes seven AC triple rigs. Ten of the drill rigs are said to be actively operating, three of which are in Canada and the remainder in the US.
The transaction is slated to result in annual operating synergies of $20 million once the assets are fully integrated, with Precision noting that CWC has roughly $20 million in excess real estate that will be monetized post-transaction. The purchase is also expected to be accretive to 2024 cash flow on a per share basis, while supporting deleveraging.
The transaction is set to consist of the issuance of 947,909 Precision shares, valued at roughly $88 million, along with a $14 million cash payment and the assumption of certain debt. The latter is despite Precision looking to cut $500 million in debt by 2025, and achieve a net debt to adjusted EBITDA ratio of less than 1.0 by the end of that year.
The offer collectively amounts to $0.197 per CWC share, despite the company closing yesterdays session at $0.205 per share.
“With the expected synergies and by further leveraging our scale, we believe the transaction will be accretive to earnings and provide significant cash flow to drive shareholder returns and support our debt reduction strategy. I am excited to welcome the CWC employees to the Precision team,” commented CEO Kevin Neveu on the purchase.
The transaction is currently slated to close in the fourth quarter of 2023, and is subject to shareholder approval by CWC shareholders, as well as regulatory approval.
Precision Drilling last traded at $91.37 on the TSX.
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