It said the deal also includes the assumption of about $477 million in Trinidad net debt.
Upon completion of the transaction, existing holders of Trinidad shares will collectively own about 29 per cent of Precision.
“This transaction creates exceptional value for both Trinidad and Precision shareholders. 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,” said Kevin Neveu, president and chief executive officer of Precision.
“From a strategic perspective, Trinidad is a perfect fit with Precision. We can realize immediate synergies, estimated to be over $30 million, through fixed cost reductions, operational efficiencies and reduced public company costs. 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 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 international markets.”
The company said 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 said it will have a North American fleet that includes over 200 active rigs and 322 total rigs. As the third largest driller in the U.S., Precision will have strong positions in all key shale plays and will be positioned for improving industry activity.
In 2019, Precision said it expects to realize more than $30 million in annual synergies through corporate efficiencies and facility consolidations. Precision will leverage its increased scale and realize long-term incremental operating efficiencies through its recently upgraded IT infrastructure, technical support centres in Nisku and Houston, and its supply chain management and manufacturing capabilities.
“Precision will benefit from the deployment of international rigs into long-term contracts and Precision’s operating experience, infrastructure and scale in Saudi Arabia and Kuwait will support successful project execution. With an expanded international platform, Precision is well positioned to win future tenders and to leverage the combined company’s fleet of 26 international rigs,” said the company.
Mario Toneguzzi is a veteran Calgary-based journalist who worked for 35 years for the Calgary Herald, including 12 years as a senior business writer.