(WO) – Patterson-UTI Energy, Inc. and NexTier Oilfield Solutions Inc. have entered into a definitive merger agreement to combine in an all-stock merger of equals transaction. The combined company, with an enterprise value of approximately $5.4 billion, will be an industry leading drilling and completions services provider with operations in the most active major U.S. basins.
Andy Hendricks, Chief Executive Officer of Patterson-UTI, commented, "This merger unites two top-tier and technology-driven drilling and well completions businesses, creating a leading platform at the forefront of innovation. As one company, we will have a significantly expanded, comprehensive portfolio of oil field services offerings across the most active producing basins in the United States, along with operations in Latin America.”
Robert Drummond, President and Chief Executive Officer of NexTier, said, "Our agreement to merge with Patterson-UTI brings together two complementary organizations to create a premier North American drilling and completions company. We believe offering a comprehensive suite of solutions on one integrated platform will position the combined company as the partner of choice for a greater number of customers across geographies and throughout the full well life cycle.”
Leading drilling and well completions businesses: The combined company will have a best-in-class operational and technology portfolio, along with data analytics to maximize well performance. Specifically, the merger will create a leading U.S. contract drilling business with 172 super-spec drilling rigs and a directional drilling business.
The merger also creates a leading U.S. well completions business with deployed capacity of 45 active spreads and 3.3 million hydraulic fracturing horsepower, with nearly two-thirds of deployed fleets being dual fuel capable. NexTier's integrated approach will provide additional market capacity of Power Solutions, wireline, last mile logistics, proppant handling and cementing services.
Strong revenue and cash generation: On an annualized combined basis as of the first quarter of 2023, the combined company generated approximately $6.9 billion of revenue, $1.9 billion in adjusted EBITDA and improved free cash flow generation. The combined company will be an attractive investment opportunity with greater size and scale facilitating increase share float and liquidity.
Delivers significant cost saving and operational synergy opportunity: The transaction is expected to create significant efficiencies for the combined company's well completions operations. The combined company expects to realize annual cost savings and operational synergies of approximately $200 million within 18 months following close through operations integration, supply chain management and reductions in sales, general and administrative expenses. One-time costs expected to be incurred to achieve the synergies are approximately $80 million.
Significant value creation potential through the expansion of wellsite integration strategies: The combined company's wellsite integration strategy is expected to create additional value through efficiency gains and cost reductions. This strategy can create as much as $7 million in adjusted EBITDA improvements and CapEx reduction annually on fully integrated completions fleets with a larger frac footprint.
Shared commitment to sustainably focused operations: The combined company will have a sustainability leadership position in lowering carbon emissions at the wellsite, with over 50% of the drilling and completions fleet capable of being powered by natural gas.
Leadership, governance and headquarters: The combined company will be led by a proven management team that reflects the strengths and capabilities of both organizations. Upon close, Andy Hendricks, President and Chief Executive Officer of Patterson-UTI, will serve as President and Chief Executive Officer of the combined company and Robert Drummond, President and Chief Executive Officer of NexTier, will become Vice Chair of the combined company's Board. Curtis Huff, Patterson-UTI's current Chair of the Board, will serve as Chair of the combined company's Board. Following close, the combined company's Board will comprise 11 directors, six of whom will be from the Patterson-UTI Board, including Mr. Hendricks, and five of whom will be from the NexTier Board.
The combined company will operate under the name Patterson-UTI Energy, Inc. and trade under the ticker symbol PTEN. The Well Completions business will operate under the NexTier Completions brand. The combined company's corporate headquarters will remain in Houston, Texas.