PATTERSON-UTI ENERGY, INC. announced that it has entered into an agreement to acquire Pioneer Energy Services Corp. for approximately $295 million, which includes the retirement of all Pioneer Energy Services’ debt. Consideration for this acquisition consists of the issuance of up to 26,275,000 shares of Patterson-UTI common stock plus payment of $30 million of cash. The transaction is expected to close in the fourth quarter of 2021, subject to regulatory approvals, customary closing conditions and the approval of Pioneer Energy Services’ stockholders. Transaction highlights and strategic rationale include:
Andy Hendricks, Patterson-UTI’s Chief Executive Officer, stated, “As a leading provider of contract drilling services in the United States, we are proud to announce this transaction. Pioneer’s high-quality fleet of 17 drilling rigs in the United States, of which 16 are super-spec, will be a valuable addition to our business. Additionally, many of these rigs are capable of substituting cleaner-burning natural gas for diesel, a technology that is becoming increasingly important to operators for reduced emissions.
“Following the closing of this transaction, Patterson-UTI will own 166 super-spec rigs in the United States, with almost half of these rigs equipped to utilize alternative power sources for reduced emissions. Furthermore, this transaction expands our geographic footprint into the international markets with the addition of eight rigs in Colombia, where Pioneer has worked for 14 years with an experienced operations team and a well-established infrastructure. I want to recognize the Pioneer employees for their hard work in creating such an attractive company with great performance for their customers, and I look forward to welcoming the Pioneer employees to the Patterson-UTI family.”
Transaction and Timing
Under the terms of the transaction, Patterson-UTI will acquire Pioneer Energy Services for aggregate consideration of up to 26,275,000 shares of Patterson-UTI common stock and $30 million of cash. As more fully described in the acquisition agreement, all Pioneer Energy Services debt is being retired in the transaction with a portion of such shares and cash and with Pioneer Energy Services’ cash on hand determined in accordance with the acquisition agreement prior to closing. The number of Patterson-UTI shares to be delivered in the acquisition is subject to downward adjustment if the VWAP of Patterson-UTI shares for the 10 days prior to closing exceeds $11.00, in which case the shares to be delivered will be reduced by 50% of the value exceeding $11.00 per share. The transaction values Pioneer Energy Services on a cash and debt free basis at approximately $295 million, assuming the issuance of 26,275,000 shares of Patterson-UTI common stock at the closing price of $10.14 on July 2, 2021, plus $30 million of cash. Pioneer Energy Services’ convertible notes will convert into shares of Pioneer common stock in accordance with their terms in connection with the closing and will receive Patterson-UTI shares on the same basis as if the notes had been converted prior to the closing.
The transaction was unanimously approved by each of Patterson-UTI’s and Pioneer Energy Services’ board of directors and is expected to close in the fourth quarter of 2021, subject to regulatory approvals, customary closing conditions and the approval of Pioneer Energy Services’ stockholders. Additionally, Patterson-UTI has entered into an agreement with holders who collectively represent approximately 88% of the outstanding voting power of Pioneer Energy Services to vote in favor of the transaction.
In addition to the U.S. and Colombian contract drilling businesses, Pioneer Energy Services includes a well-run and high-quality well service rig business consisting of 123 service rigs with a leadership position in the Gulf Coast region. Patterson-UTI believes this business would be better served as part of a larger well service rig business or as a focused standalone business. Accordingly, Patterson-UTI expects that this well service rig business would be divested following the closing of the transaction.
Patterson-UTI will host a conference call to discuss the transaction on July 6, 2021 at 8:00 a.m. Central Time. The dial-in information for participants is (844) 494-002 (Domestic) and (647) 253-8640 (International). The passcode for both numbers is 7582880. The webcast can be accessed through the Investor Relations section at investor.patenergy.com.
Gibson, Dunn & Crutcher LLP is serving as legal counsel to Patterson-UTI. Vinson & Elkins L.L.P. is serving as legal counsel to Pioneer Energy Services. Simmons Energy, a division of Piper Sandler, and Tudor, Pickering, Holt & Co. are serving as financial advisors to Pioneer Energy Services.
Patterson-UTI is a leading provider of oilfield services and products to oil and natural gas exploration and production companies in the United States, including contract drilling, pressure pumping and directional drilling services. For more information, visit www.patenergy.com.