Patterson-UTI Energy (PTEN.O) and NexTier Oilfield Solutions (NEX.N) on Thursday agreed to merge in an all-stock deal to create a $5.4 billion oil services firm.
According to the terms of the transaction, NexTier shareholders will receive 0.7520 shares of Patterson-UTI common stock for each share of NexTier common stock owned.
The deal represents an equity value of about $1.93 billion based on the stock's last closing price, according to Reuters' calculations.
The Wall Street Journal was the first to report that the two companies were in talks over a possible merger.
Oilfield services firms have been consolidating as their oil and gas customers limited spending on new wells in recent years. NexTier and Patterson-UTI have also acquired operations from rivals and customers to boost competitiveness and service offerings.
The oilfield services sector saw 69 mergers and acquisitions together worth $13 billion in 2022, a growth of 35% over 2021, albeit on a low base, according to a Deloitte report.
The merger brings together Patterson-UTI's sizeable land drilling business and NexTier's well completion operations. The merged entity would compete with the two largest U.S. fracking services firms — Halliburton (HAL.N) and Liberty Energy (LBRT.N).
Upon the deal's closing, expected in the fourth quarter of 2023, Patterson-UTI shareholders will own about 55% and NexTier shareholders will own approximately 45% of the combined company on a fully diluted basis.
Patterson-UTI's top boss Andy Hendricks will serve as the president and chief executive officer of the combined firm.
The deal is expected to boost earnings per share and free cash flow per share in 2024 and generate annual cost savings and synergies of about $200 million within 18 months of close.
