Canada-based Akita Drilling has agreed to acquire its rival Xtreme Drilling in a stock-cum-cash deal worth about C$209m ($161.38m) in a move to create a major onshore drilling contractor in North America.
Image: Onshore drilling. Photo: courtesy of Stuart Miles/Freedigitalphotos.net.
The merged companies, which will operate under the Akita name, will posses a fleet comprising 44 drilling rigs with operations across important resource basins in both Canada and the US.
As per the transaction terms, shareholders of Xtreme will be issued 0.29 of Akita Class A non-voting common share along with C$0.59 ($0.46) in cash for each share they hold in the former.
The transaction is said to club two complementary companies with each of them focused on high-spec drilling rigs and disciplined operations.
Akita said that the transaction offers it immediate scale in the US market, consolidating upon its recent expansion into the Permian Basin, and the potential for premium dayrates and margins.
Akita president & CEO Karl Ruud said: “The transaction is a continuation of AKITA’s strategy of capitalizing on the improving fundamentals in the US land drilling market.
“Our highly experienced and capable leadership, which has run one of Canada’s most successful and stable drilling contractors, will lead the combined company into a new stage of growth while continuing to deliver on AKITA’s objective to increase shareowner value.”
The merger is also expected to enable Akita in sustaining its position in active Canadian markets such as oil sands maintenance drilling operations, with leverage to a longer-term recovery in drilling activity in Canada.
Akita further said that the merger will grow operational and customer network of the combined entity across all major North American resource basins, thereby offering the flexibility to utilize high quality drilling rigs on both sides of the border to streamline utilization and returns.
Xtreme president and CEO Matt Porter said: “The combined company will have a larger and stronger platform to continue Xtreme’s strategy of providing high-spec drilling rigs with a premium value proposition for the US market.
“Together we will be better positioned to optimize existing assets and pursue new business opportunities. Our shareholders will be part of a strongly capitalized, historic dividend-paying and disciplined organization that will execute on growth while focusing on shareholder returns.”
The merger, which will be subject to TSX, court and regulatory approvals among other closing conditions, is anticipated to be completed in the third quarter of this year.