Canada-based directional drilling services provider Cathedral Energy Services has completed the acquisition of Rime Downhole Technologies, a Texas-based oil field equipment supplier.

Cathedral purchased Rime for around $41m, including $21m in cash and $20m in subordinated exchangeable promissory notes, exchangeable into 24,570,000 Cathedral shares.

Established in 2012, Rime is an engineering company specialised in building products for the downhole measurement-while-drilling (MWD) industry.

It offers a wide range of MWD components, including pulsers, pulser drivers, shock isolators and gamma modules, with Slick-HDTM Pulser and Agilis Driver as its top pulser solutions.

Rime founders Manoj Gopalan and Robert Weber will continue to lead the business.

Gopalan and Weber said: “We are aligned with the strategy of Cathedral and felt it gave us the best opportunity to grow our business and our technology.

“We are confident that with this partnership we will continue to support our customers with the same great products, service, dedication, and focus they’ve come to expect from Rime. Rime only becomes stronger with the resources of Cathedral behind it.”

Cathedral said that the acquisition will provide unique MWD products, where nearly 40% of the onshore drilling rigs in the US are operating with either Slick-HDTM Pulser or Agilis Driver.

Rime is expected to generate strong margins and consistent Adjusted EBITDA levels, based on historical results, low requirement for capital investment, and current outlook.

To fund the transaction, Cathedral has obtained a new $21m term loan from its lending syndicate and issued the EP Notes with an exchange price of CAD$1.10 per common share.

Cathedral estimates that the total investment in Rime should pay for itself in two years or less including expected synergies and cost of synergies, on an annualized basis.

Peters & Co. served as a financial advisor, and Acumen Capital Finance Partners, Stifel FirstEnergy, and Cormark Securities as strategic advisors to Cathedral to Cathedral.

DS Lawyers Canada and Fasken Martineau DuMoulin served as Canadian legal counsel, while Porter Hedges served as US legal counsel to Cathedral and its subsidiaries.

PPHB served as financial advisor and investment bank to Rime, and Meadows, Collier, Reed, Cousins, Crouch & Ungerman served as legal counsel to Rime and PPHB.

Cathedral president and CEO Tom Connors said: “We will continue to operate Rime as an independent brand and support the sale of industry-leading technology to a broad customer base, including some of our competitors.

“The addition of Rime’s proprietary MWD products completes Cathedral’s US directional drilling platform with the full suite of premier directional services technologies demanded by our customers.

“Cathedral will invest $5-10m to build Cathedral-owned MWD equipment and reduce our reliance on renting third-party MWD products resulting in significantly enhanced Adjusted EBITDA and stronger margins.”