Patterson-UTI Energy’s business overview
Patterson-UTI Energy (PTEN) contracts land-based drilling rigs to upstream energy companies in the US and Canada. Currently, Patterson-UTI Energy owns 161 advanced rigs, known as “APEX rigs.” Patterson-UTI Energy’s pressure pumping assets include more than one million horsepower of fracturing equipment in Texas and the Appalachian region of the northeast US. Patterson-UTI Energy makes up 0.26% of the SPDR S&P MidCap 400 ETF (MDY).
Seventy Seven Energy’s business overview
Seventy Seven Energy (SVNT) provides drilling, hydraulic fracturing, and oilfield rental services to upstream producers. Seventy Seven Energy owns a fleet of 40 high-spec drilling rigs and 51 mechanical rigs. It also owns ~500,000 horsepower of fracturing equipment located in the Anadarko Basin and Eagle Ford Shale.
Patterson-UTI Energy and Seventy Seven Energy will complement each other, particularly with Seventy Seven Energy rigs targeted at the US unconventional shales. Following the merger, Patterson-UTI Energy is expected to own 201 land-based drilling rigs. It will also own one of the largest pressure pumping fleets in the US with 1.5 million hydraulic fracturing horsepower.
Revenue and net income
From 3Q15 to 3Q16, Patterson-UTI Energy’s revenues fell 51%, while its net loss improved. In comparison, Schlumberger’s (SLB) 3Q16 revenues fell 9.4% compared to 3Q15. Halliburton’s (HAL) revenues fell 31% during the same period.
On June 7, 2016, Seventy Seven Energy filed for bankruptcy. As a result, it filed for re-organization in the US bankruptcy court. It emerged from bankruptcy on August 1. During the two months ending on September 30, Seventy Seven Energy recorded revenues of $80 million and a net loss of $36.5 million.
Patterson-UTI Energy expects to achieve synergies in excess of $50 million. Its management also estimates that the merger will be accretive to cash flow per share.
On May 19, FMC Technologies (FTI), a Texas-based OFS (oilfield service and equipment) company, disclosed that it will combine with Technip, a France-based OFS company. To learn more about the pending acquisition, read FMC Technologies and Technip to Form Energy Services Giant.
Check out how shares of Patterson-UTI Energy and Seventy Seven Energy reacted to the acquisition news in the next part.