Blog Coverage Patterson-UTI Energy Announces the Acquisition of Seventy Seven Energy

Upcoming AWS Coverage on Helmerich & Payne Post-Earnings Results

LONDON, UK / ACCESSWIRE / December 14, 2016 / Active Wall St. blog coverage looks at the headline from Patterson-UTI Energy, Inc. (NASDAQ: PTEN) as the Company announced on December 12, 2016, the acquisition of Seventy Seven Energy Inc. in an all-stock transaction including outstanding debt. The deal is valued at $1.76 billion. Register with us now for your free membership and blog access at: http://www.activewallst.com/register/.

One of Patterson-UTI Energy’s competitors within the Oil & Gas Drilling & Exploration space, Helmerich & Payne, Inc. (NYSE: HP), reported on November 17, 2016, its results for fiscal year-end ended September 30, 2016. AWS will be initiating a research report on Helmerich & Payne in the coming days.

Today, AWS is promoting its blog coverage on PTEN; touching on HP. Get all of our free blog coverage and more by clicking on the links below:

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Patterson-UTI Energy is one of the largest land drilling contractors with a large, high-quality fleet of drilling rigs and offers onshore contract drilling and pressure pumping services to exploration and production companies in North America, and drilling rig pipe handling technology globally. Seventy Seven Energy provides a wide range of well-site services like drilling, hydraulic fracturing and oilfield rentals. It also offers equipment to its land-based exploration and production customers in the US.

Commenting on the merger, Andy Hendricks, Patterson-UTI’s Chief Executive Officer said:

“This merger provides both strong personnel and high quality equipment that are complementary to our existing service offerings.”

Jerry Winchester, Seventy Seven Energy’s Chief Executive Officer added:

“Given the changes our company and industry have been through the past two years, this merger is the right decision for our shareholders, employees and the oil field services industry as a whole. This transaction will establish a company with tremendous scale, a diversified customer base and premier assets located in the most active basins in the US.”

Merger details

As per the agreement, Patterson-UTI will acquire all the outstanding common shares of Seventy Seven Energy in exchange of approximately 49.6 million Patterson-UTI common shares. The exact number of Patterson-UTI common shares could vary if some of the warrants of Seventy Seven are forfeited or exercised on a net-share basis. Based on this exchange and the closing price of Patterson-UTI share of $28.67 at the close of trade on December 12, 2016, Seventy Seven Energy is valued at approximately $1.76 billion including Seventy Seven’s debt of approximately $336 million net of cash and warrant proceeds. Patterson-UTI will pay off Seventy Seven Energy’s outstanding debt on the finalization of the merger. The exchange works out to approximately 1.7725 shares of Patterson-UTI for each Seventy Seven Energy’s share. Once the merger is in place, Seventy Seven Energy’s shareholders will own approximately 25% stake in the new entity.

Capital Management, Axar Capital Management, and Mudrick Capital Management are the majority shareholders of Seventy Seven Energy and own more than 50% stake in the company. Patterson-UTI has entered into a voting agreement with these majority shareholders of Seventy Seven Energy to vote in favour of the merger.

The merger is expected to be finalized at the end of Q1 2017 subject to regulatory approvals and closing conditions.

Patterson-UTI has put in place the funding required to pay off all the debts of Seventy Seven Energy which consists of cash in hand, $500 million in undrawn revolving credit facility, and $150 million in senior unsecured bridge financing. Patterson-UTI also plans to issue additional equity to maintain its conservative equity structure.

Merger Benefits for Patterson-UTI

Patterson-UTI and Seventy Seven Energy are in the building and operating high-spec rigs business. This merger will establish Patterson-UTI as a leader in the land drilling market. Patterson-UTI presently has a fleet of 161 APEX® rigs for pad drilling applications whereas Seventy Seven Energy has a fleet of 40 high-spec drilling rigs, 93% of which are pad capable. At the finalization of the merger Patterson-UTI will have 201 high-spec rigs.

Patterson-UTI’s pressure pumping business has more than one million fracturing horsepower in Texas and the Appalachian region of the northeast United States. Seventy Seven Energy, on the other hand, owns approximately 500,000 horsepower of fracturing equipment located in the Anadarko Basin and Eagle Ford Shale. Post-merger it will own one of the largest and modern pressure pumping fleets with the capacity of more than 1.5 million hydraulic fracturing horsepower. This fleet is located strategically in oil and gas regions across the US.

The merger will also give a new revenue stream and business to Patterson-UTI as it will inherit Seventy Seven Energy’s oilfield rentals business as a part of the deal. The oilfield rentals business of Seventy Seven Energy offers a fleet of premium rental tools as well as provides specialized services for land-based oil and natural gas drilling, completion, and work-over activities.

With the merger, Patterson-UTI expects to save over $50 million in synergies it would be accretive to cash flow per share, excluding transaction costs.

In August 2016, the company managed to successfully complete the Pre-Packaged Bankruptcy Process and emerged from Chapter 11 bankruptcy protection. Seventy Seven Energy had filed a pre-packaged plan of reorganization under Chapter 11 of the US Bankruptcy Code in June 2016, wherein it planned to convert approximately $1.1 billion of its debt into equity and funds raised to be used to pay off its Trade Creditors, Suppliers, and Contractors.

Stock Performance

On Tuesday, the stock closed the trading session at $26.70, tumbling 6.87% from its previous closing price of $28.67. A total volume of 15.02 million shares have exchanged hands, which was higher than the 3-month average volume of 3.45 million shares. Patterson-UTI Energy’s stock price rallied 21.45% in the last month, 45.05% in the past three months, and 27.18% in the previous six months. Furthermore, since the start of the year, shares of the company have soared 78.50%. The stock has a dividend yield of 0.30% and currently has a market cap of $4.05 billion.

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