Precision Drilling Trust, Canada's largest oilfield-services provider, agreed to buy Grey Wolf Inc. for about $2 billion to add drilling in the larger and stronger US market. Stockholders of Grey Wolf, based in Houston, will get $5 and 0.1883 trust unit per share, the companies said today in a statement. That's $9 a share at the Aug. 22 closing price, a premium of 4.8 percent and less than a June bid of $10 a share, which Grey Wolf spurned. Acquisitions of oilfield-services providers and drillers accelerated this year as record oil prices raised demand for rigs and support equipment. Grey Wolf rejected three previous bids from Calgary-based Precision in favor of its April agreement to acquire Basic Energy Services Inc., a Midland, Texas-based oilfield contractor. Shareholders voted that deal down in July. Precision will gain 121 rigs, mostly drilling for natural gas in the US, where those in operation have risen 13 percent this year to a record 1,998, according to weekly counts by Baker Hughes Inc. Canadian rigs have fallen 13 percent since a high of 457 were operating in February. “It will provide a nice platform for expansion, particularly further into Mexico, because in North American drilling, size and scope matter,'' said Jud Bailey, an analyst for Jefferies & Co. in Houston who rates Grey Wolf shares at “buy'' and owns none. “But the premium is underwhelming. This is clearly an inferior offer.'' Grey Wolf shareholders opened the door to Precision by rejecting in July management's plan to buy Basic Energy Services for $1.4 billion. Precision Chief Executive Officer Kevin Neveu said then he would immediately revive his offer to buy Grey Wolf. Since then, natural-gas prices have tumbled, dragging down the value of Precision's trust units by 12 percent. Grey Wolf has dropped 11 percent from a high of $9.50 a share on June 23. Precision said today it will issue about 42 million new units to Grey Wolf shareholders, 4.5 percent more than in the June offer. Precision is getting Grey Wolf cheaply “because there were no other takers,'' Bailey said. Grey Wolf shareholders will own 25 percent of the combined company and three of its directors will join the Precision board at closing. A vote of Grey Wolf shareholders on the deal will be held by year-end, the companies said. Deutsche Bank AG and Royal Bank of Canada are advising Precision Drilling on the transaction. Its lawyers are Mayer Brown LLP, Bennett Jones LLP, and Felesky Flynn LLP. UBS AG is advising Grey Wolf, as did law firms Porter & Hedges LLP, Blake, Cassels & Graydon LLP, and Gardere Wynne Sewell LLP. Gas futures on the New York Mercantile Exchange have dropped 43 percent from the 30-month high reached on July 2. The announcement was made before the start of regular trading in North American markets. Precision Drilling dropped 3.3 percent to C$21.50 in pre-market trading in Toronto. Grey Wolf was little changed at $8.60 on the New York Stock Exchange.
