Nabors Industries Ltd. has entered a definitive agreement to acquire Parker Wellbore’s issued and outstanding common shares in exchange for 4.8 million shares of Nabors common stock, Nabors said in an Oct. 15 press release.
Based on Nabors’ Oct. 14 closing stock price of about $77.52, the deal is valued at about $372 million. Nabors’ offer is subject to a share price collar that establishes a floor and ceiling for the value of the stock. Nabors will also assume Parker Wellbore’s net debt of approximately $100 million.
The deal marks a continuation of service industry consolidation following a massive $243 billion wave of E&P M&A since 2023.
Nabors said the acquisition will add a large-scale, high performance tubular rental and repairs services operation to the Nabors portfolio. Growth in wellbore lateral lengths is a key driver to increasing demand for drill pipe, both in the U.S. and in other important markets.
Parker's casing running business complements Nabors' own tubular services and affords the opportunity to migrate to Nabors' integrated casing running model. Nabors expects the combination to establish the industry's third largest provider with a presence in several key geographies.
On a combined company basis, Nabors said adjusted EBITDA for the first six months of 2024 totaled $527 million. For the full year 2024, Parker expects to generate EBITDA of $180 million, Nabors said. With incremental EBITDA and $100 million in additional net debt, the transaction is projected to improve Nabors' leverage metrics, Nabors said in its press release.
The stock sent Parker Drilling, the name Parker Wellbore uses in Securities and Exchange filings, up 25% in trading on the morning of Oct. 15.
Prior to the transaction announcement, Parker Wellbore's market cap was about $240 million.
The transaction is expected to result in immediate accretion to Nabors' free cash flow, the company said, as well as increasingly accretive to valuation metrics as expense and revenue synergies are progressively realized.
Anthony Petrello, Nabors’ chairman, president and CEO, said the deal brings together two of the “storied names in our industry.”
“The acquisition of Parker expands our high margin, capex-light Nabors Drilling Solutions global business, while solidifying the geographical footprint of our international drilling rig business,” Petrello said. “With Parker's resilient free cash flow and healthy capital structure, this acquisition also is expected to deliver profitable growth together with improved leverage metrics.”
Parker provides drilling services across global energy markets. Through its Quail Tools subsidiary, Parker is the leading rental provider of high-performance downhole tubulars in the U.S. market. Internationally, Parker provides tubular rentals and repair services. Parker offers differentiated, casing and tubular running services in the U.S., the Middle East, Latin America and Asia. Its portfolio also includes a fleet of 17 drilling rigs in the U.S. and international markets, as well as operations and maintenance services primarily in Canada and Alaska.
Petrello said that in the past five years, Parker has achieved an impressive record of increasing results. “With Nabors' extensive global technology platform, we are confident we will extend Parker's success even further," he said.
Sandy Esslemont, president and CEO of Parker commented, "Parker's leading position across key product lines and geographic markets aligns neatly with Nabors' footprint. Our portfolio and technology offerings combined with Nabors' leading drilling solutions business and strong capital structure are expected to provide significant benefits to both Nabors' and Parker's customers, investors and the industry at large."
With the acquisition, Nabors expects to realize up to $35 million of annualized expense synergies, with the majority achieved during the first 12 months post-closing. The primary drivers of these savings include reductions in both duplicate overhead and operational expenses and savings in procurement. In addition to these amounts, Nabors expects to combine its existing drill pipe rental operations in the U.S. with Quail Tools, resulting in additional efficiency savings and revenue opportunities. Nabors also plans to leverage its global operations footprint to expand Parker's international business.
The transaction is expected to close in early 2025, subject to customary closing conditions, as well as shareholder and regulatory approvals.
Haynes Boone represented Nabors in the transaction.