Grey Wolf accepts Precision’s fourth offer

Wednesday, 24 September 2008 21:52

CARRIE KELLY The Pipeline After rejecting three of Precision Drilling Trust’s bids for a take over, U.S.-based Grey Wolf finally agreed to a deal at the end of August. The deal, which is subject to regulatory approval that is expected to be granted by year end, gives Grey Wolf shareholders $5 per share in cash and 0.1883 Precision trust units. That gives Grey Wolf shareholders about a 25 per cent chunk of the company. The offer represents a 4.5 per cent increase in the aggregate number of units offered to Grey Wolf shareholders over Precision’s previous public offer. The combined equity of the new merged company is $3.6 billion. The new combination creates a company with 371 drilling rigs and 229 service rigs, the second largest land-drilling company in North America. Precision will come out of the transaction a little more than a billion dollars in debt. “We are all very excited for the potential of this company going forward and look forward to getting through this process and getting on with life as one combined company,” said Kevin Neveu, Precision Drilling CEO.  The purchase of Grey Wolf by Precision gives the company a presence in Canada, the lower 48 United States and now Mexico.  “We still see significant opportunity for growth in North American,” Neveu said. “We absolutely believe this will accelerate our ‘09 capital program.” There is a need for high quality rigs in shale gas plays, he continued, saying the new company will get in on every emerging and shale gas play in Canada and the U.S., “from the Haynesville shale in Louisiana to the Horn River development in northeastern British Columbia.” The greater size of the company may give Precision an advantage over its peers on rig construction costs, Neveu said. “We think that gives us an initial capital advantage,” he said, suggesting it could give Precision maybe a 20 per cent cost advantage on construction costs. Grey Wolf comes with a high customer base and a number of experienced workers, which will bode well for the newly combined company, Neveu added. “It is our view that the single greatest challenge facing the oil service sector is the recruitment, prevision and retention of skilled and experienced field personnel. We all believe that this combination provides the combined company with an ideal employee base for growth both in the U.S., continued support in Canada and international growth. There is an open invitation for all Grey Wolf employees to be part of the company.” The Grey Wolf management team will be staying on. Thomas Richards, president and chief executive officer of Grey Wolf, will assist with the transition but will not be an employee. David Crowley, executive vice president of Grey Wolf, will become president of U.S. operations for the company. Neveu said that the Grey Wolf name  will be protected and honored indefinitely. The Grey Wolf headquarters in Houston will remain the U.S. headquarters.