Nabors Industries Ltd. plans to purchase Tesco Corporation, a company that is based in Houston, Texas. The deal must close by February 14, 2018, or else Tesco will be required to pay Nabors $8 million.
Nabors is the owner of the largest land-based drilling rig fleet, and it supplies equipment that is related to the oil industry, including performance tools, directional drilling services and offshore platform rigs.
Under the present deal, Nabors’ rig equipment subsidiary will be combined with some of Tesco’s supplementary equipment, such as the rental and aftermarket service business and rig equipment manufacturing. Nabors’ Drilling Solutions operations would also benefit from Tesco’s tubular services business. Nabors’ CEO, President and Chairman Tony Petrello stated that he expects the operating synergies to be in the $20 million range in the first 365 days. After that point, he believes that there will be full run-rate synergies between $30 million and $35 million.
The strategy that Mr. Petrello presented in November of 2016 will be expedited by this transaction. Mr. Petrello determined that the delivery platform for future rig services will be served by the drilling rig. The beginning stages of this strategy have been successful, and they are showing Mr. Petrello and his team that their service integration efforts have been affirmed.
Each company’s board has approved of the transaction. Nabors was advised by Intrepid Partners, and their legal advisers were Stikeman Elliot LLP and Milbank, Tweed, Hadley, & McCloy. Tesco’s exclusive financial advisor was J.P. Morgan Securities LLC, and its legal advisor was Norton Rose Fulbright.
The deal has been described as the logical next step for a company that intends to increase its integrated drilling services. The entire industry is beginning to rely on software and automation, and the rigs are beginning to dig more deeply and horizontally to create an increased number of wells that can be produced on each drilling site. This strategy permits workers to give up the use of “dumb iron” and exchange it for equipment that requires fewer workers.
Tesco was founded in Calgary, but its headquarters were moved to Houston, Texas, 10 years ago. The rig equipment company still does a lot of its manufacturing in Canada. Nabors’ operations take place in Houston, but its permanent legal residence is in Bermuda for tax purposes.
Nabors Industries employs people from all over the world, and its work force currently includes 13,000 people. Before the oil bust occurred three years ago, the company employed 30,000 people. Tesco has 1,200 people on its workforce.
Nabors plans to upgrade its operating system, and one of the improvements will be the “iRig” platform. The technology that Nabors will begin using is called “iRacker.” With this technology, long pieces of pipe can be lifted, put together and driven into drilled holes for the purpose of building oil wells.
Nabors’ reputation has been strengthened in Saudi Arabia since Nabors and Tesco began working on the deal. As a result, Nabors has been able to form a joint venture with Saudi Aramco for an offshore drilling cooperation. Tesco is a company that is presently firmly planted in Saudi Arabia.
According to Tony Petrello, the addition of Tesco has benefited Nabors’ Drilling Solutions business and rig equipment. Many people admire Tesco for its aftermarket services and its high-quality product offerings. Mr. Petrello looks forward to offering his company’s customers and shareholders the many benefits that this deal will present to them.
Because of this deal, Nabors is going to be able to combine technologies, tools and products that will create solutions, products and services that are more “fit-for-purpose” than they have been in the past. With the increased capability that the acquisition will provide, Nabors will be able to make the company more efficient, build newer rigs and increase the operation of its older rigs.
The deal is expected to close at the end of this year and is valued at approximately $215 million. Tesco’s shares were valued at $4.62 per share in August.
Mr. Petrello and his company determined that future rig services will be served by the drilling rig. Now, Nabors has the “Rigtelligence” operating system that can be used to automate the features of the largest drilling fleet, and this put the company in the position of using Tesco’s automation technologies and casing running tools on a global scale.
About Tony Petrello
Tony G. Petrello became the CEO and Chairman of Nabors Industries Ltd. in June of 2012. He has been President of the company since 1991.
Mr. Petrello attended Yale University and received a Bachelor of Science in Mathematics. He also went on to earn a Master of Science in Mathematics at Yale, but he earned his Juris Doctor at Harvard Law School. After graduating from law school, Mr. Petrello began practicing as an attorney at the law firm of Baker & McKenzie. This law firm’s focus was on general corporate law, taxation and international arbitration. In 1986, he became a managing partner of this law firm and resigned in 1991 to join the Nabors Industries team.