Precision Drilling to buy peer Grey Wolf

Canada's Precision Drilling Trust will buy U.S. driller Grey Wolf Inc for US$2 billion in cash and stock, creating one of the largest North American oil and gas rig operators, the companies said on Monday.
Precision Drilling, Canada's largest oil and gas driller, will pay US$5 in cash and 0.1883 newly issued Precision trust units for each Grey Wolf common share.
That values each Grey Wolf share at $9.02, a 5 percent premium to Friday's closing price but lower than the $10 per share that was discussed earlier.
The U.S. company's shareholders will own about 25 percent of the combined entity, and three Grey Wolf directors will be added to Precision's board.
The deal will allow Precision to expand further outside Canada, where it operates about one-quarter of the country's rigs, by adding Grey Wolf's activities in South Texas, the Gulf Coast, Mississippi/Alabama, the Midcontinent, the Rocky Mountains and Mexico.
High oil and gas prices have kept the market for drilling rigs strong as energy producers spend heavily to pull new resources out of the ground.
The number of rigs searching for oil and gas onshore in North America rose by 11 percent in July from a year earlier to 2,276, according to data released by Baker Hughes.
Precision did not give details on potential cost savings or profitability from the deal but said the transaction "is expected to be highly accretive to Precision's cash flow per unit."
Based on financial results through June, the combined companies will have annual revenue of $1.8 billion.
The announcement comes a month after Grey Wolf shareholders voted down a proposed purchase of well-servicing company Basic Energy Services Inc.
Precision Drilling first made an unsolicited purchase offer for Grey Wolf in June. News that a deal had been struck emerged on Sunday.
The merged companies will have a combined fleet of 371 drilling rigs and 229 service rigs and will provide camp and catering, procurement, rig manufacturing and repair, wastewater treatment and a turnkey drilling business.
Grey Wolf shares rose more than 1 percent in modest volume in premarket trading. The shares closed at $8.59 Friday on the American Stock Exchange.