Last April, Executives with Nabors Industries announced that they would be purchasing Tesco Corporation. The deal was set to be an “all-stock” deal where Tesco is valued at approximately $215 million. Nabors Industries executives bid on this company because they hoped to improve upon their effectiveness in constructing wells and oil drilling. With this deal, two different oil field services companies will be combined.
The executives’ intention is to increase the size of their company and ensure its place as the owner of the most land drilling rigs in the world, according to energy analyst James West.
West reported that the step Nabors Industries took to purchase Tesco was logical in order for Nabors to prop up its integrated drilling services in an atmosphere where software and automation are becoming more prevalent. Wells are now digging into the earth at a much deeper rate, and they are also going farther horizontally as they create a larger number of wells per each drilling site than had been created in the past. Companies that use drilling rigs aren’t depending on “dumb iron” as much, so crews no longer need to hire as many people to work on a rig.
The deal means that Nabors Industries has purchased Tesco at a 19 percent premium from its closing share price on August 11. With this deal, Tesco has been valued at $4.62 per share while its closing price on August 11 was $3.90 per share. At the start of the year 2017, Tesco was trading at $9 per share, but before the oil bust occurred, the company was trading at $20 per share in around June of 2014.
According to the deal, approximately 10 percent of Nabors’ outstanding shares will be owned by Tesco shareholders.
Tesco is a services company that also deals with technology and rig equipment. The original owners started the business in Calgary and moved 10 years ago to Houston, Texas, although the company continues to do most of its manufacturing in Canada.
Nabors Industries is also located in Houston, but its permanent legal residence is in Bermuda. About 13,000 people all over the world work for Nabors Industries, but before the oil bust, Nabors Industries had about 30,000 employees. Tesco currently employs nearly 1,200 workers.
Nabors plans to introduce new technology into its business in the near future, and one example is the “iRig” platform. The company also has what it calls the “iRacker” that contains robotics that are automated to pick up large portions of pipe from the racks. It also puts the pipes together and forces them into previously drilled holes to form the wells.
The latest deal bolsters Nabors’ dealings in U.S. shale, but it also invigorates the company’s position in Saudi Arabia. In December, Saudi Aramco and Nabors became partners in an offshore drilling project, but Tesco has been present in Saudi Arabia for some time.
Nabors’ Chairman and CEO Tony Petrello offered his thoughts on the deal. According to Petrello, Tesco helps Nabors advance the company toward Drilling Solutions and the rig equipment business. Tesco’s products are known to be of high quality, and their aftermarket service levels are highly esteemed as well. He is looking forward to offering Tesco’s and Nabors’ customers and shareholders the advantages that this merger will provide both companies.
Tesco’s global tubular services business will be put to use to the benefit of Nabors Industries when all of the loose ends of the deal have been tied. By the end of the year 2017, the deal should be complete.
With this merger, Tony Petrello states that Nabors will be able to give its customers more of the “fit-for-purpose” products, solutions and services that it are currently lacking. With the increased capacity, Nabors will be able to be even more efficient. Plus, it will be easier for them to move forward in their desire to develop new equipment and improve older equipment.
Tesco’s Non-Executive Chairman Michael W. Sutherlin stated that the transaction will give Tesco the opportunity to have an expanded platform. The expanded platform will help Tesco move its blueprint forward and encourage market share gains around major trends in the industry. Mr. Sutherlin stated that Tesco’s shareholders will experience greater value because of the combination of the companies’ equipment.
Tony Petrello explained that the deal would make it possible for him to implement the strategy that he outlined at the annual analyst day last November. The deal will also cause Tesco to widen its reach within the United States.
Nabors’ board and Tesco’s board have both approved the transaction.
About Tony Petrello
After graduation, Tony Petrello joined the law firm of Baker & McKenzie in 1979, and in 1986, he became the firm’s Managing Partner. He resigned in 1991 to move on to his latest company Nabors Industries.
In 1991, Tony Petrello joined the Executive Committee of the Board for Nabors Industries and was elected to the Board of Directors. Also in 1991, Tony Petrello began serving as President of the company as well as the Chief Operating Officer until October of 2011. After leaving those two previous positions, Tony Petrello became Chairman of the Board and Chairman of the Executive Committee of the Board.