Nabors Industries Ltd. said it entered into a definitive agreement to sell its subsidiary Nabors’ Quail Tools LLC, which provides downhole tubulars to the U.S. oil and gas drilling market, to Superior Energy Services, Inc. for $600 million plus adjustments for net working capital.
The consideration consists of $375 million in cash and a seller note of $250 million, and the transaction closed Wednesday, Nabors said in a news release, adding that it expects to incur cash taxes on the sale of approximately $5 million.
The transaction includes a preferred supplier agreement under which Superior will be the preferred supplier of rental drill pipe and related products to Nabors, according to the release. Superior provides rental tubulars to the U.S. and international markets.
To fund the acquisition, Nabors said it issued 4.8 million common shares at $37.50 per share and assumed about $93 million in net debt, as defined in the merger agreement.
Upon full realization of the sale proceeds, Nabors said it expects net debt to decline by $625 million, more than 25 percent of its net debt, and annual interest savings of more than $50 million, enhancing its financial flexibility.
Following the sale, Nabors said it will retain the drilling rig operations and maintenance, and tubular running services operations acquired from Parker. Shortly following the close of the Parker acquisition, in the second quarter, Nabors said it completed the sale of idle Parker rig assets generating cash proceeds of around $35 million.
Nabors Chairman, President and CEO Anthony Petrello called the transaction a “textbook win-win” for both parties.
“In Superior, we believe Dave Lesar and his talented team will enable Quail to achieve even greater success. The combined company will be the premier provider in both the U.S. land and offshore tubular rental space, and there are substantial additional synergy opportunities,” Petrello said.
“We are retaining the balance of the portfolio that we acquired from Parker Wellbore, which includes tubular running services in the U.S. and Middle East, drilling rigs, and rig operations and management contracts (O&M). This portfolio is already making a solid contribution to our results, and we expect further improvement as we realize targeted cost synergies,” he added.
Last month, Nabors reported second-quarter operating revenues of $833 million, compared to operating revenues of $736 million in the first quarter.
Net loss attributable to Nabors shareholders for the quarter was a loss of $2.71 per diluted share, compared to earnings per diluted share of $2.18 in the first quarter. The first quarter included a one-time, non-cash net gain on the Parker transaction of $113.0 million, or $9.68 per diluted share, the company said in its most recent earnings release.
Petrello said, “Our second quarter results demonstrated the strength of the Nabors portfolio while reflecting a full quarter contribution from the acquisition of Parker Wellbore. In total, EBITDA from the legacy Nabors businesses increased sequentially. I am pleased with the performance of the Parker operations, and our progress to realize expected cost synergies”.
“Before the impact from Parker, adjusted EBITDA grew sequentially in all three of the business lines in our U.S. Drilling segment. The Lower-48 rig market in oil focused basins remains flat to down, and we are working to mitigate the impact of the current industry rig count and dayrates. At the same time, natural gas drilling has moved upwards. We see our rig count and leading-edge pricing stabilizing in the third quarter and through the end of the year,” Petrello added.
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