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Nabors to buy Enserco in $287 million deal
Steve Sutherlin
Nabors Industries Inc. and Enserco Energy Service Co said Feb. 26 that Nabors has agreed to buy Enserco for $287 million including debt assumption. Nabors said it undertook the transaction primarily to better serve its customers that are expanding oil and gas operations in Canada. Nabors wants to expand in Canada “Enserco's assets are relatively new, in excellent condition and well suited for the increasingly important role that Canada is playing in the North American natural gas supply picture,” said Gene Isenberg, Nabors' chairman and CEO.
The transaction will increase Nabors’ activity in Alaska as well, adding Enserco’s Kuukpik/H&R Drilling joint venture, which is drilling for Unocal at Ninilchik. At PNA press time, Nabors Alaska Drilling Inc. officials were unsure how or if the Ninilchik operation would be integrated into local operations.
H&R in Alaska is headed by Dale Larsen, former general manager of Pool Alaska Drilling. Pool Alaska was absorbed into Nabors’ Alaska operations after being acquired by Nabors in the 1999 purchase of Pool Energy Services Co. of San Angelo, Texas. Analysts generally positive Canadian oil and gas stocks notched a record high close Feb. 27, partially because the Nabors/Enserco deal sparked investor’s expectations of additional merger and acquisition activity in the market, analysts said.
Analysts following Nabors were generally positive on the deal. Morgan Stanley said the drilling assets were acquired at an attractive price and Goldman Sachs raised its price target for Nabors stock from $50 to $53, saying the deal should boost earnings in 2002 and 2003.
Standard & Poor's said Feb. 26 that the transaction would not affect Nabors’ credit rating.
Nabors is offering C$15.50 per Enserco share in cash or exchangeable shares in a Nabors subsidiary, plus 6 percent interest from Feb. 26 to closing. The offer represents a premium of 5 percent above Enserco's Toronto Stock Exchange closing price of C$14.81 on Feb. 25.
Enserco is Canada's third-largest oil field service firm and will add 193 service rigs and 30 drilling rigs to Nabors’ fleet of more than 500 land drilling and 740 land workover and well-servicing rigs worldwide, including 52 in Canada.
The deal has a C$17 million break fee if it falls through, and Nabors has the right to match any competing bid.
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