Oil-Field-Services Companies Hold Merger Talks
NexTier Oilfield Solutions and Patterson-UTI Energy discuss deal that would create bigger player in consolidating industry
NexTier Oilfield Solutions NEX -3.41%decrease; red down pointing triangle and Patterson-UTI Energy PTEN -4.69%decrease; red down pointing triangle are holding talks over a possible merger that would create a bigger player in the oil-field-services industry, according to people familiar with the matter.
A deal isn’t imminent, and it’s not certain that the talks will result in a transaction, the people cautioned.
Houston-based NexTier has a market capitalization of just under $2 billion after its shares dropped roughly 11% this year. Shares of Patterson-UTI, also based in Houston, have fallen around 35% as natural-gas prices have dropped, dragging its market value down to about $2.2 billion.
While oil-field services has morphed into a more consolidated sector, its companies are catering to a shrinking pool of clients—oil and gas producers—creating a need for fewer, bigger providers, according to analysts.
The giant influx of cash that energy producers received in 2022 as oil and gas prices hit multiyear highs following Russia’s invasion of Ukraine has spurred a wave of deals.
Exxon Mobil, on the hunt for a blockbuster deal, had preliminary talks with Pioneer Natural Resources about a possible acquisition, The Wall Street Journal previously reported. Chevron recently deepened its commitment to oil-and-gas drilling in the U.S., spending more than $6 billion to acquire a rival with sizable operations in Texas and Colorado.
A merger with NexTier would allow Patterson-UTI, which is mostly focused on onshore-drilling services, to get bigger in fracking.
NexTier, born out of a merger between C&J Energy Services and Keane Group in 2019, provides well-completion and production services, according to its website. The company’s revenue surged 128% in 2022 to $3.24 billion, in part thanks to an increase in fracking activity and higher prices.
Patterson-UTI provides contract-drilling, fracking and directional-drilling services to companies in the U.S. and elsewhere, according to its website.
It is the second-largest rig provider in contract drilling after Helmerich & Payne, providing mostly so-called super-spec rigs, the most advanced and efficient on the market, according to analysts at research firm Morningstar. The company booked about $2.7 billion in revenue last year, roughly double what it collected in 2021.
Those torrid revenue gains could ebb as oil-and-gas producers reduce activity amid depressed natural-gas prices.
The U.S. benchmark natural-gas price has fallen from around $9 per million British thermal units last year to slightly over $2 on the back of an unusually warm winter.
Since the end of April, companies have cut down the number of rigs drilling for gas by 26 to 135, according to the latest count by oil-field-services firm Baker Hughes.