Nabors Industries Ltd.NBR has agreed to acquire Parker Wellbore, a leading rental provider company for downhole tubulars in the United States. The company has closed the deal at a consideration of 4.8 million shares of its common stock for an overall transaction value of around $372 million based on Monday’s closing price. NBR has also agreed to assume a net debt of about $100 million.
The acquisition agreement between NBR and Parker Wellbore has been approved by the board of directors of both companies but is subject to approval by the shareholders and the regulatory authorities. The deal, upon receiving all the required approvals, is expected to close by early 2025.
The acquisition will lead to the expansion of Nabors’ drilling business globally and will also strengthen the geographical footprint of its drilling rig business. The accord is expected to bring profitable growth due to Parker’s free cash flow and strong capital structure.
Parker Wellbore, a leading company in the drilling sector, not only provides tubular rentals in the United States but also has a strong presence in international markets like the Middle East, Latin America and Asia. Parker maintains a strong portfolio of 17 drilling rigs globally and operations and maintenance services in Canada and Alaska.
This acquisition will benefit Nabors’ financial performance through better free cash flow. Parker is expected to generate an annual EBITDA of $180 million in 2024, and on a combined basis, the adjusted EBITDA for the first half of the year would be $527 million. As a result of the acquisition, the duplicate overhead and operational cost would be reduced, and the annualized synergy is expected to deliver up to $35 million.
Post-acquisition, Nabors also plans to combine its U.S. drill pipe rental operations with Quail Tools, a subsidiary of Parker, in order to drive operational efficiency.
The acquisition enhances Nabors' portfolio in the tubular rental and repair services space. With increased global demand for drill pipe, the company is well-positioned to expand in the United States and key international markets. The combined company is projected to become the third-largest provider of casing and tubular services globally.
Hamilton-based Nabors is one of the largest land-drilling contractors in the world. Currently, NBR has a Zacks Rank #4 (Sell).
Investors interested in the energy sector might look at some better-ranked stocks like PEDEVCO Corp. PED,Nine Energy Service, Inc. NINE and MPLX LP MPLX.While PEDEVCOcurrently sports a Zacks Rank #1 (Strong Buy), Nine Energy and MPLX each carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Headquartered in Houston, TX, PEDEVCO Corp. is an oil and gas company engaged in the acquisition and development of energy projects in the United States and Pacific Rim countries. Over the past 60 days, the Zacks Consensus Estimate for PED's 2024 earnings has improved by 60%.
Nine Energy Service, Inc. provides onshore completion and production services for unconventional oil and gas resource development. NINE’s expected EPS (earnings per share) growth rate for the current quarter is 23.08%, which compares favorably with the industry's growth rate of 6.36%.
MPLX LP is a master limited partnership engaged in providing a wide range of midstream energy services, including fuel distribution solutions. MPLX’s expected EPS growth rate for three to five years is currently 8.50%, which compares favorably with the industry's growth rate of 5.70%.
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