Under the deal, Nabors is offering C$15.50 per Enserco share in cash or exchangeable shares in a Nabors subsidiary, plus interest between now and the time of deal's completion at an annual rate of 6 percent. Enserco, formed in late 2000 through the merger of Bonus Resource Services and Tetonka Drilling, is Canada's third-largest oil field service firm after Precision Drilling Corp. and Ensign Resource Service Group.
Through units Bonus Well Servicing and H&R Drilling, Enserco operates 193 Canadian service rigs and 30 drilling rigs in Canada. Nabors, which has operated in Canada for five decades, said it would require at least two-thirds of Enserco's stock being tendered to its offer as well as a shareholder vote. But it already has lockup agreements with holders of about 36 percent of Enserco's stock. The offer represents a premium of at least 5 percent above Enserco's Toronto Stock Exchange closing price of C$14.81 on Monday. It is well below Enserco's 52-week high of C$21.69 set when the drilling sector was at its peak in late May.
Due to the sharp decline in oil and gas prices, drilling activity has fallen sharply from last year's levels. The Canadian Association of Oilwell Drilling Contractors reported last week that 75 percent of the country's 658 onshore rigs were operating, down from 96 percent a year earlier. Enserco stock jumped 76 Canadian cents to C$15.57 in Toronto after the offer was announced on Tuesday. Nabors shares dipped 10 cents to $34.70 on the American Stock Exchange.
Nabors Chief Executive Gene Isenberg said the deal was driven partly by the expansion of its major customers in Canada in recent years. U.S. firms such as Burlington Resources Inc., Anadarko Petroleum Corp., Devon Energy and Conoco Inc. made large acquisitions in Canada in 2001. ``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,'' Isenberg said in a statement.
The deal includes a C$17 million break fee Nabors would get if the transaction fell through. Nabors also said it had the right to match any competing bid.
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