CALGARY — Akita Drilling Ltd. is buying U.S.-focused rival Xtreme Drilling Corp. in a $209-million cash-and-shares deal designed to gain greater access to the more active U.S. oil and gas exploration market.
The Calgary-based companies say the resulting medium-sized drilling firm will have a total of 44 rigs in major resource basins in Canada and the United States.
Akita, which has been focused on drilling in Western and Northern Canada, announced in January it would make its initial entry into the U.S. market by moving a rig from Canada to Texas to take advantage of greater demand from oil and gas producers there.
It now has two of its 28 rigs in the U.S. All 16 of Xtreme’s rigs are working south of the border.
Xtreme shareholders are to receive 0.29 of an Akita non-voting share and 59 cents in cash for each share tendered, representing what Akita says is a 32 per cent premium over the 20-day volume weighted average price. Akita has agreed to assume $10 million of Xtreme’s debt.
Akita says the deal will provide greater financial capacity to build new drilling rigs. It says it expects to find $8 million per year in cost savings through synergies from the merger.
“The transaction is a continuation of Akita’s strategy of capitalizing on the improving fundamentals in the U.S. land drilling market,” Akita CEO Karl Ruud said.
The transaction is expected to be completed in the third quarter of 2018 and will require approval by a two-thirds majority vote by Xtreme’s shareholders.
Companies in this article: (TSX:AKT.A, TSX:AKT.B, TSX:XDC)
The Canadian Press