As others look to specialize, Patterson-UTI Energy Inc. has seized the opportunity to become a diversified U.S. onshore oilfield services company. Patterson-UTI agreed in July to acquire drill bit designer and manufacturer Ulterra Drilling Technologies LP, just weeks after the announcement that it would merge with fracker NexTier Oilfield Solutions Inc. These moves could be the jolt that the OFS M&A market needs to start a new wave of consolidation.
The acquisitions by Patterson-UTI will turn the No. 2 contract driller in the U.S. into a unique company in terms of premium services, offering super-spec drilling rigs, dual-fuel frac fleets and premium polycrystalline diamond compact drill bits under one roof. In each segment, Patterson-UTI will have the proprietary datasets and leverage to squeeze every drop of efficiencies out of the system.
While Patterson-UTI was already dabbling in fracking, NexTier brings another 33 fleets, leading to a combined capacity of 45 fleets and 3.3 million hhp, behind only Halliburton in the U.S. on both figures. While NexTier owns no drilling rigs, Patterson-UTI’s current fleet of 172 super-spec drilling rigs in the U.S. trails only Helmerich & Payne. Nearly two-thirds of the combined company’s frac fleets are dual-fuel capable, and 120 of the drilling rigs are Tier 1. In addition, NexTier brings a last-mile logistics platform for frac sand and Ulterra comes with BitHub, its proprietary database with information on 80% of all bit runs on U.S. land.
The acquisitions are unlike any seen in the U.S. OFS market in several years. In terms of changing the U.S. landscape, the most recent precedent might be the 2020 acquisition of Schlumberger’s North American pressure pumping business that turned Liberty Oilfield Services into a fracking power player or the buying binge of the Wilks brothers’ ProFrac in which it gobbled up fracker FTS International, electric frac fleet supplier U.S. Well Services and several proppant providers in 4Q21-1Q23. But those deals were basically examples of frackers growing bigger. Patterson-UTI isn’t staying in its lane; it’s paving a new one.
As bold as the Patterson-UTI deals are, whether they will spawn imitators remains to be seen. The OFS acquisition market has been stagnant in 2023 with just 39 transactions announced during 1H23 compared with 125 transactions in 1H22, according to Enverus M&A Analytics. The 15 deals announced in Q2 amount to the lowest quarterly total in more than a decade.
Since the NexTier deal was announced June 15, no other contract drillers have announced any acquisitions. Leading rival Helmerich & Payne hasn’t announced an acquisition since buying DrillScan in 2019, the last of four acquisitions over two years that targeted upgrading its digital offerings.
Perhaps the most notable OFS deal since mid-June not involving Patterson-UTI was RPC Inc.’s $79.5 million acquisition of cementing services provider Spinnaker Oilwell Services LLC. The completions company already offered cementing services, although Spinnaker expands it into the Permian and the Mid-Continent. RPC making the deal at all was remarkable in that it has been a no-show in the M&A space for several years. In its 2022 annual report, RPC defended its stagnation as a response to targets’ unrealistic demands and a decision that promoting organic growth provided better returns than taking on integration risks. If a picky buyer such as RPC can change its mind, maybe others will make a move.
Enverus Intelligence® | Research (EIR) recently reviewed market fundamentals of oilfield services supply and demand by each service line. EIR also forecast changes in year-end costs to coincide with E&P budgeting season. Click for more (available to EIR subscribers)!
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