Trinidad Drilling

Last updated
Trinidad Drilling Ltd.
Public
Traded as TSX: TDG
Industry Oil and gas
FateAcquired by Ensign Energy Services
Founded Calgary, Alberta (1996)
HeadquartersCalgary, Alberta, Canada
Key people
Lyle C. Whitmarsh, CEO; Brent J. Conway, President
Products Drilling & well services
Revenue Green Arrow Up.svg $859.327 million CAN (2012)
Number of employees
3,000
Website www.trinidaddrilling.com

Trinidad Drilling Ltd. is a corporation headquartered in Calgary, Alberta, Canada that operates in the drilling and well servicing sectors of the North American oil and gas industry. The company converted to an income trust in 2002 and did business under the name Trinidad Energy Services Income Trust. It has since reverted to a corporation under the name Trinidad Drilling.

Contents

A strategic review process that began in late 2017, a procedure to court potential buyers looking for a "white knight" to reportedly maximize value for shareholders, was not fruitful. In August 2018 the company was tendered a formal unsolicited offer, that is considered a hostile takeover bid, by Ensign Energy Services. By October 2018 Precision Drilling made an offer, valued at over $1 billion, potentially pitting the two largest Canadian drilling companies against each other.


History

In 2014 Trinidad entered a joint venture with Halliburton/Baker Hughes (40%) and plans to drill in Saudi Arabia that led to surmising of a Halliburton takeover plan. [1]

In August 2017 Trinidad purchased RigMinder Inc. in a $40 million cash and stock acquisition. This has allowed the integration electronic data between the rig and the directional drilling tools as well as cutting costs. [2]

In January 2018 Trinidad announced it would be moving eight rigs, two from Canada, three from Saudi Arabia, and three from other areas of the US, to the Permian Basin area in West Texas and New Mexico. [3] The plans had to be altered because the company decided to sell the three rigs in Saudi Arabia instead of moving them. The price of around $114 million will see a net of $69 million with the rest going to partner Halliburton. According to the new report CEO Brent Conway stated "selling is a better option because the funds can be used for its capital program or to repay debt.". [4]

Current

A turn of events started with the director of Trinidad Drilling purchasing shares of the company in August 2018 that happened during a strategic review process looking for buyers. When no offers were tendered Ensign Energy Services stepped in with an unsolicited offer or hostile takeover attempt, valued at C$947 million (US$720.26 million) including $477 million in debt at $1.68 a share. [5] This was a 20% premium to the volume weighted average price of the common shares of Trinidad on the TSX for the trading days between August 1, 2018 through August 10, 2018 and an 11% premium to the closing price on the last trading day prior to the announcement. [6] [7] By the end of August 2018 Ensign owned 9.8 percent of Trinidad’s shares. Although not part of the strategic review process Ensign tendered an informal offer that was rejected. The company then made the same unsolicited offer formal. [8] The Board of Directors has recommended shareholders reject the Ensign offer because it undervalues the company with a low balling bid. [9]

The financial market has mixed reviews on the future company share value with National Bank Financial lowering the price objective for the stock in September 2018 from an outperform rating to a sector perform rating with a target price of $2.20 a share. Analysts at Canaccord Genuity lowered the price objective from $2.20 to $2.10 a share and BMO Capital Markets lowered the price objective from $3.00 to $2.00. Raymond James had raised the price objective from C$2.75 to C$3.00. Three investment analysts have issued a "hold" rating on the stock, five have it listed as "buy", with an average target price of C$2.41. [10]

In October 2018 Precision Drilling entered into an agreeable negotiation with Trinidad, that includes a stock swap of 0.445 Precision stocks for each Trinidad stock. Including debt the deal is worth $1.03 billion dollars. Also included is a $20 million break fee that Precision will have to agree to pay if the deal does not materialize. A Raymond James analyst, Andrew Bradford, noted that Ensign could sweeten the deal, also agreeing to pay the break fee, or walk away. The counter offer may lead a bidding war that would be beneficial to Trinidad stock holders. [11]

See also

Related Research Articles

A shareholder rights plan, colloquially known as a "poison pill", is a type of defensive tactic used by a corporation's board of directors against a takeover.

In business, a takeover is the purchase of one company by another. In the UK, the term refers to the acquisition of a public company whose shares are listed on a stock exchange, in contrast to the acquisition of a private company.

Initial public offering (IPO) or stock market launch is a type of public offering in which shares of a company are sold to institutional investors and usually also retail (individual) investors. An IPO is underwritten by one or more investment banks, who also arrange for the shares to be listed on one or more stock exchanges. Through this process, colloquially known as floating, or going public, a privately held company is transformed into a public company. Initial public offerings can be used to raise new equity capital for companies, to monetize the investments of private shareholders such as company founders or private equity investors, and to enable easy trading of existing holdings or future capital raising by becoming publicly traded.

Halliburton Company is an American multinational corporation. One of the world's largest oil field service companies, it has operations in more than 70 countries. It owns hundreds of subsidiaries, affiliates, branches, brands, and divisions worldwide and employs approximately 55,000 people.

Carl Celian Icahn is an American businessman, investor, and philanthropist. He is the founder and controlling shareholder of Icahn Enterprises, a diversified conglomerate holding company based in New York City, formerly known as American Real Estate Partners. He is also Chairman of Federal-Mogul, an American developer, manufacturer and supplier of powertrain components and vehicle safety products.

Saudi Aramco Saudi Arabian petroleum and natural gas company

Saudi Aramco, officially the Saudi Arabian Oil Company, is a Saudi Arabian national petroleum and natural gas company based in Dhahran, Saudi Arabia.

Greenmail or greenmailing is the action of purchasing enough shares in a firm to challenge a firm's leadership with the threat of a hostile takeover to force the target company to buy the purchased shares back at a premium in order to prevent the potential takeover.

Ensign Energy Services Calgary-based oil well drilling and servicing company

Ensign Energy Services Inc. is a publicly traded Canadian company that provides oilfield services for the North American and international market. Founded in 1987, Ensign is headquartered in Calgary, Alberta. Ensign's Common Shares are publicly traded though the facilities of the Toronto Stock Exchange under the trading symbol ESI.

In corporate finance, a tender offer is a type of public takeover bid. The tender offer is a public, open offer or invitation by a prospective acquirer to all stockholders of a publicly traded corporation to tender their stock for sale at a specified price during a specified time, subject to the tendering of a minimum and maximum number of shares. In a tender offer, the bidder contacts shareholders directly; the directors of the company may or may not have endorsed the tender offer proposal.

In business, a white knight is a friendly investor that acquires a corporation at a fair consideration with the support from the corporation's board of directors and management. This may be during a period while it is facing a hostile acquisition from another potential acquirer or it is facing bankruptcy. White knights are preferred by the board of directors and/or management as in most cases as they do not replace the current board or management with a new board, whereas, in most cases, a black knight will seek to replace the current board of directors and/or management with its new board reflective of its net interest in the corporation's equity.

Cairn Energy oil and gas exploration and development company

Cairn Energy PLC is one of Europe's leading independent oil and gas exploration and development companies and is listed on the London Stock Exchange. Cairn has discovered and developed oil and gas reserves in a variety of locations around the world. Cairn Energy has a primary listing on the London Stock Exchange and is a constituent of the FTSE 250 Index.

Sun-Rype

Sun-Rype Products Ltd. is a Western Canadian fruit-based food and beverage manufacturer. Since its foundation in 1946, Sun-Rype has been producing juices and fruit snacks based in Kelowna, British Columbia, in the Okanagan.

Precision Drilling

Precision Drilling Corporation is the largest drilling rig contractor in Canada, also providing oil field rental and supplies.

A squeeze-out or squeezeout, sometimes synonymous with freeze-out (freezeout), is the compulsory sale of the shares of minority shareholders of a joint-stock company for which they receive a fair cash compensation.

Seadrill seadrill

Seadrill is a deepwater drilling contractor for the petroleum industry. It is incorporated in Bermuda and managed from London. The company operates semi-submersible platforms, jackup rigs and drillships.

Aker Drilling, was a Norwegian drilling rig operation company; based in Stavanger, Norway and majority owned by the Aker Group. It was listed on Oslo Stock Exchange under the ticker - 'AKD'.

Willamette Industries

Willamette Industries, Inc. was a Fortune 500 forest products company based in Portland, Oregon, United States. In 2002, the lumber and paper company was purchased by competitor Weyerhaeuser of Federal Way, Washington in a hostile buyout and merged into Weyerhaeuser's existing operations.

Nabors Industries is a global oil and gas drilling company based in Houston, Texas. Nabors owns the largest land drilling fleet in the world with approximately 400 rigs in more than 20 countries. Company consists of the following business segments: U.S. Drilling, Canada Drilling, International Drilling, Drilling Solutions, and Rig Technologies.

The following is a glossary which defines terms used in mergers, acquisitions, and takeovers of companies, whether private or public.

Jowdat Waheed is a senior Canadian mining executive and Chartered Financial Analyst. Waheed worked as Chief Executive Officer of mining company Sherritt. He resigned, for personal reasons, in 2009.

References

  1. "Trinidad Drilling Ltd. Potential Takeover And Halliburton/Baker Hughes' Role". Seeking Alpha. 26 November 2014.
  2. Mason, Richard (Chief Technical Director) (6 October 2017). "Digitalization Comes To Directional Drilling". Hart Energy.
  3. McEwen, Mella (3 February 2018). "Two Canadian drillers relocating rigs to Permian Basin to meet demand". MRT: Midland Reporter-Telegram (acquired by Hearst in 1979).
  4. "Trinidad Drilling sells rigs to Saudi Arabia instead of moving them to U.S." The Canadian Press. 12 April 2018.
  5. "Ensign Launches C$947 Million Takeover Bid For Trinidad Drilling". Hart Energy. 13 August 2018.
  6. "Trinidad Drilling Ltd. (TDG.TO): Historical data on shares".
  7. Varcoe, Chris (14 September 2018). "Trinidad Drilling seeks white knight as it fends off hostile bid by Ensign". Calgary Herald.
  8. Jaremko, Deborah (30 August 2018). "Ensign makes formal offer to acquire Trinidad Drilling". JWN Energy.
  9. "REJECT Ensign's Hostile Bid". Trinidad shareholders announcement. 14 September 2018. (Primary source on rejection call)
  10. Cottrell, Gemma (27 September 2018). "Trinidad Drilling (TDG) Downgraded by National Bank Financial to "Sector Perform"". Fairfield Current.
  11. Morgan, Geoffrey (5 October 2018). "Precision Drilling emerges as white knight for Trinidad, but Ensign may still sweeten bid". Financial Post. Retrieved 2018-10-10.