Precision Drilling Corp T.PD

RBC

[retiredcf]

September 7, 2023

Precision Drilling Corporation
Agreement to purchase CWC Energy Services, for $141MM

TSX: PD | CAD 91.37 | Outperform | Price Target CAD 118.00

Sentiment: Positive

Our view: PD announced $141MM cash and stock acquisition of CWC Energy Services. PD reiterated its plans of reducing its debt by $500MM between 2022-2025, thus we view the transaction as a step in achieving its current strategy rather than a change in strategy. The deal is also the second well servicing acquisition PD has done in 2022/23. We view the transaction essentially as an asset purchase given CWC's minimal EBITDA generation YTD and take a positive initial view given the acquisition is a discount to CWC's book value.

• Transaction details. PD will pay $14MM cash plus 0.948MM shares, and the assumption of CWC's debt of ~$40MM, for a total consideration of approximately $141MM, or a blended implied offer price of $0.197 per CWC share relative to most recent stock closing price of $0.20. PD expects the deal to close in 4Q23. PD sees $20MM of annual operating synergies post-closing, and expects the transaction to be accretive on 2024 CFPS.

• CWC Energy Services Corp. CWC is a contract drilling and well servicing company operating in Canada and the US. The company has 62 marketed service rigs, and seven marketed drilling rigs in Canada, along with 11 marketed drilling rigs in the U.S, including seven AC triple rigs. CWC currently has three and seven actively working rigs for customers in Canada and the US, respectively. CWC generated 1H23 Adj. EBITDA of ~$12.5MM.