Archer expands oilfield drilling services with Great White Energy acquisition

Archer, a global oilfield service company specializing in drilling services and well services, has signed a definitive purchase and sale agreement to acquire Great White Energy Services, for US$742 million on a cash and debt free basis.

The deal, expected to close in the third quarter of 2011, gives Archer an entry point into the rapidly expanding frac market and effectively doubles its coil tubing and directional drilling capacity in the United States where development of unconventional oil and natural gas shale plays continue to drive E&P investments

Great White, formed by Wexford Capital LP, operates 13 service centers located around the unconventional plays in Michigan, Oklahoma, Texas, West Virginia, Colorado, Arkansas and Wyoming. As a result of this transaction, Archer will double the size of its existing Coiled Tubing and Directional Drilling business and add a hydraulic pressure pumping division that has 100,000 HHP currently and will have 140 000 HHP by first quarter 2012. The new pressure pumping division and expanded pressure control divisions will be headquartered in Oklahoma City.

Archer's financing for the transaction is fully guaranteed by its two largest shareholders, Seadrill Ltd. and Lime Rock Partners. Archer will complete a private placement for approximately 30 million shares prior to closing the Great White acquisition. The issue price will be a minimum NOK 35 per share and the issue will be fully underwritten by Seadrill and Lime Rock.

Archer has also received indicative proposals from its existing bank syndicate for long-term debt financing of up to US$400 million and short term bridge facilities. These facilities are expected, together with existing facilities and working capital, to fully finance the acquisition.

Archer's chairman Saad Bargach said: "We are very pleased to welcome Great White's employees and management to Archer. Great White has a highly complementary services offering with very little geographical overlap to Archer. Its completion and production services for shale oil and gas and are well recognized by its customers for first class services and completes Archer's ambition to have a full well service offering in the USA."

Great White's first quarter revenue for the period ended March 31 2011, was $80.4 million and second quarter revenue is expected to be between $100 million to $103 million. Great White's operating income before taxes for the first quarter 2011 was $ 19.3 million and the second quarter operating income before taxes is expected to be between $20 and $22 million. The adjusted EBITDA for the first quarter totaled $25.9 million. Second quarter EBITDA is estimated to be $29.0 million.

The expected quarterly run rates for revenue in the second half of 2011 are between $110 and $120 million as additional equipment is delivered and contributes to revenues. The estimated quarterly run rates for operating income before taxes in the second half of 2011 are between $23 and $26 million. Second half 2011 EBITDA quarterly run rates are $32 going to $38 million and will increase further as the equipment to the last fracturing crew arrives in Q1 2012.

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