Patterson-UTI and NexTier Will Form the Second-Largest Pressure Pumper in All-Stock Merger

Patterson-UTI PTEN announced a merger of equals with NexTier Oilfield Solutions through an all-stock transaction, creating a fully integrated drilling and completions oilfield services firm with an estimated $5.4 billion enterprise value. The combined entity will maintain the Patterson-UTI name and PTEN ticker following close, currently slated for the fourth quarter of this year. We’re raising our fair value estimate for Patterson to $17 per share from $15, as we expect the combination will foster more cost-efficient asset-light operations, lifting profitability and cash generation over time. We view the firms’ legacy product lines as highly complementary, enabling Patterson to diversify its end-market exposure without straying too far from its core competencies—a pitfall suffered by peers in deals past. We maintain our no-moat rating for Patterson, as the highly fragmented North American pressure pumping market remains prohibitive for any one firm to carve out a lasting competitive advantage.

The deal will still yield scale-based cost savings despite the ever-competitive operating environment, as the firms leverage their complementary skill sets to optimize internal operations and maximize R&D productivity over time. Already one of the largest land drillers in the United States, this consolidation will catapult Patterson to the number two share position in hydraulic fracturing, second only to Halliburton. We expect the firm will unlock numerous cross-selling opportunities in basins across the U.S. as the integration progresses.