Sam Fletcher
OGJ Online
Houston-based Pride International Inc., a potential white knight sought by Canadian drilling contractor Plains Energy Services Ltd. as a counter to an unsolicited takeover by Precision Drilling Corp., has sued both companies for $500 million plus punitive damages after they decided to merge anyway.
At stake is Plains Energy's new fleet of nine coiled-tubing drilling rigs and that technology, which both Pride International and Precision Drilling want (OGJ Online, May 12, 2000). Officials said the acquisition also would have provided Pride with entry into the Canadian market where drilling activity is accelerating.
Damages being sought by Pride are about 2� times greater than Plains Energy's book value and are based on the value of that lost opportunity, officials claim.
In its suit filed in Harris County, Tex., Pride International claims that Plains Energy officials reneged on a merger contract. It alleges tortious interference by Precision Drilling on that merger agreement.
Plains Energy officials in Calgary say the suit is without merit because they never agreed to merge with Pride International.
Deal history
The melee began May 8 when Precision Drilling, Canada's biggest drilling contractor, made an unsolicited takeover bid of $250 million (Can.), or $8/share, for Plains Energy, which rejected it as substantially too low. Precision Drilling officials said at the time that they had tried to negotiate a friendly merger but failed.
Plains Energy officials then began shopping for a better alternative offer. They said more than 10 companies, including Pride International, expressed interest and signed confidentiality agreements, which stipulated any disputes would be settled in Alberta, rather than a Texas court.
Precision Drilling subsequently sweetened its offer to $10.75/share, plus 8.85% of a Precision common share warrant. A merger agreement signed last week by Precision and Plains Energy provides that Plains shareholder can take about 18.7% share of Precision common stock in lieu of the cash price. Precision Drilling also will assume about $65 million (Can.) of Plains's long-term debt.
Pride International officials have been tight-lipped about the deal all along. But they claim they signed a merger agreement with Plains Energy on the same day as Precision Drilling.
Plains Energy officials deny that Pride signed anything but the confidentiality agreement. Plains CEO Bob Mullen said Wednesday there were negotiations with Pride, but no deal was signed.
Precision Drilling officials deny any knowledge of another merger offer or deal.
Pride is one of the largest international drilling contractors with a fleet of 293 rigs, including 238 land-based drilling and workover rigs. In April, it concluded a $95 million acquisition of Servicios Especiales San Antonio S.A. from Perez Companc SA in Argentina, in a move to increase the variety of oilfield services in South America.
Coiled-tubing drilling technology also was a key factor in that acquisition, said Blake Hutchinson, an analyst with Howard Weil Labouisse Freidrichs Inc. in Houston who follows Pride Energy's operations. "They want to spread that technology throughout their fleet," he said.
