In continued consolidation of drilling companies, Patterson-UTI Energy Inc. (Nasdaq: PTEN) plans to buy the remaining 80% of TMBR/Sharp Drilling Inc. (Nasdaq: TBDI) it does not already own, helping to solidify its position as the No. 2 land driller in North America. The deal is expected to close in the third quarter. Shareholders of TMBR/Sharp will receive approximately 0.312 share of Patterson-UTI common stock and $9.09 cash per TMBR/Sharp share-for a total value of $20.20 per share based on Patterson's pre-announcement closing price, or a 4% premium. Overall, the price will total about $88.2 million. TMBR/Sharp owns 18 land rigs that operate primarily in the Permian Basin and eastern New Mexico, six of which can drill deeper than 15,000 feet. The addition will bump Patterson's fleet to a total of 358 land rigs in Texas, New Mexico, Oklahoma, Utah, Louisiana, Mississippi and western Canada. Patterson first purchased roughly 20% of Midland, Texas-based TMBR/Sharp in June 2002 for $16.60 per share. James K. Wicklund, an oil-service stock analyst with Banc of America Securities, raised his 2003 earnings-per-share estimate on Patterson-UTI by a penny and his 2004 EPS estimate by six cents, to $1.83. He says the increase in rig utilization will more than offset the $8 million increase in depreciation and 1.4 million increase in shares outstanding. "The price paid per TMBR/Sharp rig of nearly $4.8 million is half the market value per rig of the larger land drillers, but double the amount for the smaller, privately owned drillers, reflecting the significant discount for lack of marketability in this sector," Wicklund says. The deal comes with oil and gas reserves and production. In fourth-quarter 2002, TMBR/Sharp had net production of 29,775 bbl. of oil and 213 million cu. ft. of gas. Daily production was 324 bbl. of oil and 2.3 million cu. ft. of gas. -Jodi Wetuski
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