SWSI Superior Well Services (MM)

Nabors Industries Ltd. (NBR) has agreed to pay $735 million for the stock of Superior Well Services Inc. (SWSI), expanding the drilling contractor's offerings in shale natural gas fields.

The deal adds pressure pumping--a key service used in exploiting these deeply buried shale-rock formations--to the Hamilton, Bermuda, company's business, increasing the world's biggest onshore-drilling company's exposure to a rapidly growing part of the energy industry.

Gas production from shale deposits is both drilling- and service-intensive, and a wide expansion in shale-gas production over the past few years has been a boon to drilling contractors and service providers. The shale-gas wells boast huge initial production and then decline quickly, requiring producers to drill additional wells. To release the gas, drillers bore down horizontally through the formation and then pump a mixture of water, sand and chemicals into the well under high pressure to break the rock apart.

"They are enhancing the way they can take advantage" of shale drilling, said Phil Weiss, an analyst with Argus Research, adding, "It's certainly nothing that their peers do."

The deal is expected to close by the end of the quarter. The companies valued the deal at about $900 million, which includes the assumption of existing debt and preferred equity.

Nabors is offering $22.12 a share, a 21% premium to Superior's Friday closing price. Superior Well's stock was up 28% this year as of Friday and has nearly tripled the past year. Shares were last at Nabors' bid level nearly two years ago, as oil prices were plummeting from their record high. Shares of Superior Well Services closed up 21% at $22.08. Nabors' shares closed up 1.9% to $18.

Nabors Chairman and Chief Executive Gene Isenberg said the company expects the acquisition to add to earnings next year and result in significant cost savings in North America as it integrates Superior's pumping services with Nabors' drilling and other offerings. Superior's U.S. presence complements Nabors' U.S. business and will aid its expansion into areas such as the Marcellus shale region, Nabors said.

Separately, Superior said it reversed a prior-year second-quarter loss absent write-downs as revenue soared.

The Indiana, Pa., company posted a profit of $6.1 million, or 18 cents a share, compared with a loss of $37.9 million, or $1.66 a share, which included $33.2 million in write-downs. Revenue soared 95% to $176 million.

Analysts polled by Thomson Reuters most recently forecast earnings of 3 cents on revenue of $156 million.

Nabors two weeks ago said it swung to a bigger second-quarter profit than analysts expected following prior-year charges as revenue rose on strength in its U.S. operations.

-By Jason Womack and Tess Stynes, Dow Jones Newswires; 713-547-9201; jason.woamck@dowjones.com

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