Source: Platts RigData RADAR Report | December 15, 2016  

Unraveling the details of the $1.76 billion merger of Patterson-UTI (PTEN) and Seventy Seven Energy (SVNT) oilfield services companies yields insights into how the investing community handicaps the value of premium drilling rigs, according to Platts RigData.

Given that both companies provide onshore contract drilling and pressure pumping services, comparing and contrasting their respective valuations prior to and after the merger announcement enables Platts RigData to arrive at enterprise-wide asset value allocations.

Backing into these enterprise asset valuations yields an estimate of $20 million for a new 1,500-horsepower, AC-powered walking rig, according to the latest issue of Platts RigData’s weekly RADAR Report. After rerunning rig valuation calculations for both companies’ premium rig models using the closing price of PTEN’s shares the day after the deal was announced, Platts RigData concludes that the market is discounting these rigs by 10%, or $2 million per rig for a net value of ~$18 million.

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