Oil Servicers Patterson-UTI and NexTier Sweeten the Pill

NEW YORK, June 15 (Reuters Breakingviews) – The approach of peak oil demand is bad for oil producers, but it’s worse for companies that help dig and service new wells. A $5 billion merger between Patterson-UTI Energy (PTEN.O) and NexTier Oilfield Solutions (NEX.N), two small oil field services firms, offers a way out. Touted as a merger of equals, it doesn’t change the final destination for fossil-fuel-adjacent industries, but it eases their passage into night.

Big oil producers are already focusing on returning cash to investors as they face up to the inevitable. The International Energy Agency said on Wednesday that global demand growth is set to nearly halt by 2028, as the use of oil in transport falls from 2026. The prospect of softening demand reduces the incentive to dig new wells.

That trend is one reason Patterson-UTI and NexTier have both delivered negative total shareholder returns since 2018. Combining the two, however, should knock out $200 million of costs within 18 months, they reckon. Taxed and put on a multiple of 10, that should create over $1.5 billion of value for the two, whose total market capitalization prior to the deal was $4.4 billion. Both stocks rallied. Decline still beckons, but such things make it a little more bearable. (By Robert Cyran)