Coalition of the Drilling

Back in October, Precision Drilling Trust 's (NYSE: PDS) then-fresh CEO told us that the Canadian driller's expansion into the U.S. market might accelerate. Today, the firm pressed the pedal to the floor with an unsolicited $2 billion bid for Grey Wolf (AMEX: GW).

This is an intriguing development, because Grey Wolf stood mere steps from the altar back in April, having agreed to a puzzling pairing with Basic Energy Services (NYSE: BAS). While we're used to one-upmanship in the commodities space, I can't remember the last such tango in the oilfield-services sector. Recent buys by spongelike National Oilwell Varco (NYSE: NOV) and Smith International (NYSE: SII) have proceeded with nary a peep.

This latest potential coupling frankly makes a heck of a lot more sense than Grey Wolf/Basic Energy, or the merger of Bronco Drilling (Nasdaq: BRNC) and Allis-Chalmers Energy (NYSE: ALY), for that matter. Seriously, would shareholders really want their drilling company to diversify into other lines of business -- aside from those whose options immediately vest upon a change in control, that is?

A Precision Drilling/Grey Wolf pairing would make for a formidable North American land drilling outfit. Ultimately, the resulting scale efficiencies of a merger would probably be mild, or moderate at best. Still, the combined company, with a strong balance sheet and customer base, would be well-positioned to keep building out the fleet in order to support the current boom in onshore drilling.

Copyright © 2008 Universal Press Syndicate.