Hunting Plc, a U.K. oil-services provider, agreed to buy Titan Group from Riverstone Holdings LLC for $775 million to expand in unconventional oil and gas services in North America. The shares fell the most since 2008.
The acquisition of Texas-based Titan gives Hunting perforating gun systems for fracturing shale rock and other hardware used in drilling and well maintenance, Hunting said today in a statement. It raised 85.4 million pounds ($139 million) by selling 13.2 million new shares to part-fund the purchase, it said in a separate statement.
Oilfield service providers are competing to boost market share as energy companies add more unconventional hydrocarbon projects, which include shale gas, oil sands and coal-bed methane. London-based Hunting is also seeking to expand in the U.S., where it expects investment in onshore drilling to rise 60 percent to $176 billion in 2016 from 2010, it said.
Hunting fell 10 percent to 646.5 pence in London, the biggest decline since Oct. 6, 2008.
“We have an acquisition strategy, we want to buy businesses that have a global footprint,” Finance Director Peter Rose said today in a telephone interview. With Titan, “there is a potential to go global using our expertise.”
Hunting, due to report first-half results on Aug. 25, expects to post sales of about 250 million pounds and earnings before interest, tax, depreciation and amortization of 35 million pounds. “The current trading and prospects for Hunting is in line with its expectations for the year,” it said.
Hunting will start making Titan products outside the U.S. and Canada, which account for about 95 percent of its revenue, and is moving into Europe and China, Rose said. In June, Hunting opened an office in China, where shale gas resources may exceed those in the U.S., according to the U.S. Energy Information Administration.
“Titan’s perforating gun systems, charges, switches and instrumentation are complementary to Hunting’s tools,” the British company said. “Hunting is looking to gain further exposure to high-growth unconventional resource plays.”
Titan has a market share of about 30 percent in the U.S., which may increase after the acquisition, Rose said. Hunting is adding explosives to the guns Titan supplies to field-service companies for fracturing wells underground.
As well as the share sale, Hunting will use cash and a 375 million-pound loan from Barclays Plc, Lloyds Banking Group Plc and Royal Bank of Scotland Group Plc to fund the Titan purchase. Barclays Capital and RBS Hoare Govett Ltd. managed the share sale, which represented about 9.9 percent of Hunting’s equity before the placing.