Scientific Drilling International (SDI), the U.S. oil industry's largest independent directional drilling firm, is being offered to potential buyers at a valuation of more than $500 million, sources familiar with the matter said this week.
The sale process for the Houston-based company, owned by the van Steenwyk family for over three decades according to the company's website, began recently, said three sources who spoke on condition of anonymity as the information has not been made public.
Both strategic buyers and financial sponsors have been invited to bid for the firm, noted two of the sources, adding that energy-focused investment bank Tudor Pickering & Holt & Co. was advising SDI on the process.
SDI CEO Phil Longorio did not respond to requests for comment.
The prospective sale of SDI comes at a time when oilfield services firms have enjoyed some financial benefits from rising crude prices. U.S. oil production is at the highest level in decades after years of severe cost-cutting by oil and gas exploration companies.
SDI is the fourth largest directional-drilling services company by 2017 revenue, according to market researcher Spears & Associates, behind publicly traded oilfield services firms Schlumberger Ltd. (NYSE: SLB), Baker Hughes Inc. (NYSE: BHGE), a GE company, and Halliburton Co. (NYSE: HAL).
Its precision-drilling services operate in an advanced technology segment of a market that is projected to have $3.57 billion in revenue this year.
"At the high end of the market, customer relationships are very loyal and long-term," said Richard Spears, a Spears & Associates vice president who declined to comment on a potential SDI sale.
Despite recent gains in profitability, the industry rebound has been spotty, with some oilfield services firms still bound by long-term contracts signed when crude prices were lower. That means company valuations, in many cases, are still at an attractive level for buyout firms.
"Private equity companies likely will be looking at the [SDI] business, with a goal to buy, fix it up, and take it public," said one of the sources, a private-equity executive.
None of the sources would elaborate on the price tag for SDI, beyond saying it was somewhere in excess of $500 million.
SDI was founded in Houston in 1969 and was bought by the late Don van Steenwyk in 1986, with the family owning it ever since.
The investment is about $300 million less than the company forecast in May and includes reductions resulting from Alberta’s mandated oil production cuts.
Canada-based Marksman serves collision avoidance, wellbore intercept, coalbed methane and other complex drilling markets. Houston-based Scientific Drilling’s passive ranging solution, MagTraC MWD Ranging, has been used around the world.
Sinking oil prices are turning distressed U.S. energy companies, such as Gastar Exploration, Parker Drilling and Waypoint Leasing, into takeover targets for opportunistic private investors.