Patterson-UTI Energy, Inc. (NasdaqGS:PTEN) entered into an agreement to acquire Pioneer Energy Services Corp. for approximately $300 million on July 5, 2021. The transaction values Pioneer Energy Services on a cash and debt free basis at approximately $295 million. Under the terms of the transaction, Patterson-UTI will acquire Pioneer Energy Services for aggregate consideration of up to 26,275,000 shares of Patterson-UTI common stock and $30 million of cash. As more fully described in the acquisition agreement, all Pioneer Energy Services debt is being retired in the transaction with a portion of such shares and cash and with Pioneer Energy Services' cash on hand determined in accordance with the acquisition agreement prior to closing. The number of Patterson-UTI shares to be delivered in the acquisition is subject to downward adjustment if the VWAP of Patterson-UTI shares for the 10 days prior to closing exceeds $11.00, in which case the shares to be delivered will be reduced by 50% of the value exceeding $11.00 per share. The transaction values Pioneer Energy Services on a cash and debt free basis at approximately $295 million, assuming the issuance of 26,275,000 shares of Patterson-UTI common stock at the closing price of $10.14 on July 2, 2021, plus $30 million of cash. Pioneer Energy Services' convertible notes will convert into shares of Pioneer common stock in accordance with their terms in connection with the closing and will receive Patterson-UTI shares on the same basis as if the notes had been converted prior to the closing. The maximum number of shares of Company Common Stock to be issued and the maximum amount of cash to be delivered by the Company in the Transactions will be 26,275,000 shares and $30 million in cash, which includes all amounts required to retire the Pioneer Senior Notes, the Pioneer Convertible Notes and any debt outstanding under the Pioneer ABL credit facility, together with the payment of the Merger Consideration to holders of Pioneer Common Stock. Pioneer will be obligated to pay to Patterson-UTI a break-up fee of $9.5 million.

The transaction is subject to regulatory approvals, customary closing conditions, the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act shall have expired or been terminated, the approval for listing of the Company Common Stock to be issued in connection with the First Company Merger on the NASDAQ, the registration statement on Form S-4, to be filed with the SEC by the Company, having been declared effective by the SEC, execution and delivery of the Third Supplemental Indenture, the requirement that not more than 6% of the shares of Pioneer Common Stock outstanding immediately prior to the Mergers have validly exercised appraisal rights pursuant to Delaware law and the approval of the holders of at least sixty percent of the total voting power of all outstanding securities of Pioneer generally entitled to vote at a meeting of Pioneer's stockholders. The transaction was unanimously approved by each of Patterson-UTI's and Pioneer Energy Services' board of directors. The Pioneer board unanimously recommends that Pioneer stockholders and Pioneer convertible noteholders vote “FOR” the Pioneer merger proposal and “FOR” the Pioneer compensation proposal. The meeting for the Pioneer stockholders is scheduled to be held on September 28, 2021. The transaction is expected to close in the fourth quarter of 2021. As of September 17, 2021, the transaction is expected to close on October 1, 2021. The transaction is accretive to both cash flow per share and adjusted EBITDA per share and generate annual synergies of than $15 million.

Tull R. Florey of Gibson, Dunn & Crutcher LLP is serving as legal counsel to Patterson-UTI. Christopher S. Collins and David Lassetter of Vinson & Elkins L.L.P. is serving as legal counsel to Pioneer Energy Services. Simmons Energy, a division of Piper Sandler, and Tudor, Pickering, Holt & Co. are serving as financial advisors to Pioneer Energy Services. Daryl Lansdale of Norton Rose Fulbright US LLP acted as legal advisor to Pioneer Energy. Piper Sandler & Co. acted as fairness opinion provider to Pioneer. Latham & Watkins LLP acted as a legal advisor to Pioneer Energy Services Corp.