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Land drilling contractor, Nabors Industries Ltd. (NBR - Analyst Report) announced that it has entered into an agreement with oilfield services provider C&J Energy Services, Inc. (CJES - Snapshot Report) to merge its completion and production services businesses located in the U.S. and Canada with the latter for about $2.86 billion in cash and stock.

Investors responded positively to this news, as shares of Nabors Industries gained around 4.6% while that of C&J Energy rose nearly 13% in after-hours trading.

Nabors Industries is expected to receive around $937 million in cash and 62.54 million shares of the new company. The cash payment will be made from the proceeds of a debt offering that will be undertaken by the to-be-formed company.

After the merger, this new entity will be incorporated in Bermuda and will trade in NYSE as C&J Energy Services Ltd. Shares of this combined company are expected to trade under the symbol CJES, subject to regulatory approval. Nabors Industries will be the majority stakeholder in this new company, with about 53% interests.

After completion of the merger, C&J Energy’s stimulation fleet is expected to nearly triple, making it North America’s fifth largest fleet. C&J Energy Services Ltd. will also become North America’s largest fluids management fleet and the second largest workover/well-servicing fleet operator. Further, the move will make way for international expansion through a global alliance agreement with Nabors.

Management at Nabors expects this move to be value additive for shareholders of both the companies. The increase in high-quality assets and widened scale of operations should improve prospects for the new company. Nabors Industries stated that though it believes that the merged assets have long-term potential, the move taken by it was a faster way to realize the true value.

Nabors Industries currently has a Zacks Rank #3 (Hold), whereas C&J Energy sports a Zacks Rank #1 (Strong Buy).

Meanwhile, one can consider other players from the oil and gas drilling industry such as Pioneer Energy Services Corp. (PES - Snapshot Report) and Patterson-UTI Energy Inc. (PTEN - Analyst Report). While Pioneer Energy has a Zacks Rank #1, Patterson-UTI holds a Zacks Rank #2 (Buy).

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