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.

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Fool contributor Toby Shute doesn't have a position in any company mentioned. The Motley Fool has a disclosure policy.

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12/23/2008 4:02 PM
GW $3.41 Down +0.00 +0.00%
Grey Wolf CAPS Rating: *****
PDS $4.78 Down -0.03 -0.62%
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ALY.DL2 $0.00 Down +0.00 +0.00%
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BAS $0.35 Down -0.37 -51.44%
Basic Energy Servi… CAPS Rating: *
BRNC.DL2 $0.00 Down +0.00 +0.00%
Bronco Drilling Co… CAPS Rating: ****
NOV $36.76 Down -0.21 -0.57%
National Oilwell V… CAPS Rating: *****
SII.DL2 $0.00 Down +0.00 +0.00%
Smith Internationa… CAPS Rating: *****