(Updates with Trinidad comment)
By Laharee Chatterjee and Rod Nickel
Aug 13 (Reuters) - Canadian oilfield services provider Ensign Energy Services Inc on Monday said it would make a C$947 million ($720 million) hostile bid for Trinidad Drilling Ltd, as the recovery of Canada’s oil industry lags a global rebound.
Ensign said it would offer in cash C$1.68 per Trinidad share, which would represent a premium of 11.3 percent to the closing price on Friday. The deal’s value would include Trinidad’s outstanding net debt of C$477 million as of June 30, Ensign said in a statement.
Bottlenecked pipelines have generated a bigger-than-usual price discount for Western Canada Select heavy crude compared with North American futures, leaving Canadian oil-producing companies cautious about spending.
The Petroleum Services Association of Canada on July 31 lowered its forecast for 2018 drilling activity to 6,900 wells from 7,400 - representing a drop from 2017.
Trinidad shares were trading 13.9 percent higher at C$1.72 in Toronto on Monday, slightly above Ensign’s offer. Ensign shares rose 5.6 percent to C$6.28.
As part of a strategic review that began in February, Trinidad Drilling, which builds rigs in Canada and the United States, made changes to its board. The review ended on Aug. 1, but the company did not decide on any deals.
After the review, Ensign, which owns about a 9.8 percent stake in Trinidad, said it approached the company’s board with an offer, but was stalled.
“The Trinidad board’s failure to fully engage with Ensign has led us to bring the offer directly to you, the shareholders,” Ensign, North America’s fifth-largest driller in number of rigs, said in a statement.
Trinidad learned on Saturday that Ensign intended to make an offer and told Ensign the next day that it was unacceptable, Trinidad said in a statement.
Trinidad said it told Ensign on Sunday that it was willing to continue discussions, but was rejected, and has not yet received any formal offer.
The offer’s premium looks “skinny” for Trinidad investors but provides a floor price that could generate a competing bid, National Bank of Canada analyst Greg Colman said in a note. It is unlikely that Trinidad shareholders would vote down the offer, given frustration with the outcome of its strategic review, he said.
Trinidad has lost money for three consecutive years and has posted losses through the first two quarters of 2018. ($1 = 1.3148 Canadian dollars) (Reporting by Laharee Chatterjee in Bengaluru and Rod Nickel in Winnipeg, Manitoba; Editing by Paul Simao and Lisa Shumaker)