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Two of Canada’s largest oil and gas drillers have agreed to combine in a deal worth about $1.03 billion, positioning them to have the third-largest contract drilling fleet in the United States.

Under the friendly deal reached by the two Calgary-based companies, Precision Drilling Corp. will buy Trinidad Drilling Ltd. in exchange for shares worth about $540 million. Precision will also assume $477 million in debt.

READ MORE: Trinidad Drilling net loss deepens despite revenue rise fuelled by U.S. growth

If the deal closes as expected, Trinidad shareholders will own about 29 per cent of Precision, which is Canada’s biggest contract drilling company.

The Trinidad board is unanimously supporting the Precision offer and rejecting a previous hostile takeover bid of $1.68 per share cash from Ensign Energy Services Inc., also of Calgary, that was announced on Aug. 30.

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READ MORE: Ensign Energy makes hostile takeover bid for Calgary-based Trinidad Drilling

However, the transaction requires approval from two-thirds of votes cast by Trinidad shareholders and a simple majority of Precision shareholders at separate special meetings.

A combined Precision-Trinidad would have more than 200 active rigs in its North American fleet after the transaction, and 322 total rigs. Of those, Precision has identified 50 that would be held for sale.

READ MORE: Canadian drillers moving oil rigs south to chase better prospects in Texas

It projects more than $30 million in annual synergies from the combination, through improved corporate efficiency and facility consolidations.

Precision shares closed Thursday at $4.44, making the offer of 0.445 share worth about $1.98 per Trinidad common share. Trinidad shares closed Thursday at $1.84 per share on the Toronto Stock Exchange.

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