To give it another leg up with exploration customers wanting to drill deeper laterals more efficiently, Helmerich & Payne Inc. (H&P) has acquired DrillScan, a French operator that provides engineering software for the oil and gas industry.

DrillScan would become a unit of subsidiary H&P Technologies LLC, which focuses on exploration and production (E&P) advanced technologies and directional drilling automation solutions.

“The capabilities DrillScan brings are highly complementary to H&P Technologies’ drilling optimization and automation solutions,” CEO John Lindsay said. “These software solutions, like other offerings in our portfolio, will be available to all E&P operators and directional drillers, regardless of drilling rig contractor.”

DrillScan, which would maintain its headquarters in France and worldwide offices, is bringing with it a team to contribute research and development to advance the digital technology portfolio. Terms of the transaction were not disclosed.

“This acquisition is a strong recognition of the quality of our modeling software that has been extensively validated with lab and field data, in collaboration with E&P operators and academic partners,” DrillScan President Stéphane Menand said. “DrillScan is a natural fit with H&P Technologies…”

H&P has been working to add value to its offerings as the leading Lower 48 driller following three acquisitions in the past two years: Motive Drilling Technologies Inc., Magnetic Variation Services LLC and Angus Jamieson Consulting.

Lindsay warned during the fiscal 3Q2019 conference call in July that the U.S. onshore rig count would continue to decline this year. The Tulsa-based operator exited the quarter with a lower-than-expected rig count. However, the CEO also said “pricing remains firm for the best-in-class fleet” for the rigs and related technology.

The purchase is not financially impactful for H&P “but intriguing nonetheless,” said Tudor, Pickering, Holt & Co. analysts.

“As horizontal lateral lengths continue to grow, so too has the importance of directional drilling services (and related drilling optimization software),” which help E&Ps “steer through the target zone along their respective wellbores…” The DrillScan purchase “only serves to further illustrate that trend.”

The addition also “reinforces the point that incremental mergers and acquisitions among the larger North American land drillers “is likely to remain heavily skewed toward these sorts of higher-margin -- and return on capital employed -- well construction-related software solutions versus hardware, i.e. other players’ rigs.”

Skadden, Arps, Slate, Meagher & Flom LLP served as legal adviser to the H&P entities, while Andrews Myers PC and Archers-AARPI were legal advisers for DrillScan.