[NABORS LETTERHEAD]
December 21, 1998
Dear Fellow Shareholder:
Last week, we sent to you proxy materials urging you to adopt a
resolution strongly recommending that the Board of Directors of Pool Energy
Services Co. arrange for the sale of the Company at the highest available price.
As you know, Nabors has proposed a merger to Pool's Board of Directors that
would provide you with a significant premium for your investment. In response,
your Board has said that even if a majority of Pool's shareholders adopt the
Nabors' Resolution, "AT THE PRESENT TIME, THE BOARD DOES NOT INTEND TO TAKE ANY
SPECIFIC ACTION." In short, they intend to conduct "business as usual" and
ignore your interests. WE STRONGLY URGE YOU - THE TRUE OWNERS OF POOL -- TO ACT
NOW TO PROTECT THE VALUE OF YOUR INVESTMENT BY SIGNING, DATING, AND MAILING THE
BLUE PROXY CARD TODAY.
Consider the following:
o Absent Nabors' Merger Proposal, it is clear that Pool's stock price
would not be trading at its current level of $11.00 as of December 18,
1998, but at an estimated "normalized current" price of $6.223.
o Nabors' offer represents a significant premium for your investment in
Pool - both now and at the time of our original offer, and provides
you with the opportunity to participate in the upside potential of a
combined Nabors-Pool.
o Pool has significantly underperformed both Nabors and the companies
currently comprising the Philadelphia Oil Service Sector Index ("Oil
Service Index") since Pool's IPO and since the implementation of
Pool's "strategic plan."
o The Pool Board is ignoring recent industry trends towards
consolidation which are aimed at increasing operating efficiencies,
leading to enhanced shareholder value despite a tough operating
environment.
We believe Pool's stock price performance since October 9, 1998, the
last day of trading prior to Nabors' initial offer, is a direct result of
Nabors' offer. In the absence of Nabors' offer, it could be expected that Pool's
stock price would have performed similarly to those companies that Pool
considers as its peers.1 Between October 9, 1998 and December 18, 1998, Pool's
peer group declined on average 11.9%. As such, were it not for Nabors' current
offer for Pool, Pool's stock price could be expected to trade at a 11.9%
discount to its price on October 9, 1998 of $7.063, or approximately $6.223.
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1 Pool's Tier 1 and Tier 2 peer group, as reported in its definitive additional
materials, includes: Key Energy Group, Inc., Parker Drilling Company, Patterson
Energy, Inc., Pride International, Inc. and UTI Energy Corp.
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Our proposal represents a win-win opportunity for Pool shareholders.
Nabors' Merger Proposal, 0.481 shares of Nabors common stock and $6.125 in cash
for each share of common stock of Pool, represents an opportunity to realize a
significant premium for your current investment in Pool, while still retaining
the upside potential inherent in a Nabors-Pool combination. A combination of our
two companies would lead to economies of scale that offer the prospect of
significant purchasing, operating and other efficiencies -- leading to lower
costs, reduced capital expenditure requirements and enhanced equipment
utilization. The combination also offers enhanced growth opportunities,
significant consolidation benefits, benefits from becoming part of a larger and
better-capitalized company and increased shareholder liquidity.
Nabors has a strong history of shareholder value creation while Pool's
results have lagged far behind. Pool argues that Nabors is opportunistically
attempting to acquire Pool at a bargain price and cites Pool's all-time highest
trading stock price of $40.63 on October 9, 1997, in support of its position.
What Pool fails to mention, is that an equivalent investment in Nabors AT NO
PREMIUM at the date of implementation of Pool's "strategic plan" would have
produced a value of $62.95. IN FACT, AN INVESTMENT IN NABORS ON JUNE 6, 1994 HAS
TRADED AT A HIGHER PRICE THAN AN EQUIVALENT INVESTMENT IN POOL ON EACH AND EVERY
DAY SINCE NOVEMBER 1, 1994.
Moreover, Pool shareholders will have the opportunity to participate
in the upside benefits of the combination through ownership of Nabors common
stock. Nabors' stock price has historically and consistently outperformed Pool's
during both positive and negative industry environments. From April 17, 1990,
the date of Pool's IPO, through October 9, 1998, the day of trading prior to
Nabors' initial offer, Pool's stock price declined 31.1% from $10.250 to $7.063,
while Nabors' stock price increased 211.8% from $4.250 to $13.250 and the stock
prices for the companies currently comprising the Oil Service Index increased
83.9%. From June 6, 1994, the date of Nabors' initial investment in Pool and
Pool's subsequent implementation of its "strategic plan," through October 9,
1998, Pool's stock price fell 22.6% from $9.125 to $7.063, while Nabors' stock
price grew 96.3% from $6.750 to $13.250 and the stock prices for the companies
currently comprising the Oil Service Index increased 87.5%.
POOL'S BOARD AND MANAGEMENT ARE ATTEMPTING TO DELAY WHAT OTHERS IN THE
INDUSTRY ARE CLEARLY EMBRACING. Consolidation, in the face of deteriorating
industry conditions, has become a consistent strategy recently implemented by
both oilfield service companies as well as our customers (both independent and
major exploration and production companies). These companies have recognized
economies of scale which have led to significant cost savings and efficiencies
which are crucial to competitive survival in the current environment.
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POOL'S MANAGEMENT IS ALSO ENTRENCHING ITSELF AT THE EXPENSE OF
SHAREHOLDERS. While the Pool Board has refused to negotiate with Nabors, it
indicated that it is implementing lucrative "golden parachute" agreements for 17
senior executives and amended Pool's Bylaws. As Pool's proxy statement
acknowledges, the Bylaw amendment "may, under certain circumstances, have
anti-takeover implications." Simply put, the Board's actions make it more
difficult for Nabors, or any other qualified bidder, to acquire the Company.
Pool's Board, which collectively owns less than 0.3% of the outstanding common
stock excluding options, is unilaterally determining the future of our Company.
What's next?
You should ask yourself, "How long must I wait to achieve a return on
my investment in Pool?" A VOTE FOR THE NABORS "SALE OF POOL" RESOLUTION
REPRESENTS THE BEST OPPORTUNITY TO REALIZE A SIGNIFICANT PREMIUM FOR YOUR SHARES
AND THE OPPORTUNITY TO PARTICIPATE IN THE FUTURE UPSIDE OF A STRONGER COMBINED
COMPANY.
THE FUTURE OF YOUR INVESTMENT IS AT STAKE
In your own self interest, you can send a strong message to Pool's
Board indicating that continued lackluster performance is no longer acceptable.
WE STRONGLY URGE YOU TO SIGN, DATE AND RETURN THE BLUE PROXY CARD TODAY IN THE
ENCLOSED, POSTAGE PAID ENVELOPE. As the largest single shareholder of the
Company, Nabors believes that communicating our message loud and clear to the
Pool Board will be a critical first step in effecting change in our Company.
We continue to urge Pool's Board to discuss this powerful combination
with us. As we have consistently stated, if Pool can demonstrate additional
value, we are prepared to offer a higher price. We remain committed to effecting
a transaction with Pool. We believe that together Nabors and Pool will
outperform Pool's "strategic plan" and will maximize value for Pool shareholders
over the near- and long-term.
Thank you very much for your support,
NABORS INDUSTRIES, INC.
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THE SPECIAL MEETING IS ON JANUARY 12, 1999
If your shares of the Company are held in "Street-Name" only your
broker or bank can vote your shares and only upon receipt of your specific
instructions. Please return the enclosed BLUE proxy card to your broker or bank
and contact the person responsible for your account to ensure that a BLUE proxy
card is voted on your behalf.
We urge you not to sign any proxy card you may receive from Pool.
If you have any questions or require any assistance in voting your
Shares, please call:
INNISFREE M&A INCORPORATED
501 Madison Avenue, 20th Floor
New York, New York 10022
CALL TOLL-FREE: (888) 750-5834
Bankers and Brokers Call Collect: (212) 750-5833
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