NEW YORK (Dow Jones Newswires), Nov. 3, 2010
Offshore drilling companies Pride and former spinoff Seahawk have put up for-sale signs at the same time but are likely looking at different timelines in getting any potential deals done.
The Wall Street Journal reported late Tuesday that Pride is evaluating strategic options that could include a possible sale and has held discussions with Norway's Seadrill Ltd. (SDRL) and London-based Ensco PLC (ESV), among other possible suitors. The same day Seahawk, which was spun off from Pride in August 2009, said it is looking at options to boost shareholder return, including a sale or recapitalization.
But the difference is Pride, whose largest business by revenue is deep-water drilling, has the luxury of time to weigh options, Raymond James analyst Collin Gerry said.
Seahawk, on the other hand, is burning through cash and needs a more immediate solution. The Houston-based company specializes in shallow-water drilling. Its stock has taken a beating, down 55% year-to-date, hurt by the company's inability to receive permits for shallow-water drilling in the Gulf of Mexico following the Deepwater Horizon oil spill.
Shares of both companies spiked in early trading before the broader U.S. markets turned south. Pride was recently up 2.8% at $31.89 and earlier climbed as high as $33.42. The stock is essentially flat year to date. And Seahawk was recently off 1.5% to $9.97 but earlier rose as much as 8.2% to $10.95.
A Pride spokeswoman wasn't immediately available to comment, while a Seahawk spokeswoman said the company doesn't have a timeframe for completing its review and declined to comment further.
Global Hunter Securities analyst Matt Beeby said in the past, Pride has been resistant to an acquisition, so the report that it is exploring options indicates management is looking practically at the company's businesses.
However, he cautioned Wednesday's share gains may not hold if Pride doesn't address a potential merger or acquisition on Thursday's earnings call.
Beeby said Pride is particularly attractive to companies like Ensco because of its rig positioning in Brazil. The South American country is poised to become one of the biggest deep-water markets for the next several years, if not decade.
"It makes sense that [a buyer] would pay a premium for that," he said. Pride also touts four brand new drill ships.
Seahawk, however, has less to offer as long as it doesn't have access to permits. The company, which operates entirely in the U.S. Gulf shallow-water drilling market, has two options--selling assets or some sort of merger and acquisition, Raymond James' Gerry said.
Beeby offered one solution: With a market capitalization of less than $120 million, "maybe some rich Wall Street guy could buy it."
Copyright (c) 2010 Dow Jones & Company, Inc.
Most Popular Articles