Can Offshore Drilling Come Back in Wake of $1.9B Ensco, Atwood Merger?
Ensco plc is acquiring Atwood Oceanics in an all-stock merger, the first major mergers and acquisition (M&A) activity in the offshore space following the long downturn in commodity prices.
And some analysts say it could herald long-awaited improvement in the struggling sector.
Analysts at Evercore ISI said offshore drillers needed to things to catalyze improvement in returns: fewer rigs in the water and more M&A consolidation.
“We believe this transaction may kick start a much-needed M&A cycle in the offshore drilling group,” Evercore ISI said. “Today’s joint announcement between Ensco and Atwood is a major step forward for a sector that is just beginning to see stabilization in terms of contracting and dayrates.”
Analysts at Barclays weren’t as buoyant over the deal.
“What does this transaction mean for the currently oversupplied offshore drilling market? Unfortunately not much,” Barclays said in a note to investors. “The fact remains that the offshore drilling market (both floaters and jackups) remains severely oversupplied with floating rig utilization at 47 percent (134 contracted out of 282 total supply … and jackup rig utilization at 54 percent (293 contracted out of 540 total supply).”
However, Barclays noted that of those rigs, 205 floaters and 458 jackups are currently marketed.
Analysts at Barclays said the estimated value of the deal is $1.9 billion, including about $860 million in the equity purchase price. That’s based on a May 26 closing price of $10.72 per ATW share and $6.70 per ESV share.
By mid-day May 30, ESV was trading at $6.43 per share. ATW shares were $10.13 each.
Under the terms of the deal, Atwood (NYSE: ATW) shareholders will receive 1.60 shares of Ensco (NYSE: ESV). Upon closing, which is expected in the third quarter, ATW and ESV shareholders will own about 69 percent and 31 percent of the combined company, Evercore estimated.
Ensco said in a statement the company expects to see “annual pre-tax synergies” of about $65 million for 2019 and beyond.
“The combination of Ensco and Atwood will strengthen our position as the leader in offshore drilling across a wide range of water depths around the world – creating a broad platform that we can build upon in the future,” Ensco CEO Carl Trowell said in the statement. “This acquisition significantly enhances our high-specification floater and jackup fleets, adding technologically advanced drillships and semisubmersibles, and refreshing our premium jackup fleet to best position ourselves for the market recovery.”
The combined company will be an “offshore drilling bellwether” able to rival the likes of Transcocean by fleet size, Evercore said. And, it will also be one of the most technologically advanced. Twenty-one of the 26 floaters are designed for ultra-deepwater.
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
- The Rigzone Interview: Private Equity Cash Focuses on Oil, Gas Development
- Could Argentinian Politics Beat the Vaca Muerta?
- The Rigzone Interview: Oil, Gas Goes Digital for Safety, Speed
- Deal Of The Month: EQT, Rice Energy Merge in Mega Marcellus $6.7B Gas Deal
- OpEd: OPEC Production Cuts Fail, Markets Pay for Underestimating US Shale
- Gunvor CEO Sees Russian Refining Capacity Taking Hit from Drone Strikes
- These Factors Helped Brent Oil Price Break Above $85
- Sinopec Engineering Posts Higher Annual Petrochemicals Revenue
- Imperial Pipeline in Winnipeg Goes Offline for Three Months
- Gaz System to Acquire Gas Storage Poland
- Subsea7 Secures Contract to Service Woodside's Trion
- Adnoc Inks Supply Deal for Ruwais LNG Project with Germany's SEFE
- EIA Boosts USA Crude Oil Production Forecasts
- Norway Regulator Blasts Proposal to Halt New Oil and Gas Permits
- Chinese Mega Company Makes Major Oilfield Discovery
- EIA Drops 2024 Henry Hub Gas Price Forecast
- EIA and Standard Chartered Offer Up Latest Oil Price Predictions
- Red Sea Region Sees Another Watershed Incident
- Chevron Oil Project in Kazakhstan to Cost $48.5B
- OPEC Voices Encouragement after IEA Affirms Support for Oil Security
- Biden Govt Bares Strategy for Freight Charging, Hydrogen Fueling Infra
- Rystad Looks at the Buzz Around White Hydrogen
- Ukraine Hits Third Russian Refinery In Escalating Drone Strikes
- VIDEO: Missile Attack Kills Crew Transiting Gulf of Aden
- Norway Regulator Blasts Proposal to Halt New Oil and Gas Permits
- Chinese Mega Company Makes Major Oilfield Discovery
- What Is the Biggest Risk to Offshore Oil and Gas Personnel in 2024?
- Is Peak Oil Demand Close?
- Vessel Sinks in Red Sea After Missile Strike
- JP Morgan, Standard Chartered Reveal Latest Oil Price Forecasts
- Exxon Rights in Stabroek Do Not Apply to Hess Merger with Chevron: Hess
- Rystad Forecasts Net Production of Top Permian Producers in 2024
- Analysts Reveal Latest Oil Price Outlook Following OPEC+ Cut Extension