Noble CEO's Sudden Resignation Renews Driller Merger Talk

HOUSTON Sep 21, 2007 (Dow Jones Newswires)

The unexpected resignation of Noble Corp.'s (NE) chief executive Thursday night has sent the company's shares soaring and jump-started speculation that the offshore driller is considering a merger with a rival.

CEO Mark Jackson's departure was announced in a short statement by the company, offering no details as to why he was leaving after less than a year on the job. Lawrence Chazen, a Noble board member, told Dow Jones Newswires the CEO was resigning for "personal reasons" unrelated to a potential takeover, adding that the move came as a surprise. The company's stock rose 3.1% to $50.98 in trading Friday morning, far outstripping its peers and indicating that the market was not convinced that "personal reasons" were the only force at work.

"We don't buy it - we don't think Mark would just bolt from (a) sweet CEO job on short notice," Dan Pickering of Tudor Pickering Energy wrote in a note to clients.

Without a concrete explanation for the resignation, traders and analysts settled on Jackson's longtime aversion to a merger or takeover involving Noble and another driller. Two of Noble's U.S. rivals agreed to merge in July, and earlier this week, offshore driller shares rose on talk of a three-way deal involving Noble and Norwegian drillers Seadrill (SDRL.OS) and Awilco ASA (AWO.OS).

Noble spokesman John Breed said the company does not comment on rumors and declined to elaborate on why Jackson was resigning. Awilco CEO Henrik Fougner repeated an earlier denial by Seadrill's CEO.

"I saw supposedly that the three companies were to do something together," he said. "Seadrill's chief executive (has come out) and said that such a rumor was nonsense. I can only add to that."

When asked whether he could categorically deny that Awilco is in talks with Noble Corp. over a deal, Fougner reiterated that the latest rumors in the market were nonsense but added that he takes a positive view toward consolidation.

Seadrill spokespeople did not return telephone calls seeking comment.

A Good Fit

Fearnley Fonds analyst Truls Olsen in Norway said that the lack of reasons given for Jackson's resignation "only leads to more speculation" and added that Seadrill and Awilco both recorded positive stock moves Friday.

"Is it likely, is it unlikely? Everything can happen," Olsen added. He reckoned a tie-up between Noble and either Seadrill or Awilco would make sense, given the former's "fast-aging fleet" and the latter's brand new rigs. "They have to start considering the quality of the fleet from an integrity point of view," he said. But he noted that a formation between any of the three companies could work.

Analyst Karsten Hjelsth of ABG Sundal Collier said: "We know that (Seadrill's) CEO has been denying the rumors, but doesn't mean anything. It depends on who's approaching who."

Hjelsth said a tie-up between Seadrill and Noble would make strategic sense, not least in order to bulk up in the face of the merger of offshore oil and gas drilling contractors GlobalSantaFe Corp. (GSF) and Transocean Inc. (RIG). The companies said in July they would merge to form a $53 billion drilling company that would dwarf Noble's rig fleet.

Even Jackson had come around to a deal similar to the Transocean-GlobalSantaFe merger, where Transocean paid no premium for its rival's shares. At an industry conference organized by Lehman Brothers earlier this month, Jackson said a "so-called merger of equals has a lot of appeal."

"It does possibly open up opportunities for shareholders as we move forward, if there could be further consolidation into the form of a no-premium transaction," he said.

Copyright (c) 2007 Dow Jones & Company, Inc.