Released June 11, 2024 | SUGAR LAND
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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--Adding its name to the growing list of those pursuing an aggressive merger and acquisition strategy, Noble Corporation plc (NYSE:NE) (Sugar Land, Texas) said Monday it entered into an agreement to buy upstream-focused Diamond Offshore Drilling Incorporated (NYSE:DO) (Houston, Texas) for about $1.6 billion.
Noble said the offer represents an 11.4% premium to Diamond's closing stock price on Friday of $13.93 per share. Robert Eifler, the president and chief executive officer at Noble, said his company's upstream footprint would be bolstered by additional drillships, along with a harsh-environment semi-submersible rig, that would be acquired in the deal.
"Supported by Diamond's $2.1 billion of backlog and $100 million of anticipated cost synergies, we expect the transaction to be immediately accretive to our free cash flow per share and contribute to accelerated growth in our return of capital to shareholders," he said.
Though mostly chartered for work in the U.S. territorial waters, Diamond's fleet is deployed globally, with the Ocean Apex semi-submersible rig working off the coast of Australia, while the Ocean BlackRhino drillship is headed to Ivory Coast in December.
In outlining its rationale for the acquisition, Noble noted that Diamond averaged a day rate of around $460,000 for its seventh-generation drillships.
"Giving effect to the acquisition, Noble will own and operate a fleet of 41 rigs including 28 floaters and 13 jackups," Noble added. "Additionally, backlog for the combined company would be approximately $6.5 billion as of today, with a wide diversity of customers and regions of operation."
Diamond was forced to file for bankruptcy protection in Texas in 2020, just as the COVID-19 pandemic was descending on North America. The company at the time said demand for upstream services had collapsed, a situation that was compounded by a dramatic decline in crude oil prices.
West Texas Intermediate, the U.S. benchmark for the price of oil, traded in negative territory--to $37 per barrel--early in the pandemic as social restrictions choked off demand. Diamond emerged from bankruptcy in 2021.
"This combination is an ideal outcome that provides Diamond shareholders both immediate and long-term upside potential as part of a more fully scaled platform that can deliver customer and shareholder value on a through-cycle basis, more visibly and accessibly, while gaining access to Noble's robust dividend program," said Diamond President and Chief Executive Officer Bernie Wolford.
Diamond reported first-quarter revenue of $275 million, compared to $298 million in the fourth quarter. The decline was driven primarily by the costs associated with an incident involving the semi-submersible Ocean GreatWhite rig, which saw its lower marine riser package sink to the ocean floor while working for BP plc (NYSE:BP) (London, England) off the Shetland Islands.
The riser package is part of the blowout preventer system, a critical safety feature that closes off a well to avoid a major hydrocarbon release.
Noble too took a loss in the first quarter but saw drilling revenue improve from $609 million during the fourth quarter to $612 million during the three-month period ending in March. The company attributed the improvement in drilling revenue to an increase in fleet utilization, which increased from 68% during the fourth quarter to 72% during the first quarter of 2024.
Both companies saw a jump in stock prices in early Monday trading.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
Noble said the offer represents an 11.4% premium to Diamond's closing stock price on Friday of $13.93 per share. Robert Eifler, the president and chief executive officer at Noble, said his company's upstream footprint would be bolstered by additional drillships, along with a harsh-environment semi-submersible rig, that would be acquired in the deal.
"Supported by Diamond's $2.1 billion of backlog and $100 million of anticipated cost synergies, we expect the transaction to be immediately accretive to our free cash flow per share and contribute to accelerated growth in our return of capital to shareholders," he said.
Though mostly chartered for work in the U.S. territorial waters, Diamond's fleet is deployed globally, with the Ocean Apex semi-submersible rig working off the coast of Australia, while the Ocean BlackRhino drillship is headed to Ivory Coast in December.
In outlining its rationale for the acquisition, Noble noted that Diamond averaged a day rate of around $460,000 for its seventh-generation drillships.
"Giving effect to the acquisition, Noble will own and operate a fleet of 41 rigs including 28 floaters and 13 jackups," Noble added. "Additionally, backlog for the combined company would be approximately $6.5 billion as of today, with a wide diversity of customers and regions of operation."
Diamond was forced to file for bankruptcy protection in Texas in 2020, just as the COVID-19 pandemic was descending on North America. The company at the time said demand for upstream services had collapsed, a situation that was compounded by a dramatic decline in crude oil prices.
West Texas Intermediate, the U.S. benchmark for the price of oil, traded in negative territory--to $37 per barrel--early in the pandemic as social restrictions choked off demand. Diamond emerged from bankruptcy in 2021.
"This combination is an ideal outcome that provides Diamond shareholders both immediate and long-term upside potential as part of a more fully scaled platform that can deliver customer and shareholder value on a through-cycle basis, more visibly and accessibly, while gaining access to Noble's robust dividend program," said Diamond President and Chief Executive Officer Bernie Wolford.
Diamond reported first-quarter revenue of $275 million, compared to $298 million in the fourth quarter. The decline was driven primarily by the costs associated with an incident involving the semi-submersible Ocean GreatWhite rig, which saw its lower marine riser package sink to the ocean floor while working for BP plc (NYSE:BP) (London, England) off the Shetland Islands.
The riser package is part of the blowout preventer system, a critical safety feature that closes off a well to avoid a major hydrocarbon release.
Noble too took a loss in the first quarter but saw drilling revenue improve from $609 million during the fourth quarter to $612 million during the three-month period ending in March. The company attributed the improvement in drilling revenue to an increase in fleet utilization, which increased from 68% during the fourth quarter to 72% during the first quarter of 2024.
Both companies saw a jump in stock prices in early Monday trading.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
