Director at Icarus Consultants
Last Updated: August 24, 2017
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Business Trends

The forecasted and inevitable merger and acquisition season appears to be amongst us. We have already seen an increasing number of acquisitions  of individual distressed rigs over the last year or so by the likes of  Advanced Energy Systems, Arabdrill, Vantage, Ocean Rig and White Fleet  Drilling, but company mergers have been dormant through the worst part  of the downturn. But with green shoots of a recovery now evident, and  with a host of distressed or restructured companies around, M&A  activity is underway.

After Borr Drilling bought out Transocean’s jackup fleet plus  a couple of distressed jackups from Hercules, Transocean turned around  and is investing the money into Songa Offshore. This follows the earlier  acquisition of Atwood Oceanics by Ensco.  

The Ensco / Atwood merger does has an impact in this region,  providing Ensco with a strong presence in Australia where they have been  a regularly occasional player since early 2000’s, often the half rig in  a one and a half jackup market. They will now have a firm floater  presence there. The Atwood jackup fleet, all modern premium rigs, will  allow Ensco to phase out more of its older fleet, most likely their  present five (5) cold stacked jackups. Ensco has already scrapped nine  (9) of its jackup fleet and sold off at least four (4) others.

Transocean obviously have their sights on dominating the  harsh environment floater market with their $3.4bn acquisition of  Songa.  Songa have four (4) very modern semis all on long term charters  with Statoil in Norway as well as three (3) 1970/1980 vintage mid water  floaters that are currently idle and which Transocean will surely scrap,  probably with a few more of its own elderly floaters. Until this  happens Transocean will operate a fleet of fifty one (51) floaters, with  thirty (30) UDW units (and four (4) more under construction), eleven  (11) harsh environment floaters, three (3) deepwater floaters and seven  (7) mid water floaters. The Songa acquisition also strengthens  Transocean’s footprint in Norway. 

With sixty (60) different drilling contractors operating  floaters and one hundred and twenty (120) jackup drilling contractors  around the world, there is a lot of scope for further M&A activity.  Naturally the Ensco and Transocean deals have stimulated much  speculation by analysts as to who is the next in line. Odfjell seems to  be a common pick to be on Transocean’s radar but their roster of prime  acquisition candidates includes Ocean Rig, Pacific Drilling, North  Atlantic Drilling, Seadrill Partners and Seadrill itself, Maersk  Drilling, Rowan and Noble. Maersk Drilling may have just leapt to the  top of the list with Total having just acquired Maersk Oil, giving the  impression that Maersk are exiting the oil and gas sector.

But who are the buyers? The analysts are suggesting Diamond,  Rowan, Noble, Ensco, Seadrill (after restructuring), Borr Drilling as  well as Transocean. One thing is for sure, no-one is going to buy out a  company with a fleet of 1980’s vintage rigs unless they are mixed in  with an attractive number of modern premium rigs. We certainly need  consolidation, especially in the jackup market, but it is hard to  envisage the number of contractors being reduced by very many when most  of them operate thirty (30) year old rigs or older. But the jackup  market, with near one hundred (100) stranded new builds yet to be cut  lose into the market, is not going to improve until the old rigs are  scrapped and this means many contractors will also have to fall away or  invest in the new rigs and scrap the old.

However. the big boys are definitely preparing for an upswing  in the market. There is no doubt the rig market is going to look very  different a year from now. Meanwhile we are all guessing who is next.

Mergers and Acquisitions Drilling Contractors
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