1:15 PM
By Matt Daily and Braden Reddall
NEW YORK/SAN FRANCISCO | Mon Feb 7, 2011 3:27pm EST
NEW YORK/SAN FRANCISCO (Reuters) - Ensco Plc (ESV.N) plans to buy rival Pride International Inc (PDE.N) for about $7.3 billion in a deal to create the world's second-largest offshore oil and gas driller and extend its reach into lucrative deepwater markets off Brazil and west Africa.
The deal announced on Monday sets the purchase price for Pride's shares at $41.60 each, a premium of 21 percent to Friday's closing price, and would give Ensco more cash flow to to buy new, high-tech rigs needed to meet oil companies' demand for equipment capable of drilling in increasingly tough waters.
"Pride and Ensco combined are going to be in all the major oil-producing regions now," said Kurt Hallead, co-head of energy research at RBC Capital Markets in Austin, Texas.
The industry has been hit hard by the deepwater drilling moratorium in the Gulf of Mexico and stringent shallow-water regulations following last year's BP Plc (BP.L) well blowout, which led to the worst-ever U.S. maritime oil spill.
But major energy companies such as Chevron Corp (CVX.N) and Royal Dutch Shell Plc (RDSa.L) expect to continue spending billions of dollars offshore, encouraged by strong oil prices.
With a total of 74 rigs, including six being built, the deal would lift the combined company past Noble Corp (NE.N) to be second only to Transocean Ltd (RIGN.VX), which has 136 rigs.
GLOBAL SCALE
London-based Ensco's fleet is deployed in the Gulf of Mexico, Europe, the Middle East and Asia, and the deal would add Pride's five rigs off the west coast of Africa and nine rigs off Brazil.
Ensco did not even have any rigs in South America before it agreed to move an out-of-work Gulf of Mexico rig to French Guiana in December. Then just last week, it struck a deal to move a rig to Brazil from Australia.
Brazilian state oil company Petrobras (PETR4.SA) plans to invest $224 billion between 2010 and 2014 as part of efforts to tap into billions of barrels of oil from ultra-deep water fields off its coast, with $119 billion of that going toward exploration and production.
That will require dozens of deepwater drilling rigs that can operate in water depths of 10,000 feet; and although Petrobras has said it plans to build many of its own rigs, drilling contractors are hoping they will win a substantial share of that market.
The new company would have 21 deepwater rigs working or being built, equal to Noble but behind Transocean's 44, giving it a strong position in the most lucrative market segment, which often pays rig owners more than $500,000 per day.
Ensco said rig construction would absorb much of the new company's cash flow in the next few years. Combined, they have added 12 new vessels in the past few years, and now would have the second-youngest deepwater fleet, after Seadrill Ltd (SDRL.OL).
Seadrill, an acquisitive Norway-listed company, had long been seen as Pride's natural buyer, given that it owns nearly 10 percent of Pride's shares. Seadrill Chief Financial Officer Esa Ikaheimonen told Reuters the Ensco offer looked like a "decent number" and said the deal would be positive for the sector.
Offshore drillers are likely to see plenty of acquisitions in the coming months and years as they scramble to increase their size and market share and challenge Transocean, which itself bought GlobalSanteFe in 2007 for about $15 billion.
Posts
