Combined company worth $6.9 billion
Ensco (ticker: ESV) and Atwood Oceanics (ticker: ATW) announced a merger agreement today, with Ensco acquiring Atwood in an all-stock transaction worth $860 million. According to the Houston Business Journal, the merger will create a combined company worth $6.9 billion.
Ensco is one of the largest offshore drilling companies in the world. The company owns 13 semisumbersible drilling platforms, seven drillships and 36 jackup rigs. Ensco has an additional drillship and jackup rigs under construction, with expected drillship delivery in Q1 2019 and jackup delivery in Q1 2018. Atwood owns a total of ten rigs, five jackup rigs, two drillships and three semisubmersibles. In addition to these, Atwood is constructing two more drillships and is scrapping one semisubmersible rig.
Combined company will have largest jackup fleet in the world
Ensco reports that the combined company will have a fleet of 63 rigs in total, including 26 floating rigs and 37 jackups. The jackup fleet will be the largest in the world. Within the fleet of floating rigs are 21 ultra-deepwater rigs, which are among the youngest in the industry with an average age of five years.
The combined company will have a customer base of 27 NOCs, supermajors and independents. Current operations and drilling contracts are in place in nearly every major deep and shallow water basin in the world.
Ensco’s executive management and chairman will remain unchanged by the merger, while two members of the combined board of directors will come from Atwood’s current board.
In the merger each Atwood shareholder will receive 1.6 shares of Ensco per Atwood share. Based on Ensco’s May 26 closing price of $6.70, this gives each Atwood share a value of $10.72, a premium of 33%. After merger completion, Ensco shareholders will own about 69% of all outstanding shares of Ensco, while Atwood shareholders will own the remaining 31%. As an all-stock transaction, there are no financing conditions for this transaction. Atwood and Ensco report that anticipated closing could be as soon as Q3 2017.
Offshore hit hard by downturn
Ensco anticipates annual expense savings and synergies of $65 million in 2019 and beyond.
However, the industry downturn has hit offshore drillers particularly hard and recovery is much slower to appear on the horizon as onshore service and drilling activity, according to Douglas Westwood. In a recent release, the firm predicted 3% growth in offshore services in the next four years.
Of Atwood’s ten rigs, four are currently idle and one more is being sold for scrap. Ensco reports nine rigs currently available, and another 12 stacked.
