Transocean LTD (NYSE:RIG) announced recently that it had obtained the shareholder’s approval to acquire the Norway-focused competitor Songa Offshore. The company’s latest acquisition reveals a positive partnership between two strong offshore drilling companies which comes at the right time. Currently, RIG is working on the requirements to clear the recovery as it plans to commence building up the next phase after spending three years of stagnant growth.
RIG remains one of the leading long-term offshore drillers among its peers but it’s usually portrayed as a poster child in the industry and its frequently perceived as a collection of various companies including Ensco, Noble, Rowan, Seadrill Partners, and Diamond Offshore. With a unique business model and an impressive backlog of more than $13 billion, Transocean will continue growing strong even as it waddles in the last stretch of the ongoing oil price crisis.
According to the drilling contractors, the deepwater drilling industry is potential optimistic toward 2018 and afterward especially as the oil price crisis is slowly diminishing. The conditions are still difficult but the worst is possibly over as a few business opportunities emerge for the industry.
Transocean reached an agreement with Songa Offshore SE, and it will be subjected to a number of conditions including making the Voluntary Exchange Offer to obtain 100% for both the issued and the outstanding shares of Songa offshore company. Furthermore, the shares will be issued before the expiry date of the offer period due to the exercise of warrants, convertible loans, and others.
The transaction would strengthen Transocean’s market-leader position especially with the addition of Songa Offshore’s offerings including the Cat-D harsh environment, the long-term semisubmersible drilling rigs contracts with Statoil in Norway. In addition, Songa Offshore’s fleet includes three more semisubmersible drilling rigs.
The transaction is expected to close on the EBITDA, Operating Cash Flow and Net Debt/EBITDA basis and the firm expects an annual expense of approximately $40 million. The combined company would potentially become a leader in the market as the industry strives to recover.