The merger of Maersk Drilling and Noble created a giant in the drilling sector. One of the next companies on the analysts’ list is Seadrill, which will soon emerge from bankruptcy protection.
“We know many people are smelling the assets in Seadrill, which is coming out of Chapter 11 soon,” says analyst Christopher Moe Dieji at Pareto Securities to E24.
The merger of Danish Mærsk Drilling and American Noble was announced on Tuesday.
The combined market capitalization of the two drilling companies is approximately NOK 30 billion, making them, according to Pareto Securities, the most valuable in the rig segment.
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Point to Seadrill
Drilling rig analyst Kim André Uggedal at SEB predicts that there will be more mergers in the rig industry. Seadrill and US drilling firm Diamond Offshore are believed to be the most relevant candidates.
At Seadrill, an offer has already been seen from a consortium consisting of Transocean, Dolphin Drilling and Ades International. Noble was also at some point with a bid and Valaris might have been interested.
In August, Stavanger-based drilling giant Transocean and Dolphin Drilling submitted a bid for Seadrill’s rigs, according to For example. Finansavisen. He wrote in May, Nobel was also in the field with a show Reuters.
In February, Seadrill entered US bankruptcy protection, so-called Chapter 11, the second time in a few years that the company has been bailed out.
The bailout recently got court approval. The company expects to be out of bankruptcy protection at the end of the year.
Seadrill is underway restructuring, and I think there will be negotiations with the new shareholders fairly close after Chapter 11 is completed, says Ogidal, noting that creditors own 99.75 percent of the company.
Seadrill’s plan means the company will get rid of $4.9 billion in debt. The company will also receive $350 million in new funding.
Getting Libra offsetting and having clarity on the capital structure is absolutely essential to be able to achieve any form of consolidation. You have to agree internally before you can begin negotiating relative values with the counterparty, says Diggy.
It’s definitely a step in the right direction as Seadrill gets cleaned up. Then they could be part of the consolidation process, he says.
Pareto analyst also refers to Diamond Offshore, a drilling company I exited bankruptcy protection in April After getting rid of more than two billion dollars of debt.
Diamond Offshore, also a restructured platform company in the US, is very small as a “stand-alone” company, as we see it. He also says he is a consolidation candidate.
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Uggedal notes that Diamond Offshore Involve Goldman Sachs To consider so-called strategic options, including acquisitions and mergers.
Diamonds are mentioned as a Nobel Prize. The question is whether Noble is full after Pacific Drilling and Maersk Drilling, he says.
Noble Corporation Buy Earlier this year Pacific Drilling. Both companies underwent bankruptcy protection and sharply reduced their debts.
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Digg believes it is uncertain exactly when and how the mergers will occur.
– The important thing on the wallpaper is Maersk Drilling and Noble. Then you can see what things look like when the dust falls after this merger. But overall, we expect the sector to continue strengthening for the time to come.
Uggedal envisions the survival of a few large companies.
– You will be able to stay with three or four VIPs, with the combined Transocean, Noble, Maersk Drilling and Valaris being dominant.
Sees ‘fairly strong price hike’
Just a few years after the oil crisis in 2015, the rig industry was hit by the Corona crisis and a new round of cuts to oil companies’ budgets, resulting in a market with too many rigs.
Diggy says there is still a lot of rig capacity in the market, but nonetheless there has been a “fairly strong price hike”, that is, income from rigs.
This is how we see it, partly as a product of the consolidation that we see, combined with the fact of restructuring stocks and removing a lot of debt from the industry. The rig is still associated with high debt, but that is no longer the case. Many drilling companies have net cash.
As we can see, this consolidation is contributing to greater discipline in the industry in general, which is a large part of what has pushed the price picture up so far this year.
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