John Fredriksen made huge money offshore oil drilling with his historic investment in the rig Seadrill. However, it has slowed down in recent years. When the company is soon out of its second debt restructuring, it is the creditors who have taken control.
Frederiksen is still involved in Seadrill with a convertible loan that can give him five percent of the shares. And now it turns out that the ambitions of the billionaire in the rig that lies ahead do not stop there.
In a statement, drilling giant Valaris announced that Fredriksen has bought nearly five percent of the company on the open market. At today’s share price, this item is worth just over $114 million, which is more than a billion kroner.
This means that Frederiksen, through investment firm Famatown Finance Limited, will be one of the largest shareholders in the world’s largest drilling company measured by number of units. Valaris itself emerged from bankruptcy protection earlier this year, and is still controlled by several funds that have converted their debts into equity. The announcement also states that Famatown will have an observer role on Valaris’ board of directors.
And Frederiksen may increase his influence in Valaris: In a separate press release, Sitankers to Frederiksen’s management said it wants to be a “long-term shareholder” and “can increase its position from the current level,” potentially earning a seat on the board.
“After seven years of sustained downturn, we believe the offshore drilling industry is poised for a recovery,” Gunnar Eliassen, Seadrill’s outgoing board member and one of Fredriksen’s closest advisors, wrote in an email to DN.
“Continuing the merger to create a bigger and better company is critical. Our ambition is for Seatankers to be a leading driving force for this merger in the same way that Seatankers has historically driven successful mergers in the seafood, shipping and other sectors,” Eliassen wrote.
Seat officials also say the rig industry is dependent on other mergers. “Standardization” is the buzzword in the industry now, and most experts anticipate big deals in the future, after drilling giant Noble has already swallowed Pacific Drilling and decided to merge with Danish Maersk Drilling recently.
“Setankers Group also believes that further industrial consolidation is critical, and that Valaris will be an industry leader in the coming years,” the report stated, adding that “Setankers is well positioned to become an industrial consolidation company.”
Seatankers does not mention Seadrill in his letter. But speculation about a merger between Fredriksen’s historic drilling rig and Valaris probably won’t diminish after news of Fredriksen’s new position in the rig industry.
DN previously wrote that Valaris showed interest in Seadrill during its recent bankruptcy process, without receiving any specific bids as it did from other competitors. Noble on the one hand, and a trio led by industrial giant Transocean on the other, both made bids, but these did not meet creditors’ expectations.
It’s also worth noting that as of Wednesday, Valaris announced that Anton Debowitz will become CEO on a permanent basis after leading the company since September. Dibowitz was previously the Senior Manager at Seadrill, from 2017 to 2020, and thus knows the company well.
In any case, it’s clear that Frederiksen hasn’t given up on the rig industry, although there have been tough ceilings in place since the oil price crash began in 2014 in what would have been a crisis almost unrelated to large parts of the oil services industry.
Fredriksen started Seadrill in 2005 with then right-hand man Tor Olav Troim, and together they built the company into the most valuable company in the industry. Seadrill and the rest of the industry have navigated the increasing demand for their services in little less than a decade as oil companies have been constantly increasing reserves and production.
Then there was a sudden stop, and the situation was turned upside down for Seadrill, which incurred at most $20 billion in liabilities to creditors, shipyards and others. However, Frederiksen himself made very good profits from the company, which had been paying very high dividends for years.
Seatankers are embracing the green shift. Unfortunately, the world cannot turn on the oil tap overnight. Oil and related oil services will play an important role in a critical transition period in the coming years,” Eliassen wrote to DN.
It also made new money on its first Seadrill restructuring, and for a while it looked like it would be a good bet. But the recovery never took hold, and then came the epidemic.
Now, however, the situation is different in the industry, with somewhat brighter prospects thanks to less investment in oil and gas, lower debt after several restructurings, and a clear will to consolidate companies into larger units.
“After years of headwinds, the Sitankers Group believes the offshore rig industry is in the early stage of an exciting recovery driven by industrial consolidation and a growing recognition of the need for sustainable drilling activity to facilitate a controlled transition of energy over time,” said the report.. of Seatankers.(Terms)Copyright Dagens Næringsliv AS and/or our suppliers. We would like you to share our cases using a link that leads directly to our pages. All or part of the Content may not be copied or otherwise used with written permission or as permitted by law. For additional terms look here.
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