In a note sent to Rigzone by Wood Mackenzie recently, the company’s Principal Analyst of Upstream Supply Chain, Leslie Cook, said Wood Mackenzie has been predicting offshore rig market consolidation for some time.
“With little appetite from owners to add new rigs as rig demand is flattening out, we believed growth would be inorganic,” Cook said in the note.
“It therefore comes as little surprise that the first major deal in the upstream service sector has been announced. Noble has grabbed first mover advantage, and solidified is status in the top two offshore rig contractors,” Cook added.
According to a chart included in the note, which highlighted the top five floating rig contractors by rig fleet size and composition, Transocean is in top spot with well over 35 rigs, while the post-acquisition Noble Corporation is in second with just under 30.
The pre-acquisition Noble is in third, neck and neck with Valaris, with over 15 rigs each, while Seadrill and Diamond round out the top five, the chart showed.
“With this [Noble Corp-Diamond Offshore Driiling] deal, more than 60 percent of total floater backlog is with four drilling contractors,” Cook said in the note.
“While we believe this will have little impact on day rates in the shorter term, we do believe that the consolidation of the market will afford rig contractors more control in the medium and long term,” Cook added.
“With day rates currently reaching $500,000 per day, this will be an ongoing concern for operators adhering to capital discipline and planning for long-term drilling programs,” Cook went on to state.
Outlining other notable highlights from the Noble-Diamond deal in the note, Wood Mackenzie said it positions Noble in the most commercially advantageous markets, leverages economies of scale, provides a good cultural fit, and diversifies the company’s portfolio without dilution of marketability of assets.
Wood Mackenzie also pointed out in the note that it “broadens client footprint, improves access to UK and Australian markets, and strengthens Noble’s competitive position in the lucrative U.S. Gulf of Mexico market”.
“If expected synergies and costs are realized, it will increase effective utilization and make Noble’s fleet more competitive,” Wood Mackenzie added in the note.
The timing of the Noble Corporation – Diamond Offshore Drilling deal likely reflects bullishness for Noble about offshore activity levels globally, Mark Chapman, a Principal Analyst for oilfield services at Enverus Intelligence Research, told Rigzone recently.
In a statement posted on its website announcing its deal with Diamond, Noble highlighted that, following the closing of its transaction, it will “own and operate a fleet of 41 rigs including 28 floaters and 13 jackups”.
“Additionally, backlog for the combined company would be approximately $6.5 billion as of today, with a wide diversity of customers and regions of operation,” it added.
“With this expanded fleet and contracted cash flow visibility, Noble will remain committed to maximizing value for customers, employees and shareholders by delivering safe and efficient operational results and maintaining a disciplined capital allocation approach that prioritizes returning the significant majority of free cash flow to shareholders,” it continued.
The transaction is subject to the satisfaction of customary closing conditions, including receipt of required regulatory approvals and the approval of Diamond shareholders, according to the statement, which revealed that the transaction is expected to close by the first quarter of 2025.
The transaction has been unanimously approved by the board of directors of each company, the statement noted.
Wood Mackenzie describes itself as the global insight business for renewables, energy, and natural resources.
Source: www.rigzone.com
