Noble to Acquire Diamond Offshore Drilling in $1.59 Billion Deal

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Offshore rig contractor Noble announced on Monday its plans to acquire smaller rival Diamond Offshore Drilling in a cash-and-stock deal valued at $1.59 billion. This move marks the latest in a series of acquisitions within a sector undergoing significant consolidation.

Following the announcement, Diamond Offshore’s shares surged by 9.3% in morning trade, while Noble saw a 4% increase. Major oil and gas firms, heavily reliant on service providers for drilling and completion services, are leveraging record profits to bolster their international and offshore drilling capabilities amidst robust oil prices, thereby enhancing prospects for companies like Noble.

Industry analysts have noted that improving balance sheets and margins are fueling deal-making activities within the oilfield services sector. Earlier this year, top oilfield services firm SLB made a nearly $8 billion bid for ChampionX, aiming to expand its technology offerings.

Under the terms of the agreement, Noble will pay $15.52 per Diamond Offshore share, representing an 11.4% premium to Diamond’s closing share price on Friday. With approximately 102.48 million outstanding shares of Diamond, the deal is valued at $1.59 billion, as per a Reuters calculation.

Upon completion, the combined entity will boast a backlog of $6.5 billion, with Noble’s fleet expanding to include 41 rigs, comprising 28 floaters and 13 jackups. Analysts, such as Evercore ISI’s James West, anticipate that the acquisition of 12 offshore floaters will enhance Noble’s revenue and cash flow visibility throughout the extended offshore upcycle.

To finance the cash portion of the deal, Noble plans to secure $600 million in new financing. Additionally, the transaction is projected to yield pre-tax cost synergies of $100 million, with 75% of these synergies expected within a year of the deal’s closure in the first quarter of 2025. Noble foresees an immediate positive impact on its free cash flow per share following the acquisition.

With this strategic move, Noble aims to solidify its position in the offshore drilling market and capitalize on the anticipated growth opportunities within the sector.