Offshore driller Transocean has agreed to sell its fleet of shallow-water drilling rigs to Norwegian startup Borr Driling for $1.35 billion as it continues to streamline its operations in response to the oil price bust.
The deal, which was announced Monday, includes 10 active rigs and another five under construction at Singapore’s Keppel FELS. It is Borr’s largest acquisiton since the company was formed last year by former executives of financially troubled Seadrill.
After reports of a possible deal emerged on Friday, analysts had been bullish, noting that the price per rig would exceed industry averages. In trading Monday, Transocean shares rose 2% to $12.22.
A sale “would monetize an under-utilized jackup fleet that averages 13.5 years of age and eliminate a large chunk of future newbuild capex,” Evercore ISI analysts said.
“Although the company previously targeted high spec jackups to be 24% of their 2020 fleet, CEO Jeremy Thigpen has more recently stated the firm’s focus is on ultra-deepwater and harsh environment floaters,” they added.
As Reuters reports, Swiss-based Transocean, like other drilling contractors, has been hit by the drop in oil prices since 2014, which has resulted in oil companies cutting back on rig hires, “leaving many vessels idle and prompting owners to restructure operations to preserve cash.”
Offshore drillers have been “struggling to avoid a financial meltdown, due to a basic lack of work, dismal day rates and rig oversupply, which is the unavoidable trichotomy of an offshore drilling bear market,” Seeking Alpha noted.
Borr has been seeking to acquire cheap assets from rig firms sell during the industry downturn, picking up a pair of jack-up rigs from the bankrupt Hercules Offshore late last year. The company said it would issue $800 million in new shares to help finance the purchase of the Transocean rigs.
Of the five rigs under construction, three will be delivered between 2017 and 2018 and the remainder will be delivered in 2020. Transocean will continue to operate a fleet of 50 larger rigs used for deepwater exploration.