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Merger of deepwater drillers Maersk, Noble to capture growing offshore markets

Deepwater drillers Maersk Drilling and Noble Corp. agreed to combine Nov. 10, saying the transaction positions the combined company for a growing global offshore market that includes prolific work in Norway and Guyana-Suriname and offers sizeable savings in operating costs.

The combined company, which pro forma already has 33 of its combined 39 deepwater floaters and jackup rigs already under contract, would represent one of the youngest and highest-specification fleets in the world, top executives of both companies said in webcast remarks.

Not only is each driller a top performer on its own, according to several key metrics, notably utilization, but combined they lead the pack among peers, Robert Eifler, president and CEO of Noble Corp, said.

“A high level of utilization is extremely important when it comes to generating free cash flow,” said Eifler, who will be CEO of the combined company after the transaction closes in mid-2022. “Both companies have a history of keeping rigs contracted.”

Combined, the companies’ average utilization from 2015-2020 was 76%, nearly 10 percentage points higher than the nearest rival driller, according to an IHS Markit study featured on a presentation slide accompanying the webcast. In addition, their average fleet age was 10 years, several years newer than their nearest peers.

Guyana-Suriname growth
One big current operating arena for the companies which they hope to grow is the Guyana-Suriname Basin, an emerging deepwater play off the northern coast of South America. In Guyana, a group led by ExxonMobil has made more than 20 major discoveries.

The consortium, which also includes Hess Corp. and China’s CNOOC, has one development producing with a second expected online in Q1 2022, and is in the design phase or construction of two to three more.

In all, six ExxonMobil-operated Guyana producing projects are predicted by 2027, with plans for an eventual 10 in total. The current estimated resource potential on the Stabroek Block, where all the discoveries are sited, is 10 billion boe.

Moreover, TotalEnergies and APA Corp have made four big discoveries in Suriname, although their specific development plans are still under study.

Noble currently has four contracted deepwater drillships active in Guyana. One, the Tom Madden, has a contract that runs until January 2027. In addition, Noble recently inked a deal for a drillship with APA Corp in Suriname for one firm well and two well options.

In addition, Maersk currently is running two Suriname deepwater rigs and one in Guyana.

Norway has ‘promising potential’
And both companies also work in Norway (Maersk with four jackups, Noble with one), a market the drillers said they see recovering after a 2020 lull.

A recent Norwegian tax incentive package is expected to spur new investments and rig demand in 2023 onward. That shallow-water market is ideal for Noble/Maersk harsh-environment jackup rigs, with “promising” potential based on current field projects’ status, the companies said.

“What Noble and Maersk are doing makes sense,” said David Mullen, CEO of Shelf Drilling, an Eastern Hemisphere jackup provider, on his company’s Q3 earnings call Nov. 10.

“There’s far too many companies for this to be a viable landscape, and consolidation is inevitable,” Mullen said. “We’re going to see quite a lot more.”

Noble and Maersk shareholders will each hold 50% in the combined entity, which will be named Noble Corp. with headquarters in Houston. Its shares will be listed on both the New York Stock Exchange and Nasdaq Copenhagen.

By 2023 and afterward, the combined driller’s free cash flow yield should be about $375 million, for a percentage yield of 11%, which slightly exceeds that of the S&P E&P index, according to presentation slides. The deal would achieve cost synergies of $125 million/year, realized in the first two years as a combined entity.

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