Transocean Ltd. (NYSE: RIG) announced on Tuesday that it will acquire Ocean Rig UDW Inc. (NASDAQ: ORIG) for USD 2.7 Billion. Ocean Rig shares were trading 14.3% higher shortly after the opening bell on Tuesday.
The acquisition helps drive Transocean’s position in the ultra-deepwater and harsh environment drilling by adding nine new drillships, two harsh environment semisubmersibles and two high ultra-deepwater drillships.
The new drillships under construction will bring Transocean’s total fleet to a total of 57 floaters, with 17 of the top 50 and 31 of the top 100 ultra-deepwater drillships.
The transaction will increase Transocean’s contract backlog by USD 734 Million for a combined total of USD 12.5 Billion, at an average dayrate of USD 413,000. The annual expected cost synergies is approximately USD 70 Million.
The agreement is comprised of 1.6128 newly issued shares of Transocean and USD 12.75 in cash per Ocean Rig share, totaling USD 32.28 per share.
“The proposed acquisition of Ocean Rig provides us with a unique opportunity to continue enhancing our fleet of ultra-deepwater and harsh environment floaters, without compromising our liquidity or overall balance sheet flexibility,” said Transocean’s President and Chief Executive Officer, Jeremy Thigpen. “The combination of constructive and stable oil prices over the last several quarters, streamlined offshore project costs, and undeniable reserve replacement challenges has driven a material increase in offshore contracting activity. As such, adding Ocean Rig’s premium assets to our industry-leading fleet provides us with an increased number of the modern and highly efficient ultra-deepwater drillships preferred by our customers, and better positions us to capitalize on what, we believe, is an imminent recovery in the ultra-deepwater market.”
No changes were made to Transocean’s Board of Directors, executive management team or corporate structure. The Company’s headquarters will remain in Switzerland. The transaction is expected to close in the first quarter of 2019.