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Ensco to Acquire Atwood in All-Stock Deal Worth $839M
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Offshire drillers Ensco plc and Atwood Oceanics Inc. jointly declared their definitive merger agreement. Per the deal, Ensco will purchase Atwood for about $839 million in an all-stock transaction.
The definitive merger was unanimously approved by the board of directors of each company. The companies expect the transaction to close around third quarter of 2017.
Per the terms of the accord, Atwood shareholders will obtain 1.60 shares of Ensco for each share of Atwood common stock for a total value of $10.72 per Atwood share, based on Ensco’s closing share price of $6.70 on May 26, 2017. This corresponds to a premium of about 33% to Atwood’s closing price on the same date. On completion of the transaction, Ensco and Atwood shareholders will own about 69% and 31%, respectively, of the outstanding shares of Ensco. No financing conditions are attached to this transaction.
Notably, the merger will bring together two leading offshore drillers with long-established histories of operational, safety and technical expertise with premium assets that cover the world’s most prolific offshore drilling basins.
Combined Company Fleet
The combined company will have a fleet of 63 rigs comprising ultra-deepwater drillships, versatile deep- and mid-water semisubmersibles and shallow-water jackups, along with a diverse customer base of 27 national oil companies, supermajors and independents.
Within the fleet of 26 floating rigs (semisubmersibles and drillships) are 21 ultra-deepwater drilling rigs that are capable of drilling in water depths of 7,500′ or greater, with an average age of five years. Interestingly, the fleet is believed to be among the youngest and most capable in the industry. The jackup fleet is also estimated to be the largest in the world with 37 rigs, including 27 premium units. These jackups are all equipped with multiple advanced features as requested by clients for shallow-water drilling programs, such as increased leg length, expanded cantilever reach, greater hoisting capacity and offline handling capabilities.
Operations
Ensco’s executive managerial structure will remain unchanged with Carl Trowell continuing as President and Chief Executive Officer, Carey Lowe as Executive Vice President and Chief Operating Officer, and Jon Baksht as Senior Vice President and Chief Financial Officer.
Paul Rowsey will continue to serve as the Chairman of Ensco and the board of directors will include Carl Trowell, plus two members from Atwood’s current board effective at closing.
Ensco will continue to be domiciled in the U.K. and the company’s senior executive officers will be located in London and Houston. Ensco’s shares will continue to trade on the New York Stock Exchange under the symbol “ESV”.
Financial Highlights
An expanded fleet serving a larger customer base across a wide geographic footprint is expected to open up future revenue growth opportunities. Despite challenging market conditions, Ensco is well positioned to meet the expected increase in customer demand upon market recovery.
Ensco anticipates annual pre-tax expense synergies of about $65 million for full-year 2019 and beyond. Cost synergies for 2018 are estimated to be over $45 million. Based on the anticipated annual savings, the combination is likely to be accretive on a discounted cash flow basis.
Cost savings are estimated from the consolidation of offices that comprise corporate staff departments and shore-based operations in related markets. Also, standardization of systems, policies and procedures across the organization should help in controlling expenses.
The balance sheet of the combined company will remain strong. Adjusted for the expected retirement of Atwood’s outstanding revolving credit facility with cash and short-term investments on hand, total available liquidity was $3.9 billion on Mar 31, 2017 and included $1.6 billion of cash and short-term investments.
Based on the closing price of each company’s shares on May 26, 2017, the estimated enterprise value of the combined company is $6.9 billion. The combined company will have about $3.7 billion in revenue backlog.
Share Price
Shares of Ensco have lost 36.9% in the last three months, while the Zacks categorized Oil & Gas – Drilling industry registered a decrease of 29.6%.
On the other hand, shares of Atwood have lost 8.1% in the last three months, while the Zacks categorized Oil & Gas – Drilling industry registered a decrease of 30.9%.
Zacks Rank
Ensco currently has a Zacks Rank #3 (Hold). Some better-ranked stocks from the same space include Enbridge Energy, L.P. and Canadian Natural Resources Limited Ltd. (CNQ - Free Report) . Both these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Enbridge Energy posted a positive earnings surprise of 128.57% in the preceding quarter. The company beat estimates in three of the four trailing quarters with average positive earnings surprise of 38.22%.
Canadian Natural Resources posted a positive earnings surprise of 30.77% in the preceding quarter. It surpassed estimates in two of the four trailing quarters with average negative earnings surprise of 275.46%.
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Ensco to Acquire Atwood in All-Stock Deal Worth $839M
Offshire drillers Ensco plc and Atwood Oceanics Inc. jointly declared their definitive merger agreement. Per the deal, Ensco will purchase Atwood for about $839 million in an all-stock transaction.
The definitive merger was unanimously approved by the board of directors of each company. The companies expect the transaction to close around third quarter of 2017.
Per the terms of the accord, Atwood shareholders will obtain 1.60 shares of Ensco for each share of Atwood common stock for a total value of $10.72 per Atwood share, based on Ensco’s closing share price of $6.70 on May 26, 2017. This corresponds to a premium of about 33% to Atwood’s closing price on the same date. On completion of the transaction, Ensco and Atwood shareholders will own about 69% and 31%, respectively, of the outstanding shares of Ensco. No financing conditions are attached to this transaction.
Notably, the merger will bring together two leading offshore drillers with long-established histories of operational, safety and technical expertise with premium assets that cover the world’s most prolific offshore drilling basins.
Combined Company Fleet
The combined company will have a fleet of 63 rigs comprising ultra-deepwater drillships, versatile deep- and mid-water semisubmersibles and shallow-water jackups, along with a diverse customer base of 27 national oil companies, supermajors and independents.
Within the fleet of 26 floating rigs (semisubmersibles and drillships) are 21 ultra-deepwater drilling rigs that are capable of drilling in water depths of 7,500′ or greater, with an average age of five years. Interestingly, the fleet is believed to be among the youngest and most capable in the industry. The jackup fleet is also estimated to be the largest in the world with 37 rigs, including 27 premium units. These jackups are all equipped with multiple advanced features as requested by clients for shallow-water drilling programs, such as increased leg length, expanded cantilever reach, greater hoisting capacity and offline handling capabilities.
Operations
Ensco’s executive managerial structure will remain unchanged with Carl Trowell continuing as President and Chief Executive Officer, Carey Lowe as Executive Vice President and Chief Operating Officer, and Jon Baksht as Senior Vice President and Chief Financial Officer.
Paul Rowsey will continue to serve as the Chairman of Ensco and the board of directors will include Carl Trowell, plus two members from Atwood’s current board effective at closing.
Ensco will continue to be domiciled in the U.K. and the company’s senior executive officers will be located in London and Houston. Ensco’s shares will continue to trade on the New York Stock Exchange under the symbol “ESV”.
Financial Highlights
An expanded fleet serving a larger customer base across a wide geographic footprint is expected to open up future revenue growth opportunities. Despite challenging market conditions, Ensco is well positioned to meet the expected increase in customer demand upon market recovery.
Ensco anticipates annual pre-tax expense synergies of about $65 million for full-year 2019 and beyond. Cost synergies for 2018 are estimated to be over $45 million. Based on the anticipated annual savings, the combination is likely to be accretive on a discounted cash flow basis.
Cost savings are estimated from the consolidation of offices that comprise corporate staff departments and shore-based operations in related markets. Also, standardization of systems, policies and procedures across the organization should help in controlling expenses.
The balance sheet of the combined company will remain strong. Adjusted for the expected retirement of Atwood’s outstanding revolving credit facility with cash and short-term investments on hand, total available liquidity was $3.9 billion on Mar 31, 2017 and included $1.6 billion of cash and short-term investments.
Based on the closing price of each company’s shares on May 26, 2017, the estimated enterprise value of the combined company is $6.9 billion. The combined company will have about $3.7 billion in revenue backlog.
Share Price
Shares of Ensco have lost 36.9% in the last three months, while the Zacks categorized Oil & Gas – Drilling industry registered a decrease of 29.6%.
On the other hand, shares of Atwood have lost 8.1% in the last three months, while the Zacks categorized Oil & Gas – Drilling industry registered a decrease of 30.9%.
Zacks Rank
Ensco currently has a Zacks Rank #3 (Hold). Some better-ranked stocks from the same space include Enbridge Energy, L.P. and Canadian Natural Resources Limited Ltd. (CNQ - Free Report) . Both these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Enbridge Energy posted a positive earnings surprise of 128.57% in the preceding quarter. The company beat estimates in three of the four trailing quarters with average positive earnings surprise of 38.22%.
Canadian Natural Resources posted a positive earnings surprise of 30.77% in the preceding quarter. It surpassed estimates in two of the four trailing quarters with average negative earnings surprise of 275.46%.
More Stock News: 8 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs.
A bonus Zacks Special Report names this breakthrough and the 8 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains. Click to see them right now >>