Bloomberg: Rowan eyeing Maersk Drilling acquisition

After having arranged the sales of Maersk Oil and Maersk Tankers, Danish conglomerate Maersk is now looking to offload its offshore drilling division, Maersk Drilling.

According to a Bloomberg report on Monday, Rowan Companies, a U.S. based offshore driller and the owner of 29 offshore drilling units, has come up as a potential suitor for the Danish offshore driller.

The business news agency, citing people familiar with the matter, said that Maersk and Rowan have been having talks over Rowan’s potential sale of Maersk Drilling, assets of which have been valued at around $4 billion. According to a fleet status report date September 1, Maersk Drilling had a fleet of 24 offshore drilling rigs.

The news of a potential sale of Maersk Drilling comes as Maersk is looking to divest its energy related businesses. The company has recently reached agreements to sell its subsidiaries Maersk Oil and Maersk Tankers, as part of the company’s strategy announced almost exactly a year ago.

The Danish conglomerate in September 2016 announced a decision to split the company into two divisions: one focused on shipping and logistics, the other on oil and gas sector.

Announcing the split, the company said it would focus on transportation and logistics, while working to find a solution, a sale among others, for the energy related businesses.

The company then revealed that Transport & Logistics would consist of Maersk Line, APM Terminals, Damco, Svitzer and Maersk Container Industry based on a one company structure with multiple brands.

The Energy Division was formed of Maersk Oil, Maersk Drilling, Maersk Supply Service and Maersk Tankers.

Offshore drilling conundrum

The offshore drilling market has suffered from a combination of low oil prices and an oversupply of drilling rigs, leading to low dayrates, sometimes even below operating cost..

The up-for-sale Maersk Drilling in August said it did not expect to see financial improvements from an increase in offshore rig demand until the market reaches a stable oil price above $60 per barrel or until industry cost levels adjust further to a lower oil price.

Furthermore, the contracts are short in length, leading to idle periods between contracts and higher operating costs due to repeated mobilization, start-up and ramp-down.

The offshore drilling market has seen some consolidation, with the recent announcements of Transocean acquiring Songa Offshore, and Ensco buying Atwood Oceanics, both yet to complete.

However, despite the announced acquisitions, the net consolidation (when it comes to the number of firms the offshore drilling space) is still zero, as two new players, Borr Drilling and Northern Drilling, have come to existence, David Carter Shinn, a partner in Bassoe Offshore, a Norwegian rig broker, pointed out in his recent article.

According to Bassoe, out of nearly 1,000 offshore rigs in the world, both delivered and under construction, there are nearly 100 rig owners in the market – excluding shipyards, owners with one or two old rigs, and subsidiaries of part of the same primary entity.

So what’s next when it comes to further consolidation in the offshore drilling space?

David Carter Shinn writes: “Rumors have been spreading lately of new acquisitions. Borr has said that they will expand their fleet, and other single assets still under construction are being targeted by a selection of other owners. These might not be major, market-moving deals, but they help (assuming the buyers are companies that currently exist).

“We do see, however, bigger deals happening over the next few months and into next year. Will they contribute to a significant consolidation effect? That remains to be seen, but it’s got to get better than it is today.”

Offshore Energy Today Staff