Drilling merger
The world' two largest offshore oil drilling and exploration company are soon to be one, as US Transocean Inc. announced it will buy GlobalSantaFe, also US-based. The deal, which involves a stock swap, is said to be worth $17 billion, and the new firm will hold the Transocean name. The combined firm, according to Bloomberg News, will be three times the size of its closest rival, Nobel Corp.
This comes as oil prices are up, the need for oil keeps growing, and the demand for offshore drilling in increasingly deeper sites keeps growing. There is a shortage of drilling rigs, given the demand, and the rents charged for them have grown by 12% over the past year. According to the Bloomberg News report ("Transocean to Acquire GlobalSantaFe for $17 Billion", 7/23/07)
The combined company will own 29 rigs capable of drilling in water depths of more than 5,000 feet, according to Jud Bailey, an analyst at Jefferies & Co. There are currently about 70 such rigs in the world, and there are almost that many under construction.
As usual with deals of this type, it is expected that smaller rivals will be forced to combine in order to compete. Earlier this year, drillers Hercules Offshore Inc announced it would buy competitor Todco in $2.3 billion deal. Reuters speculated that Hercules Offshore as well as such companies as Noble Corp, Diamond Offshore, Pride International, Rowan Co., and Ensco International May be forced to seek partners to stay in the dance.
The oil industry still has lots of concentration left to undergo, and this deal represents only one layers of the cake.
