Ensco PLC, a London-based offshore drilling contractor, finished its acquisition of offshore driller Atwood Oceanics in merger earlier this week. The all-stock deal was valued at around $839 million when it was initially announced in May.
This is the first major mergers and acquisition activity in the offshore space since the industry downturn. Terms of the deal specify that Atwood shareholders are to be compensated with 1.6 shares of Ensco for each share of Atwood stock owned. When the ink is dry, Ensco shareholders will end up owning 69 percent and Atwood shareholders will end up with 31 percent.
In a press release, Ensco president and CEO Carl Trowell said “Today is an important day in our company’s history. Ensco has used timely acquisitions to grow into one of the leading offshore drilling companies, and the acquisition of Atwood is another major milestone in our progression.”
However, it’s not all good news. Atwood’s headquarters, located in energy corridor of Houston, will be closed and its employees will be laid off according to a letter Texas Workforce Commission. Ensco stated their intention to lay off 79 employees between now and March 2018.
The letter stated, “To the extent the company is unable to provide 60 days of notice to such affected employees, the company will provide them with at least 60 days of full pay and benefits in lieu of such notice”
Upon announcement of the deal, the companies stated they anticipated saving nearly $45 million in 2018 and $65 million annually going forward from 2019 as a result of the acquisition. Much of that savings is a direct result of consolidating offices, departments, and shore-based operations.
Ensco has already established operational headquarters in the San Felipe Plaza building where the remaining staff is expected to be transferred. Energy analyst Byron Pope with Tudor, Pickering, Holt & Co said most of the affected staff will be among back office operations such as human resources and tech support.
This deal follows a wave of offshore bankruptcies since the market downturn. Whether or not this signals a renewed optimism among industry leaders who may start seeking out growth strategies again remains unknown. “We’re now at the point in the cycle where there’s confidence we’ve at least hit the cyclical trough- the rock bottom” Pope added.
Atwood was Houston’s 72nd-larged public company in 2016.
Article written by HEI contributor Kevin Abbott.