Noble Corp to Acquire Diamond Offshore in $1.6 Billion Deal

Noble Corp (NE.N) announced on Monday that it will acquire smaller competitor Diamond Offshore Drilling (DO.N) in a cash-and-stock deal valued at $1.59 billion. This acquisition marks the latest move in an industry undergoing significant consolidation. Ahead of the market opening on Monday, shares of Diamond Offshore saw a 4.6% increase.

The deal comes as oil and gas majors, which depend on service providers for drilling and formation evaluation, well construction, and completion services, are leveraging their record profits to acquire international and offshore drilling inventories amid strong oil prices. This trend is improving the outlook for companies like Noble. Industry experts suggest that improving balance sheets and profit margins could spark further dealmaking on a smaller scale within the oilfield services sector.

Earlier this year, leading oilfield services firm SLB (SLB.N) made a nearly $8 billion bid for ChampionX (CHX.O) to expand its technology offerings. In this context, Noble's move to pay $15.52 per Diamond Offshore share, representing an 11.4% premium to Diamond's closing share price on Friday, aligns with the broader trend of strategic acquisitions in the sector. Based on Diamond's 102.48 million outstanding shares, Reuters calculates the deal's value at approximately $1.59 billion.

Noble stated that it will finance the cash portion of the transaction through a new secured financing of $600 million. The company expects the acquisition to immediately add to its free cash flow per share. Additionally, the deal is projected to generate pre-tax cost synergies of $100 million, with 75% of these savings anticipated within the first year of closing, which is expected in the first quarter of 2025.

The acquisition will result in a combined backlog of $6.5 billion, with Noble operating a fleet of 41 rigs, including 28 floaters and 13 jackups. This move follows Noble's $3.4 billion merger with Maersk Drilling, which was completed in 2022.

This series of mergers and acquisitions highlights the increasing competition and operational scale within the oilfield services sector. Companies are strategically positioning themselves to enhance their service offerings and expand their market reach. The consolidation trend reflects a broader strategy to achieve operational efficiency and capitalize on favorable market conditions driven by high oil prices.

As the oilfield services industry continues to evolve, these strategic moves are expected to play a crucial role in shaping the future landscape of the sector. The ongoing consolidation underscores the importance of scale and technological advancements in maintaining competitiveness and driving growth in a dynamic market environment.