Great News out of Houston for possible GLM/PDE Consolidation!
"January 18, 1999, 07:18 p.m.
Global Marine in the market for drilling company
By MICHAEL DAVIS
Copyright 1999 Houston Chronicle
Offshore driller Global Marine is shopping to buy another drilling company to increase its size to better enable it to compete for work from the industry's biggest companies.
Global Marine's chief executive, Bob Rose, said Monday the Houston-based driller is actively seeking a deal to increase its size and scope, which will be essential in the future to landing the business of the giant companies being created through oil company megamergers.
He declined to name any potential targets or to say whether the company is in discussions.
With drilling companies' shares trading at historic lows, it would be foolish to build new rigs when they can be picked up in mergers much cheaper, Rose said.
"Rigs can be bought on Wall Street at one-third to two-thirds of replacement costs," he said.
The short list of targets for Global Marine would likely include: Diamond Offshore Drilling -- where Rose was chief executive until last April -- Transocean Offshore, Pride International, Noble Drilling, Rowan Cos. and Marine Drilling Companies, all of Houston, and Ensco International of Dallas.
Of those, the value of the shares of Pride, Rowan, Marine Drilling and Ensco is less than Global Marine market capitalization, while Noble, Transocean and Diamond Offshore are substantially larger than Global Marine.
The lowest-priced of that group is Pride International. Its shares are trading at a price that is 85 percent lower than the cost of replacing its drilling rigs, according to a recent report by Simmons & Co. International.
The average discount for offshore drillers shares to the cost of replacing their rig fleets is about 59 percent, according to the report.
Ensco is trading at about a 62 percent discount to replacement costs. Its shares are trading for around $11 and the replacement cost of its assets is pegged at around $30 per share, according to the Houston energy investment banking firm.
Global Marine's shares are trading at about a 48 percent discount to replacement costs.
Diamond Offshore and Transocean also have more floating rigs, designed for drilling in deeper waters, than jack-up rigs, which drill in shallow to medium water depths.
As oil companies have pared back their drilling budgets due to low prices, the market for deepwater rigs has fared better than that for jack-ups.
Rose cited three criteria the company is seeking in an acquisition or merger partner:
· a quality fleet of drilling rigs, with newer rigs capable of drilling in difficult environments such as extremely deep water;
· a strong balance sheet;
· a partner big enough to ensure that the combined company will have enough clout to force further consolidation in the drilling industry, which Rose described as "fragmented."
The fragmentation, Rose said, is partially the result of the large egos of many of the drilling company executives, who have resisted consolidation in the face of mounting evidence that there are too many companies chasing a declining amount of work.
But Rose said he didn't like the idea of Global Marine being absorbed by another company.
Global Marine, Rose said, would not favor being acquired by a major or large service company, in effect becoming one of many divisions of a giant company. "That wouldn't be our first choice," he said.
Global Marine disclosed in its fourth-quarter earnings report last week that because of low day rates and a slowdown in business, it had stacked five of its jack-up rigs -- four in West Africa and one in the Gulf of Mexico.
The company could stack another rig in the Gulf of Mexico sometime in the first quarter, Rose said."
Santiago
|
