Prosafe and Floatel announced Monday that they have agreed to merge, creating the world’s largest offshore accommodation provider.
Oslo-listed Prosafe will acquire Floatel with consideration in Prosafe shares, whereby Floatel’s principal shareholders will become large shareholders in Prosafe. The transaction, which is unanimously supported by the board of directors of the two companies, is expected to be completed in the third quarter of 2019, subject to clearances from competition authorities in Norway and the UK, consents from creditors and shareholder approvals.
Glen Ole Rødland, chairman of the board at Prosafe, emphasized that the merger’s main goal is to create a company better equipped to compete in globally, especially in less mature regions where demand for flotels is growing.
"The need for consolidation in oil services is well known. We consider this transaction not only strategically sound, but also necessary to adapt to the significant changes in our markets and competitive landscape in recent years," Rødland explained.
Prosafe counts fundamental and lasting changes in the offshore accommodation vessels market in the wake of the oil price drop in 2014 as key driving forces behind the merger. Lower activity in exploration, production and maintenance, combined with extensive efficiency improvements among the oil companies has led to significantly intensified competition for beds at sea, it said.
"2014 was a paradigm shift that triggered an unprecedented downturn and lasting changes in the oil industry. We also face far tougher competition than before, due to a considerable overcapacity of both drilling rigs and supply vessels that are now being used as temporary accommodation. This situation is expected to continue," Rødland said.
"A combination of Prosafe and Floatel will also be able to offer a better product to the customers, through a more flexible and geographically diversified fleet. We will to a greater extent offer the right capacity at the right time in all central regions for offshore oil and gas," Rødland said.
Prosafe owns and operates nine vessels, each with a capacity of 300-500 beds, and has options for delivery of two newbuilds over the next five years. Floatel's fleet includes five units, each with capacity of 440-550 beds.
The merged company will at the outset have the bulk of its activity in the North Sea and Brazil. Prosafe’s current contracts on the Norwegian continental shelf expire during the first half of 2019, while Floatel’s contracts in the same region expire in the third quarter of 2020 including options.
Combined firm contract backlog as of March 31, 2019 is approximately $225 million. In addition, Prosafe recently announced a three-year contract for the Safe Eurus in Brazil which adds about $80 million to the contract backlog, while Floatel has recently been awarded a four-month extension at Martin Linge which adds a further $22 million to the contract backlog.
For the year ended December 31, 2018, the combined company had revenues of more than $600 million and an EBITDA of more than $300 million.
Rødland will stay on as chairman of the combined company. FELS Offshore Pte. Ltd. and Oak-tree will nominate one board member each.