Nabors Industries' acquisition of Tesco Corp. will accelerate the automation and integration of tubular services into Nabors’ rigs, creating immediate global scale for Nabors Drilling Solutions (NDS), while providing Tesco with an expanded platform for its businesses.
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| Source: Transocean |
The all-stock transaction of $145 million, net of $72.5 million cash, was announced Monday (14 August) and will combine Canrig, Nabors’ rig equipment subsidiary, with Tesco's rig equipment manufacturing, rental and aftermarket service business. Additionally, Tesco operates a tubular services business in numerous key regions globally, which will immediately benefit NDS.
From the Nabors point of view, the acquisition fits the company’s strategy of moving from being just a provider of land and offshore drilling rigs to also using rigs as a delivery platform to provide drilling products and services, Byron Pope, managing director with Tudor Pickering and Holt, told OE. Tesco will enable Nabors to provide those ancillary services. The acquisition also gives Tesco the critical mass it needs to grow that it couldn’t get on its own.
Nabors’ acquisition of Tesco is viewed as a “prudent next step” in building out the company’s technological toolbox and aftermarket footprint, James C. West, senior managing director & partner with Evercore ISI, said in a 14 August statement.
From a CanRig perspective, acquiring Tesco will accelerate the company’s vision of developing super high-spec rigs, enhancing the quality of NBR’s top drive offering and add a casing running tool attachment to its list of products, said West.
Nabors has been at the forefront of super-spec rig development, with its NDS platform encompassing a broad range of integrated rig hardware and software packages including ROCKIT (directional steering), REVit (stick-slip mitigation), RIGWATCH (rig monitoring/data acquisition) and DRILLSMART (automatic drilling algorithm), as well as downhole tools like RSS, MWD and wellbore placement services.
“Perhaps more importantly, we believe that in bringing Tesco tubular services in-house, Nabors will further protect its Saudi position given Tesco’s leading market position in the Kingdom. In addition, Nabors should be able to grow Tesco’s service presence in the L48 (which is fairly minimal today) by pulling it through NBR’s established rig footprint,” West commented.
NDS is the most well-structured and articulated strategy for alleviating the structural headwinds brought upon by increased drilling efficiencies, West noted. “We believe NBR’s acquisition of Tesco accelerates the company’s vision. As NDS grows in scale, cross selling opportunities with CanRig should accelerate as equipment orders increase.”
While analyst reaction has been positive to the Nabors-Tesco deal, Transocean Ltd.’s announcement today (15 August) that it would acquire fellow drilling contractor Songa Offshore for US$3.4 billion triggered a decline in Transocean’s stock price by 4.89% to $7.98 as of 2 p.m. EST Tuesday.
Pope attributed Transocean’s stock price tumble to the investor mindset that the company is paying more than it should for Songa. Investors took the same view of Ensco’s announced acquisition of Atwood Oceanics. However, such a mindset is shortsighted, in Tudor Pickering Holt’s view, Pope said.
The offshore drilling sector needs to consolidate to prepare for the coming wave of consolidations among its customer base, particularly deepwater.
“We can debate whether Transocean or Ensco could have gotten it cheaper, but both are steps needed to get on the path to rationalize industry structure,” Pope said.
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