Helmerich & Payne, KCA Deutag form global onshore drilling powerhouse in $2 billion acquisition
(WO) – Helmerich & Payne, Inc. and KCA Deutag International Limited (“KCA Deutag”) today announced a definitive agreement under which H&P will acquire KCA Deutag for $1.9725 billion in cash.
KCA Deutag is a diverse global drilling company. The company has a significant land drilling presence in the Middle East, which represents approximately two-thirds of the company’s calendar year 2023 Operating EBITDA, with additional operations in South America, Europe and Africa.
In addition to its land operations, KCA Deutag has asset-light offshore management contract operations in the North Sea, Angola, Azerbaijan and Canada, with super major customers and long-term earnings visibility through a robust backlog.
KCA Deutag’s Kenera segment comprises manufacturing and engineering businesses, including Bentec, with three facilities serving the energy industry, representing a longer-term growth opportunity.
Compelling strategic and financial benefits.
Accelerates international growth strategy, significantly increasing Middle East presence: This acquisition provides immediate and significant exposure to land operations in key markets in the Middle East, which generated a large majority (~70%) of KCA Deutag’s calendar year 2023 Operating EBITDA.
Through the transaction, H&P will increase its Middle East rig count from 12 to 88 rigs, 71 of which are in Saudi Arabia, Oman and Kuwait. Based on award activity to date, the pro forma company would be one of the larger rig providers in the Middle East.
Enhances scale and diversification: With KCA Deutag, H&P will have a robust geographic and operational mix across the U.S. and international crude oil and natural gas markets and diversified geographical exposure in earnings and cash flow streams.
The transaction adds a complementary asset-light offshore management contract business, primarily comprising 29 offshore platform rigs under management, and a manufacturing and engineering business with three facilities serving the energy industry.
H&P expects this transaction to grow its international land operations from ~1%(2) on a standalone basis to ~19%(2) on a pro forma basis based on calendar year 2023 Operating EBITDA. Offshore operations are expected to grow from ~3%(2) on a standalone basis to ~7%(2) on a pro forma basis based on calendar year 2023 Operating EBITDA.
Strengthens cash flow and durability: The Middle East rig market is expected to continue to grow in the coming years. With an additional ~$5.5(3) billion contract backlog from KCA Deutag, supported by a blue-chip customer base, the Company will have highly resilient revenues and cash flow and increased earnings visibility. On a combined company basis, the last-twelve months (LTM) Operating EBITDA is ~ $1.2 billion.
President and CEO of H&P, John Lindsay, commented, “This is a historic and transformative transaction for the Company, and we are excited about what this means for H&P’s future, as it accelerates our international expansion particularly in the Middle East and enhances the Company’s global leadership in onshore drilling solutions. KCA Deutag’s assets and operations will add resilient revenues, providing greater earnings visibility and cash flow generation. As a result, we expect to generate sizeable incremental cash flows and are confident this transaction will deliver near- and long-term growth and value creation for H&P shareholders.
“H&P has a history of having a thoughtful and managed approach to running and investing in the business and is well versed in the challenges brought about by crude oil and natural gas volatility. Our experience in the industry combined with a Middle East market poised for continued growth should be indicative of the importance and the compelling reasons for executing on this acquisition at this time. Acquiring KCA Deutag gives H&P immediate scale in core Middle East markets in a way that would be challenging to replicate organically. Furthermore, as there is very little geographic overlap, we view this transaction more than just acquiring assets, but rather acquiring operations with quality people.”
