ADES International, a London-listed provider of offshore and onshore oil and gas drilling in the Middle East and Africa, has bought three jack-up drilling rigs from Nabors Industries for $83 million.
ADES International has signed the purchase and sale agreement (PSA) for the three rigs with Nabors Drilling International II Limited, a subsidiary of Nabors Industries for a total purchase price of $83 million, payable in a combination of cash and ADES shares.
The rigs are currently contracted by a major national oil company in the Arabian Gulf. The PSA also provides for the existing drilling contracts associated with the rigs to be transferred to ADES.
Consideration for the transaction will include a cash payment equivalent to 75% of the total transaction value and the remaining 25% will be paid in the form of newly issued shares of ADES.
The total number of consideration shares was calculated using the closing mid-market price of ADES shares on December 18, 2017, being the business day prior to the transaction signing date. Consideration shares issued to Nabors as part of the transaction will be subject to a three-month lockup period.
In total, the acquisition is expected to add approximately $60 million annually to ADES’ Group revenue, while maintaining margins and thereby further enhancing group earnings.
The transaction is expected to close in 1Q 2018, subject to the fulfillment of the conditions precedent as agreed in the PSA, including the renewal of current drilling multi-year contract terms.
The three ultra-shallow drilling rigs have each been in continuous service for more than 10 years. The rigs have recently been refurbished, with five-year inspections already implemented on two rigs and the third is due in 2018.
Six rigs under contract in Arabian Gulf
Once completed, the transaction will bring the number of the group’s rigs under contract in the Arabian Gulf to six.
ADES and Nabors will collaborate to advance the integration and automation technology initiatives of Nabors Drilling Solutions and Canrig, including automating rig surface and downhole activities, within the offshore drilling space in the Middle East and beyond. Specifically, the companies will set up a technical, operational and commercial taskforce with the objective of introducing the Nabors value proposition within the region utilizing ADES rigs.
ADES is also finalizing a separate PSA with Nabors to acquire two stacked offshore jack-up rigs in a similar cash and shares deal which, in line with the company’s strategy of minimizing risk, will be contingent on the awarding of specified drilling contracts.
Commenting on the acquisition, Dr. Mohamed Farouk, Chief Executive Officer of ADES International Holding, said: “We are delighted to announce the signing of the PSA to purchase these rigs, which once closed, will double our Arabian Gulf fleet and number of contracted rigs. The acquisition will enhance the group’s position in the region’s offshore drilling fields and serves as testimony to the confidence our clients have placed in us.
“Nabors has a significant track record and strong operational experience in the oilfield services sector and we are very pleased with their decision to become a shareholder in the Group.”
According to David Carter Shinn, an analyst at Bassoe Offshore, the Nabors rigs are 40 years old on average, but they’ve got contracts with Saudi Aramco, one of the most desirable oil companies in the world and the one with the highest barriers to entry for drilling contractors.