Ensco/Pride merger: combined firm will enjoy first-mover advantage

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14 February 2011, Oil, Gas

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Having agreed to buy Pride in a deal worth $7.3bn, Ensco is set to make the largest acquisition in its history. The transaction, which marks the first major consolidation since the oil spill in the Gulf of Mexico, will create the second biggest offshore drilling company worldwide after Transocean. The combined firm will have one of the youngest and most technologically advanced rig fleets in the industry, consisting of 74 rigs. This will include 21 deepwater and ultra-deepwater rigs that are capable of drilling at depths of 4,500 feet or more. The entity's jackup rig fleet will consist of a total of 47 rigs, including 27 units capable of drilling at a water depth of 300 feet or more.

Through this deal, Ensco is expanding its position in the rapidly growing deepwater markets of Brazil and West Africa, where Pride has a long-standing presence and a good relationship with its customers. Ensco's operations are mainly in the North Sea, Southeast Asia, North America, and the Middle East. As such, the new entity will be in a position to enjoy a diversified geographical presence, with operations and drilling contracts in more than 25 countries. Moreover, the company's presence will cover almost every major deep- and shallow-water basin in the world. The deal will therefore not only serve the purpose of delivering an immediate financial upside for Ensco, but will also augment future growth.

The stakeholders can hope to build synergy by leveraging improved efficiency, access to broader marketing channels, and the ability to attract and retain human capital through this deal, besides scaling up the business operations in terms of increasing volume and fleet diversification. According to Ensco's CEO, Dan Rabun: "The combination is an ideal strategic fit, as our rig types, markets, customers and expertise complement each other with minimal overlap."

According to Datamonitor's Global Oil and Gas Analyzer, global offshore deepwater activity is expected to account for about 24% of total drilling activity by 2020, rising from around 17% today. Ensco has positioned itself to benefit from a first-mover advantage by pursuing consolidation and, in the process, has also shielded itself from the existing uncertainty amid the current tightening of rules and regulations in the offshore drilling industry.

Source: Datamonitor

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