Aberdeen’s KCA Deutag acquired by US firm in $2bn deal

Aberdeen-headquartered drilling services KCA Deutag is set to be acquired by American competitor Helmerich & Payne (H&P) in a deal worth nearly $2 billion.

Under the agreement, H&P (NYSE:HP) will acquire KCA Deutag for $1.9725 billion (£1.53bn) in cash with the transaction expected close prior to the end of 2024 subject to approvals.

Announcing the deal, H&P said it will establish the company as a “global leader in onshore drilling”.

Formed in a merger between KCA Drilling and Deutag AG in 2001, KCA Deutag has a significant land drilling presence in the Middle East alongside operations in Europe, South America and Africa.

Portlethen-based KCA Deutag also maintains “asset-light” offshore management contracts in the North Sea, Angola, Azerbaijan and Canada.

© Supplied by Neptune Energy

H&P said the acquisition will increase its rig count in the Middle East from 12 to 88 rigs, positioning itself as one of the largest rig providers in the region.

KCA completed a string of deals with oilfield services multinational Saipem last year, acquiring the Italian firm’s onshore rigs in Kuwait, Saudi Araba and the United Arab Emirates.

Similarly, H&P has in recent years made moves to invest in the Middle East market, forming a strategic alliance with Emirati state-owned firm ADNOC in 2021

H&P president and chief executive officer John Lindsay described the deal as “historic and transformative”.

“KCA Deutag’s assets and operations will add resilient revenues, providing greater earnings visibility and cash flow generation,” Lindsay said.

“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.”

Deal brings ‘immediate scale’ in Middle East

Acquiring KCA Deutag gives H&P “immediate scale” in core Middle East markets “in a way that would be challenging to replicate organically”, Lindsay said.

“Furthermore, as there is very little geographic overlap, we view this transaction more than just acquiring assets, but rather acquiring operations with quality people,” he said.

The combined company will maintain its “shared customer-centric approach and safety focus”, Lindsay added.

According to its website, KCA Deutag employs close to 11,000 people globally across 26 countries.

© Supplied by Equinor

The company’s assets include 138 land drilling rigs, 27 offshore rigs and two jack-up rigs, with an order backlog of around $5.5 billion (£4.27bn).

KCA Deutag chief executive officer Joseph Elkhoury said the deal represents a “significant milestone” and will deliver benefits to employees, customers, shareholders and communities where the company operates.

“We look forward to joining H&P, combining the strengths of our people together with our geographical footprint, to create an organization with an unrivalled global network, service capability and technology offering,” Elkhoury said.

“The size, scale and financial strength of the combined organization will provide a stable foundation for long-term growth and diversification to safeguard a sustainable and prosperous future for our people.”

After the deal is finalised, H&P will remain headquartered in Tulsa, Oklahoma. The new H&P will have three segments including ‘North America’, ‘International’ and ‘Offshore’ divisions.

H&P said it will fund the acquisition with cash on hand and new borrowings, with the transaction expected to be immediately accretive to cash flow.

The ownership of KCA last changed in 2020 when the firm’s owners Pamplona Capital swapped its $1.9bn debt pile for equity, with lenders taking control of the business through a complex network of business entities.

North-east farmer and businessman Alasdair Locke founded the oil and gas service company in 1992 and collected nearly £120m from a deal announced in December 2007 to take it private.