KDA Deutag’s Aberdeenshire headquarters is “expected to remain” in the north-east of Scotland following its $2 billion (£1.56bn) acquisition by US oilfield services firm Helmerich & Payne (NYSE: HP).
Tulsa, Oklahoma-based Helmerich & Payne (H&P) revealed an agreement to snap up KCA Deutag in an all cash deal last month.
The deal, which will largely pay off lenders that rescued the firm in a debt for equity swap in 2020, is expected to complete by the end of 2024.
The buyout marks a new era from the firm that was forged in a merger between KCA Drilling and Deutag AG in 2001. It employs 11,000.
© KCA DeutagNorth-east farmer and businessman Alasdair Locke had first founded the oil and gas service company in 1992 and collected nearly £120m from a deal announced in December 2007 to take it private.
A spokesperson for KCA Deutag told Energy Voice: “Until completion of the transaction, H&P and KCA Deutag will continue to operate as normal. There are no changes in our teams, company or day-to-day business priorities.
“As part of the integration planning process, teams from H&P and KCA Deutag will review our combined footprint and determine the best path forward. However, the Aberdeen office is expected to remain.”
Deal synergies
H&P said it plans to refinance KCA’s existing debt “at a lower rate” and it had a number of options to “quickly reduce debt”. The KCA spokesperson added the transaction would “repay KCA Deutag’s Group debt instruments and provide value realisation for its existing investors.”
Westwood Global Energy senior analyst Ben Wilby highlighted some of the benefits of the deal, including that the combined group will control the world’s largest privately-owned rig fleet.
H&P currently has the largest fleet of land drilling rigs in the US where it is a major player in shale gas.
However, it has a “small presence internationally” until it adds KCA’s rigs 129 rigs spread across 20 countries.
Most of KCA’s business is in Gulf Co-operation Council (GCC) areas – mainly Kuwait, Oman and Saudi Arabia.
KCA operates a fleet of 36 units within the Kingdom, where Westwood forecasts there will be almost 10,000 wells drilled between 2024-2028.
Wilby noted this was an added benefit for the US firm as hires in the Middle East are usually “multi-year contracts” compared to “short-cycle contracts that rule onshore in the US”.
But the deal would also “opens new areas” to the US firm, such as “Europe’s geothermal drilling market, where H&P has no existing experience”.
He added: “The acquisition puts the combined company in a great position to capitalise on the three core Middle Eastern countries, which are expected to see a 28% rise in rig demand by 2028.
“This rise comes despite a raft of newbuild land rig additions to GCC fleets from major regional players, such as ADNOC Drilling, Arabian Drilling and the Saudi Aramco-Nabors JV SANAD.”
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