Offshore oil driller Noble will get 'ever pickier' on M&A after Diamond deal, CEO says
Summary
TLDRNoble Corporation's CEO, Robert Eier, discusses the company's recent acquisition of Diamond Offshore for $1.6 billion, aiming to expand offshore rig operations and leverage economies of scale. Eier highlights the importance of scale in the energy sector and the company's journey of consolidation through major mergers and acquisitions. He expresses confidence in the deal's regulatory approval and addresses the wide range of predictions for global oil demand, emphasizing Noble's preparedness for various market outcomes. The conversation also touches on the potential for increased demand in offshore drilling, especially in the deep water segment, as Noble's backlog of tenders indicates a resurgence in the industry.
Takeaways
- 📈 Noble Corporation is actively pursuing acquisitions to increase its scale in the offshore drilling industry.
- 💰 The acquisition of Diamond Offshore is valued at $1.6 billion, aiming to enhance Noble's offshore rig count and global reach.
- 🔍 Scale is emphasized as crucial for meeting the needs of sophisticated customers and spreading investments in technology and innovation.
- 🛠️ Noble has undergone three major mergers and acquisitions in recent years, with Diamond being the latest and significant addition.
- 🚀 The company is confident about the regulatory process and expects the deal to close in the first quarter of the following year.
- 🔎 Despite previous acquisitions, Noble remains selective and strategic in its approach to further deals for shareholder value.
- 🌐 The energy sector, including offshore drilling, is expected to see market expansion for at least the next five years.
- 📉 Predictions beyond 2030 for oil demand vary widely, with some suggesting a peak by 2029 followed by a decline.
- 🛳️ Noble is observing an increase in demand, particularly in the deepwater segment, with leading indicators and customer budgets on the rise.
- 📊 The offshore rig count has rebounded but remains lower than pre-pandemic levels, indicating potential for further industry expansion.
- 💼 Noble's CEO, Robert Eier, highlights the company's strong position with a large fleet and a robust backlog of tenders, signaling a positive outlook for offshore drilling.
Q & A
What recent acquisition has Noble Corporation announced?
-Noble Corporation has announced an acquisition of Diamond Offshore Drilling, with a cash and stock deal valued at $2.6 billion.
What is the expected outcome of the acquisition for Noble Corporation's offshore rigs?
-The acquisition is expected to increase the number of offshore rigs that Noble Corporation has, enhancing their economies of scale in the business.
Why is scale important in the offshore drilling industry according to Robert Eier?
-Scale is important because it allows Noble Corporation to meet the global needs of their large and sophisticated customers by spreading investments in technology and innovation across a larger base.
How many major mergers and acquisitions has Noble Corporation made in recent years?
-Noble Corporation has made three major mergers and acquisitions in recent years, including the acquisition of Diamond Offshore Drilling.
What was the significance of the Maersk Drilling acquisition for Noble Corporation?
-The Maersk Drilling acquisition in 2022 was described as a transformative merger for Noble Corporation, significantly increasing their scale and capabilities.
What is Noble Corporation's approach to future acquisitions?
-Noble Corporation will continue to look at deals that are accretive for shareholders but will be increasingly selective, ensuring that any future deals are the right fit.
What is the expected regulatory risk for the Diamond Offshore acquisition?
-Noble Corporation is confident about the regulatory approval process, expecting to close the deal in the first quarter of the next year, with compliance with a handful of regulators around the world.
How does Robert Eier view the predictions about global oil demand peaking by 2029?
-Robert Eier acknowledges the difficulty in predicting energy demand past 2030, noting a wide range of forecasts and emphasizing that Noble Corporation is positioned for a variety of outcomes.
What is Noble Corporation's strategy for dealing with the potential decline in oil demand?
-Noble Corporation is prepared for a range of outcomes, focusing on maintaining a scale that can last through the cycle and having some of the best assets in their fleet.
What trends does Noble Corporation see in the offshore drilling industry?
-Noble Corporation sees an increasing demand, especially in the deepwater segment, with leading indicators such as customer budgets, FIDs, and subsea orders showing positive signs.
How does the current offshore rig count compare to pre-pandemic levels according to Baker Hughes?
-The offshore rig count has rebounded but is still lower than pre-pandemic levels, suggesting potential for further expansion in the industry.
Outlines
🏢 Acquisition and Scale in the Offshore Drilling Industry
Noble Corporation's CEO Robert Eier discusses the company's recent acquisition of Diamond Offshore Drilling for $6 billion, which is aimed at increasing the number of offshore rigs and achieving economies of scale. Eier highlights the importance of scale in the energy sector and the benefits of having a global presence with sufficient assets to meet the needs of large, sophisticated customers. He also addresses the company's journey of three major mergers and acquisitions, including the Diamond acquisition, which has provided a new level of scale and enabled the company to innovate and expand its services. Regarding regulatory risks, Eier expresses confidence in the acquisition's timeline and the company's compliance with global regulators, emphasizing the competitive and fragmented nature of the business.
📈 Future Outlook and Growth in the Offshore Drilling Sector
The conversation with Robert Eier continues as he shares insights on the future of the offshore drilling industry. Eier acknowledges the difficulty in predicting oil demand beyond the next five years, given the wide range of forecasts and the unique features of the energy industry. However, he is confident in Noble Corporation's position to adapt to any outcome due to its scale and high-quality assets. Eier also discusses the potential for increased demand in offshore exploration and production as the growth in the shale region in the U.S. begins to slow. He notes the positive indicators for the industry, such as increasing customer budgets, project sanctions, and a rise in subsea orders, which suggest a return to offshore drilling and a particular focus on the deepwater segment. Eier concludes by expressing optimism about the industry's expansion and the company's preparedness for future opportunities.
Mindmap
Keywords
💡Deal Making
💡Offshore Oil Drilling
💡Noble Corporation
💡Acquisition
💡Economies of Scale
💡Consolidation
💡Regulatory Risk
💡Market Demand
💡Deep Water Segment
💡Backlog of Tenders
💡Global Oil Demand Forecast
Highlights
Noble Corporation is pursuing an acquisition in the offshore oil drilling sector, aiming to acquire Diamond Offshore Drilling in a cash and stock deal.
The acquisition is valued at $2.6 billion and will increase Noble's offshore rig count, enhancing economies of scale.
Noble Corporation's CEO, Robert Eier, discusses the importance of scale in the energy sector and the benefits of their recent acquisitions.
The company has undergone three major mergers and acquisitions in recent years, including the Diamond acquisition, to meet global customer needs.
Eier expresses confidence in the regulatory approval process, with an expected closing date in the first quarter of the following year.
Noble's previous acquisition of Maersk Drilling in 2022 was transformative, and the company is selective in future deals for shareholder value.
The energy sector, including offshore drilling, is expected to see market expansion for at least the next five years.
Predictions for oil demand post-2030 vary greatly, with some suggesting an increase of 10-15% and others a decrease to 25% of current levels.
Noble is positioned with a global scale and high-quality assets to adapt to a wide range of energy market outcomes.
There is potential for increased demand in offshore exploration and production as onshore growth in the US begins to slow.
The offshore rig count has rebounded but remains lower than pre-pandemic levels, indicating potential for industry expansion.
Noble anticipates growth in the deepwater segment of their business, with leading indicators such as customer budgets and FIDs on the rise.
The company's backlog of tenders and open tenders is at a 10-year high, signaling a return to offshore drilling.
Eier emphasizes the company's focus on deepwater drilling and expects this trend to continue.
The interview concludes with a discussion of Noble's positive outlook following the announcement of the Diamond acquisition.
Transcripts
[Music]
the oil and gas industry has seen a wave
of deal making now the offshore oil
drilling sphere is getting in on the
action Noble Corporation among the
latest names eyeing and acquisition the
offshore drilling contractor putting in
a cash and stock deal to acquire Diamond
offshore drilling and Noble Corporation
CEO Robert eier is joining us now for a
closer look at consolidation in the
energy sector Robert thank you for being
here it's great to be here thank you so
much for having me so you guys recently
announced this acquisition .6 billion um
to buy Diamond Offshore um and this
would bring up the number of offshore
rigs that you guys have talk to me about
sort of economies of scale in your
business and this is not the first
acquisition you've made in the past few
years why it has been a good idea to try
to get
bigger yeah it's great thank you very
much um look scale is really important
right now uh and I think throughout all
of the energy space uh as well as as in
Services investors are rewarding SC
in our business specifically in offshore
drilling um we have uh a a large number
of very sophisticated customers across
the globe so we drill for some of the
largest companies in the world uh and
they have a lot of needs and uh in order
to meet those needs globally we need to
have enough assets so that we can spread
our investments uh around technology uh
and Innovation across a bigger base and
so we've been on a journey here for the
the last few years where we've made uh
three major mergers and Acquisitions
culminating this week with with the
diamond acquisition uh that really has
given us uh a a new level of scale
that's letting us uh do a lot of really
interesting things for our customers
across the globe Robert I I am curious
with this acquisition any concern for
regulatory risk in your
opinion well we we've announced a
closing date uh of first quarter next
year and and perhaps even a little bit
quicker than that uh and so we're very
confident around that timeline of course
we will uh apply with uh a handful of
regulators around the world uh but uh
this is still a very competitive uh
business uh it remains fragmented and uh
we're very confident around around the
path forward um as I mentioned earlier
Robert this is not the first acquisition
you've made it's not even the biggest
one you bought a mar drilling back in
2022 um after Diamond you done is there
still room to to grow after that well
look what what we said when we did the
mayor steel is uh we said that this is
the transformative merger for us uh and
it really has been and I think I think
the results have proved that but we also
said that if we were to do a deal after
that uh that we would be very picky uh
and we would make sure uh that it was
the exact right deal uh for for our
shareholders uh among a number of
potential deals out there uh and so I
think when we announced this deal
earlier this week uh we've been
extremely pleased uh with the results
from that in fact I think the entire
sector traded up the day we announced it
uh and and including ourselves of course
uh so I guess what I would say is um
like like any company we will continue
to look at things that are accretive for
our shareholders but we will get ever
pickier each time Robert I want to get
your take on a headline uh that made
some news here from the Ia saying Global
oil demand they they forecast going to
Peak by 2029 and that's it's going to
begin a cont track the following year
they say as the US other non OPEC
countries add to supply is that what you
see Robert is that sound accurate to you
yeah look what what I would say is that
uh for sure we see an expanding Market
uh for the next five plus years uh and
then uh from there it is extremely
difficult to predict that's one of the
unique features I think of the energy
industry right now is that the range of
predictions past around 2030 in
particular L when you get out to 2045 or
2050 is massive you've got everything
from OPEC and others uh predicting that
uh that that oil demand could be up by
10 or 15% from today uh to uh other
outcomes where it could be down at 25%
of current uh and so look we're a
service business um we uh have a scale
to to to last through cycle uh and uh we
have some of the best assets uh in the
world in our Fleet so we're positioned
uh for whatever range of outcomes might
come uh but it is it is uh remarkable
just uh how wide the the set of
predictions is and there are some
predictions as well that as we see
growth in um the shell region in the US
start to taper a little bit that we'll
see more demand for offshore um
exploration and production you know I
was taking a look at the offshore uh rig
count just globally as tracked by Baker
Hughes and you know it's rebounded but
we see lower than where it was pre
pandemic do you think that in general
you're going to see more of an expansion
in your industry as we see the demand
for oil and gas persist and the need to
look in different places to get it kind
of persists as
well we do we think we think we'll see
demand increase particularly in in the
deep water segment of our business uh
all of the leading indicators for our
business are up so our customers budgets
have been increasing year onye uh fids
which is kind of a predictor you know
sanction projects which is a predictor
of a future years are up and are
predicted to continue to go up you've
got uh things like subc tree orders that
that show positive signs for the future
and just looking more specifically at
our own business our backlog of tenders
our open tenders uh I think is the
highest than it's been in 10 years so we
are seeing a return uh to offshore
drilling uh and we are seeing deep water
uh incre get increased Focus here uh and
and we expect that to continue Robert
thanks so much for your time I
appreciate it well it's great to be here
thank you very much uh for having me
back uh and especially on a really nice
occasion like this week for us yeah well
we'll catch up with you again maybe when
the deal closes thanks a lot sounds
great thank you
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