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The final chapter of the Pride International (PDE)/Seahawk Drilling (HAWK) spinoff is nearly complete. Our earlier post noted that both companies were struggling and considering their respective strategic options. Two companies with the same goal, yet oh so different outcomes. Here is a quick update:
Pride, an offshore rig contractor with a deep-water focus and international exposure, agreed to sell itself to Ensco (ESV), a combination which will create the world’s second largest offshore driller behind Transocean (RIG). The deal is a cash + stock combo with shareholders receiving 0.4778 newly-issued shares of Ensco in addition to $15.60 cash for each share. Much of the rationale and details behind the transaction can be found in a recent investor presentation – here is Dealbook’s take on it. While there are still regulatory issues to be solved within the US and little guidance from the Dept Of Interior, there are many opportunities for deepwater drilling around the globe which only get more attractive as oil prices continue to climb. Safety will be an issue, but the company should benefit from a relatively newer fleet.
Unfortunately, more shallow focused companies are still suffering, especially those concentrated in the Gulf of Mexico such as Seahawk. As a result of the difficult operating environment and the debt burden from the spinoff, the company filed for Chapter 11 bankruptcy and agreed to a firesale of its assets to Hercules Offshore (HERO) for approximately $105 million. Not your typical ‘HERO’ to the rescue story (I’m sorry – I couldn’t resist). Seahawk was simply unable to cope with the oil spill fallout and the current challenging operating environment. Low gas prices didn’t help much either. Beaten down industries are often intriguing, but the outlook here remains cloudy. The dust will settle eventually, some new regulations will exist and a more consolidated marketplace should be able to succeed. Unfortunately, Seahawk won’t be there to participate.
With both companies ceasing to exist in the near future, it is time to close the book on this spin. Don’t fret though, there are plenty of new opportunities on the horizon to work on.
Disclosure: Author holds no position in any stock mentioned.
