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Oil driller Ensco to buy Pride International for $7.3 billion

February 07, 2011|Reuters

Ensco plans to buy rival Pride International Inc. for about $7.3 billion in a deal that would create the world's second-largest offshore oil and gas driller.

The deal announced Monday sets the purchase price for Pride's shares at $41.60 each, a premium of 21% to Friday's closing price, and would give Ensco more cash flow to buy new, high-tech rigs needed to meet oil companies' demand for equipment capable of drilling in increasingly tough waters.

"Pride and Ensco combined are going to be in all the major oil-producing regions now," said Kurt Hallead, co-head of energy research at RBC Capital Markets in Austin, Texas.

The industry has been hit hard by the deepwater drilling moratorium in the Gulf of Mexico and stringent shallow-water regulations after last year's BP well blowout, which led to the worst-ever U.S. maritime oil spill.

But major energy companies such as Chevron Corp and Royal Dutch Shell expect to continue spending billions of dollars offshore, encouraged by strong oil prices.

With a total of 74 rigs, including six being built, the deal would lift the combined company past Noble Corp. and make it second only to Transocean Ltd., which has 136 rigs.

London-based Ensco's fleet is deployed in the Gulf of Mexico, Europe, the Middle East and Asia, and the deal would add Pride's five rigs off the west coast of Africa and nine rigs off Brazil.

Pride and Ensco's combined company would be based in Britain.

Pride shares closed up $5.41, or 15.7%, at $39.80, while Ensco ended down $2.28, or 4.2%, at $52.13.

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