Is Pacific Drilling a takeover candidate?

Bloomberg Business earlier in June reported that the offshore drilling contractor Pacific Drilling was being looked at by Transocean, Ensco and Seadrill as a potential takeover candidate.

Also, it has been reported that Chevron, the driller’s largest customer has cancelled a Gulf of Mexico rig tender due for an award at the end of the year.

According to a Seeking Alpha article, this is a big problem for Pacific Drilling as the company was the likely winner of the tender, and had already moved the Pacific Meltem drillship to the Gulf of Mexico, paying the mobilization fee by itself.

The Luxembourg-headquartered Pacific Drilling, the owner of high-specification drillships fleet, has also yet to get a contract for the Pacific Zonda drillship, set for delivery later this year from the Samsung Heavy Industries yard in South Korea.

“Meltem” marketing begins

Offshore Energy Today has reached out to Pacific Drilling asking about the takeover allegations, as well as for a comment on the Chevron tender.

Regarding the tender cancellation, Amy Roddy, VP Corporate Services at Pacific Drilling said: “Pacific Drilling did participate in the Chevron tender with our rig Pacific Meltem, and I can confirm that we received a tender cancellation notice. Regarding reports of Pacific Drilling as a takeover target, as a matter of company policy, we do not comment on market rumors or speculation about our company.”

Knowing that the Meltem has been moored in the U.S. Gulf of Mexico area, Offshore Energy Today asked if Pacific Drilling was still looking to deploy the Pacific Meltem in the U.S. Gulf of Mexico. We also asked about the potential changes to the delivery date of the Pacific Zonda.

Amy Roddy said: “We are actively marketing Pacific Meltem for all regions. There has been no change to the Zonda delivery date.”

Downturn changes things

Answering to our question, “Is Pacific Drilling a takeover candidate?”, Joseph Triepke, Managing Director at Oilpro.com, said: “Absolutely, and they have been for some time. A year ago, we identified six offshore drilling takeover candidates, and Pacific Drilling was one of them. Pacific Drilling was approached by potential buyers before the downturn began (all the established drillers are interested), but ownership was an unwilling seller demanding a higher bid than the established drillers were willing to offer. The downturn changes things though.

“So far, one company on our list has been snapped up (Prospector), and we believe more will be consolidated before this downturn is done. PACD is near the top of the list now, and distress resulting from the downturn in offshore rig demand + rig supply influx could accelerate a deal. Pacific Drilling is highly leveraged, but it has desirable assets – a ripe combination for M&A.”

In its first quarter 2015 report, Pacific Drilling reported cash balances totaled $132.9 million as of March 31, 2015, and total outstanding debt was $3.0 billion.

Pacific Drilling owns a fleet of seven hi-spec drillships, with eighth, the Pacific Zonda slated for delivery later in the third quarter of 2015. Three rigs are without contract: the Pacific Meltem, Pacific Mistral and the to-be-delivered Pacific Zonda. Four rigs are contracted with Chevron and one with Total.

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Offshore Energy Today Staff