Borr launches tender offer for Paragon Offshore shares

Norway’s Borr Drilling has officially launched its tender offer to buy all outstanding Paragon Offshore shares.

The tender offer announcement released on Monday follows last week’s news that Borr Drilling had signed a binding tender deal to offer to purchase Paragon Offshore, in a move to consolidate the jack-up drilling market.

The offer of $42.28 per share will remain remain open for 20 business days (the “Offer Period”). The Offer Period is expected to expire at 12:01 A.M. Eastern time on March 24, 2018, unless extended.

The transaction is expected to close on March 27, 2018, subject to the satisfaction of the offer conditions. Borr Drilling last week said that the total acquisition price for all outstanding shares of Paragon would be $232.5 million.

Borr plans to fund the balance of the amounts required to by Paragon Shares with the net proceeds from offerings of equity or debt instruments.

World’s largest premium jack-up player

Paragon is an international driller with a fleet of 32 drilling units as per January 2018. This fleet includes two modern units of the JU-2000E design, the Prospector 1 and Prospector 5 built in 2013 and 2014 currently located in the North Sea.

Paragon’s portfolio also includes a semi-submersible MSS1 scheduled to go on a long-term contract for TAQA in the North Sea starting in March. The Prospector 1 and five of Paragon’s older jack-ups are currently working in the North Sea, India and Middle-East, with four additional jack-ups under contract or committed, including Prospector 5.

In addition, there are 21 older uncontracted jack-ups stacked in different locations, which Borr plans to scrap due to high reactivation cost, safety standards and drilling efficiency.

Borr’s fleet comprises 15 jack-up drilling rigs and 11 units under construction with deliveries scheduled from 2018 to 2020.

According to Borr, following completion of the transaction, Borr will own 24 premium jack-ups built after 2000, and become the world’s largest premium jack-up rig operator.

With the current oversupply in the market, Borr said that consolidation and divestment to non-drilling activities is needed and anticipated. The board views the four older units that are stacked in Scotland to be non-core. During the first quarter of 2018, Borr is planning to divest at least one of these rigs to a counterparty on terms that it will be used for non-drilling activities.

From 2 rigs to 57 in less than 2 years

Worth noting, Borr Drilling was founded just a little over a year ago, and in such a short space of time has managed to become the largest jack-up owner in the world.

According to a recent commentary by Rystad Energy, with the acquisition of Paragon, Borr will become the largest jack-up owner in the world, with 57 jack-ups in total, including the scrapping candidates.

The company will also be the second-largest provider of offshore rigs, measured in fleet size, just four units behind the newly-merged Ensco-Atwood. This move brings together the fourth and sixth largest jack-up providers to create an entity controlling 10% of the world’s jack-ups.

“It is remarkable what Tor Olav Troim has achieved in such a short amount of time. Going from two jack-ups in December 2016 to becoming the largest jack-up provider shows how Troim has been able take the lead and orchestrate the establishment of his second major drilling company. First it was Seadrill with John Fredriksen and now Borr,” says

“Borr’s strategy has always been to consolidate the jack-up market and focus on operating modern high-spec rigs. Hence, they put a very low value on the older rigs which is reflected in the transaction price,” says Føre.

“The timing is perfect for Borr Drilling as the signs of a recovering market are starting to appear. Contracted utilization for jack-ups has been holding steady at the low to mid-50% level since early 2017, but during fourth quarter 2017 we saw an increase in new mutual contracts, contract durations, and leading edge day rates for premium jack-ups,” says Føre.

Offshore Energy Today Staff