KCA Deutag and Dalma to form enlarged drilling and engineering group

DapelKCA Deutag (KCAD), a leading global drilling and engineering contractor, has entered into an agreement with the shareholders of Dalma Energy LLC to combine their respective businesses through the acquisition by KCAD of Dalma’s Omani and Saudi Arabian businesses

Consideration for the acquisition, based upon an Enterprise Valuation of US$660mn, will consist of US$100mn of cash and shares to be issued to Dalma’s shareholders valued at US$220mn.

KCAD had revenue of more than US$1.16bn and EBITDA of US$219mn-US$224mn in the year ending 31 December 2017. The Dalma Business had revenue of US$312mn and EBITDA of US$110mn in the year ending 31 December 2017.

Upon completion, the KCAD group as enlarged by the Dalma Business is expected to continue to operate under the KCA Deutag brand name and will have approximately 9,700 employees.

Strategic Highlights

· Consolidates KCAD’s position as the world’s premier international drilling and engineering contractor. The enlarged KCAD Group will own and operate a fleet of 83 land rigs globally.

· Strengthens KCAD’s core Middle Eastern operations and provides KCAD entry to the substantial Saudi Arabian onshore drilling services market.

· The 2nd largest international owner and operator of 46 land rigs in the Middle East, of which 28 are in Oman and nine in Saudi Arabia.

· Areas for potential cost synergies have been identified and the Enlarged KCAD Group will be working towards delivering these efficiency improvements.

· The acquisition is expected to generate more than US$10mn of run-rate cost savings synergies per annum for the Enlarged KCAD Group.

· Creates an excellent platform to capture growth opportunities in the Enlarged Group’s major markets.

· Provides enhanced opportunities for Bentec, the group’s drilling rig and oilfield equipment manufacturer.

· Adds US$1.1bn of backlog with blue chip clients to an already healthy KCAD order book of US$5.2bn (as at 1 February 2018).

Norrie McKay, CEO of KCAD, said, “The acquisition of Dalma’s operations in Saudi Arabia and Oman will significantly strengthen our foothold in the Middle East, and provide us with a stronger platform to develop and grow our business in what is an exceptionally attractive region.”

Terms of the acquisition

Under the terms of the agreement, Dalma’s shareholders will receive US$100mn in cash and an equity shareholding of approximately 22 per cent. This will be subject to final adjustment on completion of the acquisition which is currently expected to occur in the Q2 2018, subject to the fulfillment of certain conditions precedent. The Enlarged KCAD Group expects to keep KCAD’s existing financing in place and finalise US$425mn of financing for the acquisition, which may include raising new debt in the loan or bond markets and amendments or extensions to existing financing.

Dalma’s shareholders will have the right to nominate two representatives to the board of directors of KCAD at group level. In order to ensure a smooth transition, it is contemplated that all operational Dalma staff deemed critical to ensure the continuation of the Dalma Business post-closing will transfer to the Combined Group.

The combination of KCAD and the Dalma Business will join together two leading onshore drilling contractors with market leading knowledge and operational experience in the Middle East.

Alain Charles Publishing, University House, 11-13 Lower Grosvenor Place, London, SW1W 0EX, UK
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