Transocean Discussing Merger With Rival Seadrill as Offshore Downturn Eases

(Bloomberg) -- Transocean Ltd. is in talks to merge with rival offshore drilling contractor Seadrill Ltd., according to people familiar with the matter, just as oil explorers around the world are returning to the sea.

Shares of Seadrill jumped about 10% after the close of regular trading in New York while Transocean’s were up about 3.7%.

Discussions are ongoing about the potential structure of a combination, said the people, who asked to not be identified because the details are private. A final decision on pursuing a deal hasn’t been made and the companies could opt to remain independent, they said. 

A representative for Transocean didn’t respond to requests for comment. A spokesperson for Seadrill declined to comment.

Transocean, with headquarters in Switzerland, had seen its shares fall 35% this year through the close of regular trading Wednesday, giving the company a market value of about $3.6 billion. Hamilton, Bermuda-based Seadrill had been down 26% since Jan. 1, giving it a market value of $2.4 billion.

Once the world’s two biggest offshore drillers, both Transocean and Seadrill have lagged as rivals bulked up and a protracted offshore drilling downturn forced many contractors into bankruptcy. Transocean, which owned the Deepwater Horizon rig involved in BP Plc’s Macondo well blowout in the Gulf of Mexico, was the only major offshore rig contractor to avoid bankruptcy during the 2020 downturn.

Offshore Boom

Now offshore drilling, particularly in deep water, is once again booming thanks to steady oil prices and slower production growth from US shale fields.

Offshore drilling services provider Helix Energy Solutions Group Inc. is also exploring strategic options, including a potential sale, Bloomberg News reported this month. The Houston-based company, with a market value of about $1.4 billion, has been working with advisers to gauge interest from potential buyers.

Major oilfield service companies are pivoting to more work in international and offshore fields amid the shale activity slowdown brought on by industry consolidation, low natural gas prices and pressure to keep spending in check and return profits to shareholders.

SLB, the world’s biggest oilfield-services provider, sees the potential for more than $500 billion in commitments to offshore projects from 2023 through 2026.

Noble, Diamond

Unlike the booming consolidation wave sweeping up global oil producers in the past year, offshore-driller merger activity has been far more muted. Noble Corp. became the world’s biggest offshore driller by market value after acquiring rivals Diamond Offshore Drilling Inc. this year and Maersk Drilling in 2022.

Merging with Seadrill would fit Transocean’s strategy of growing its list of backlog work, utilizing some of the world’s most advanced rigs capable of drilling in water more than two miles deep.

(Updates with Helix Energy sale consideration in eighth paragraph.)

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