Transocean and Ocean Rig entered into a definitive merger agreement including Ocean Rig's net debt and the combined fleet will be 57 offshore units

The transaction consideration is comprised of 1,6128 newly issued shares of Transocean plus $12,75 in cash for each share of Ocean Rig common stock, for an implied total value of $32,28 per share of Ocean Rig, with based on the closing price on Aug. 31, 2018. Transocean said Tuesday that this represents a 20,4% premium to the 10% weighted average price of Ocean Rig's stock. The transaction was unanimously approved by each company's board of directors.

Transocean also said it intends to fund the cash portion of the transaction through a combination of cash on hand and fully committed financing provided by Citi. The merger is not subject to any financing conditions.

Upon completion of the merger, Transocean and Ocean Rig shareholders will own approximately 79% and approximately 21%, respectively, of the combined company.

Ocean Rig Fleet

Ocean Rig's fleet comprises nine high specification ultra-deepwater drillships and two harsh environment semi-submersibles, Eirik Raude and Leiv Eiriksson.

In addition, its fleet includes two high specification ultra-deepwater drillships, currently under construction at Samsung Heavy Industries, with favorable financing terms for shipyards. These two new builds are expected to be delivered in the third quarter of 2019 and third quarter of 2020, respectively.

“The proposed acquisition of Ocean Rig provides us with a unique opportunity to continue to enhance our fleet of aggressive ultra-deep water floats without compromising our liquidity or overall balance sheet flexibility,” said Transocean President and CEO Jeremy Thigpen.

“The combination of stable and constructive oil prices in recent quarters, streamlined offshore project costs and non-negotiable reserve replenishment challenges have driven a significant increase in offshore contracting activity. As such, adding Ocean Rig's premium assets to our market-leading fleet provides us with an increased number of modern, highly efficient drillships preferred by our customers and better positions us to capitalize on what we believe is an imminent upturn in the market. of ultra-deep waters”.

Thigpen continued: “This combination with Ocean Rig further strengthens our relationships with strategic customers, while expanding our presence in key markets in Brazil, West Africa and Norway. It also allows us to reduce our cost per active rig, as we believe we can merge Ocean Rig's operations into our existing structure with limited incremental expenses onshore. In addition, we are confident that we can realize significant synergies through our OEM contracts, our overall maintenance approach and our fleet-wide insurance coverage, among other opportunities. ”

Combined fleet of 57 floats

Thigpen concluded, “Including the five rigs under construction, and considering the two additional rigs we decided to recycle recently, Transocean's pro forma fleet will comprise 57 floaters, including many of the most technically capable, tough, ultra-deep water floats. semi-submersible environment in industry.

“With this unrivaled fleet, the largest and most profitable backlog in the offshore drilling industry totaling $12,5 billion, and approximately $3,7 billion in liquidity, we are well equipped for the market recovery.”

Pankaj Khanna, President and CEO of Ocean Rig UDW Inc., commented, “This strategic combination of Ocean Rig and Transocean creates a world-class fleet perfectly positioned for the market recovery, reducing the fragmentation that currently exists in offshore drilling. By adding our high-specification floaters to Transocean's industry-leading fleet, the combined company will have the offshore industry's largest and most technically capable fleet of ultra-deepwater and hardwater floaters. Upon consummation, this transaction will be of significant benefit to shareholders of both companies.”

No changes to Transocean's board of directors, executive management team or corporate structure are anticipated as a result of the acquisition. The company will remain headquartered in Steinhausen, Switzerland, with significant operational presence in Houston, Texas, Aberdeen, Scotland and Stavanger, Norway.

The transaction, which is expected to close during the first quarter of 2019, is subject to approval by Transocean and Ocean Rig shareholders and satisfaction of customary closing conditions, including applicable regulatory approvals.

Two platforms will be retired

In addition, in line with the company's strategy to recycle less competitive equipment, Transocean will retire two of its floaters, the ultra-deepwater drillship CR Luigsand, the intermediate-water floater Songa Delta. Platforms will be classified as held for sale and will be recycled in an environmentally responsible manner. Both floaters are currently stacked.

Transocean anticipates reclassification of the combined fleet, which may result in the recycling of additional platforms.

It's worth remembering that Transocean earlier this year completed the acquisition of another offshore driller, Songa Offshore, in a $3,4 billion deal.

When it comes to Ocean Rig, the driller in September 2017 completed its debt restructuring. The company's restructuring schemes provided for substantial deleveraging of the companies in the scheme – it and its subsidiaries – through an exchange of approximately US$3,7 billion in principal debt (plus interest) for new shares in the company, approximately US$288 million in cash and $450 million of new secured debt.

Following the restructuring, Ocean Rig made significant changes to the company's management in January, including changing the CEO, CFO and COO.