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Seadrill Acquires Aquadrill to Realize Opportunities in Strong Market

Seadrill acquires Aquadrill
Seadrill will acquire Aquadrill to strengthen its position as the market improves (Seadrill)

Published Dec 23, 2022 2:50 PM by The Maritime Executive

Ten months after emerging from its second bankruptcy in five years, Seadrill announced that it will acquire Aquadrill in a move that it believes will further strengthen its position as the market for offshore drilling continue to rebound. Combined they said the companies will be in a strong position to serve a broader range of customers, with one of the most technologically advanced fleets in the industry.

The past few years have been especially challenging for the sector with Seadrill and several of its competitors each using bankruptcy to lower their debt and adjust their cost structures. Seadrill reported when it filed in February 2021 that it had approximately $7.3 billion in debt. The goal of the restructuring plan was to reduce the company's debt by approximately $4.9 billion and supply $350 million in new financing. However, in the process, John Frederiksen surrendered his position in the company when it emerged in February 2022. Aquadrill had proceeded Seadrill emerged from its Chapter 11 restructuring in May 2021.

The definitive merger agreement values Aquadrill at approximately $958 million. The boards have approved an all-stock transaction. Once it is completed Seadrill investors will hold 62 percent of the combined company and Aquadrill unitholders will own 38 of the company.

The companies highlighted benefits from the combination including creating a company with a modern and high-specification fleet and a streamlined cost structure. Aquadrill currently owns eight offshore drilling units. The fleet will be among the youngest in the industry with the combined company owning 12 floaters (including seven 7th-generation drillships), three harsh environment rigs, four benign jack-ups, and three tender-assisted rigs. Additionally, seven rigs will be managed under a variety of strategic partnerships.

They are also citing strong financial justifications for the merger. The combined backlog will be $2.8 billion/ They said the company will be well-placed to realize estimated annual run rate synergies of at least $70 million.

They expect to have increased exposure and upside to the improving market. The combination will provide additional active fleet capacity which they noted can be deployed in a rising market environment. The company will also be well-positioned for further growth management told investors based on its stronger credit and liquidity profile and will have the ability to provide attractive cash flows.

The combined company will continue to be known as Seadrill Limited and will continue to be domiciled in Hamilton, Bermuda. Julie Robertson and Simon Johnson will continue in their respective roles as Chair of the Board of Directors, and President and Chief Executive Officer.

The transaction has been approved by the Boards of Directors of both Seadrill and Aquadrill. The required approval of Aquadrill’s unitholders has also been obtained. The transaction does not require Seadrill shareholder approval. It, however, is subject to applicable regulatory approvals and other customary conditions. They expect the transaction will close in mid-2023.