Helmerich & Payne Announces Agreement to Acquire KCA Deutag
Helmerich & Payne (NYSE: HP) has announced a definitive agreement to acquire KCA Deutag for $1.9725 billion in cash. This transformative transaction establishes H&P as a global leader in onshore drilling, significantly expanding its presence in the Middle East. Key highlights include:
- Increases H&P's Middle East rig count from 12 to 88
- Immediately accretive to cash flow and free cash flow per share
- Adds complementary offshore management contract business and manufacturing operations
- Expected to maintain investment grade credit rating
- Anticipates ~$25 million in run-rate synergies by 2026
The acquisition enhances H&P's scale and diversification, positioning it as one of the largest rig providers in the Middle East market. The transaction is expected to close before the end of 2024, subject to customary conditions and regulatory approvals.
Helmerich & Payne (NYSE: HP) ha annunciato un accordo definitivo per acquisire KCA Deutag per 1,9725 miliardi di dollari in contanti. Questa transazione trasformativa stabilisce H&P come leader globale nel settore del drilling onshore, ampliando significativamente la sua presenza in Medio Oriente. I punti salienti includono:
- Aumento del numero di trivelle di H&P nel Medio Oriente da 12 a 88
- Immediatamente accrescitivo per il flusso di cassa e il flusso di cassa libero per azione
- Aggiunge un'attività complementare di contratti di gestione offshore e operazioni di produzione
- Si prevede di mantenere un rating creditizio investment grade
- Si anticipano circa $25 milioni in sinergie a regime entro il 2026
L'acquisizione potenzia la scala e la diversificazione di H&P, posizionandola come uno dei maggiori fornitori di trivelle nel mercato del Medio Oriente. Si prevede che la transazione si chiuda entro la fine del 2024, soggetta a condizioni consuete e approvazioni normative.
Helmerich & Payne (NYSE: HP) ha anunciado un acuerdo definitivo para adquirir KCA Deutag por 1,9725 mil millones de dólares en efectivo. Esta transacción transformadora establece a H&P como un líder global en perforación onshore, ampliando significativamente su presencia en el Medio Oriente. Los aspectos destacados incluyen:
- Aumento del número de plataformas de H&P en el Medio Oriente de 12 a 88
- Inmediatamente accrescido al flujo de efectivo y al flujo de efectivo libre por acción
- Añade un negocio complementario de contratos de gestión offshore y operaciones de fabricación
- Se espera mantener una calificación crediticia de grado de inversión
- Se anticipan aproximadamente $25 millones en sinergias a tasa de ejecución para 2026
La adquisición mejora la escala y diversificación de H&P, posicionándola como uno de los mayores proveedores de plataformas en el mercado del Medio Oriente. Se espera que la transacción se cierre antes de fin de 2024, sujeto a condiciones habituales y aprobaciones regulatorias.
Helmerich & Payne (NYSE: HP)는 KCA Deutag을 19억7250만 달러에 현금으로 인수하기로 하는 최종 계약을 발표했습니다. 이 혁신적인 거래는 H&P를 육상 드릴링의 글로벌 리더로 자리매김하며, 중동에서의 존재감을 크게 확대합니다. 주요 하이라이트는 다음과 같습니다:
- H&P의 중동 시추 장비 수를 12대에서 88대로 증가
- 주당 현금 흐름 및 자유 현금 흐름에 즉각적인 기여
- 상호 보완적인 해양 관리 계약 사업 및 제조 운영 추가
- 투자 등급의 신용 등급 유지 예상
- 2026년까지 연간 약 2,500만 달러의 시너지 기대
이번 인수는 H&P의 규모와 다각화를 강화하여 중동 시장에서 가장 큰 시추 장비 공급업체 중 하나로 자리 잡게 합니다. 거래는 2024년 말 전까지 종료될 것으로 예상되며, 일반적인 조건과 규제 승인을 조건으로 합니다.
Helmerich & Payne (NYSE: HP) a annoncé un accord définitif pour acquérir KCA Deutag pour 1,9725 milliard de dollars en espèces. Cette transaction transformative établit H&P comme un leader mondial dans le forage terrestre, élargissant considérablement sa présence au Moyen-Orient. Les points forts incluent :
- Augmentation du nombre de forages H&P au Moyen-Orient de 12 à 88
- Immédiatement bénéfique pour le flux de trésorerie et le flux de trésorerie libre par action
- Ajoute une activité complémentaire de gestion offshore et des opérations de fabrication
- S'attend à maintenir une notation de crédit de catégorie investissement
- Anticipe environ 25 millions de dollars de synergies de rentabilité d'ici 2026
Cette acquisition renforce l'échelle et la diversification d'H&P, la positionnant comme l'un des plus grands fournisseurs de forages sur le marché du Moyen-Orient. La transaction devrait être clôturée avant la fin de 2024, sous réserve de conditions habituelles et des approbations réglementaires.
Helmerich & Payne (NYSE: HP) hat eine endgültige Vereinbarung zur Übernahme von KCA Deutag für 1,9725 Milliarden Dollar in bar bekannt gegeben. Diese transformative Transaktion etabliert H&P als globalen Marktführer im Bereich Onshore-Bohrungen und erweitert erheblich seine Präsenz im Mittleren Osten. Zu den wichtigsten Highlights gehören:
- Steigerung der Anzahl der H&P-Bohrgeräte im Mittleren Osten von 12 auf 88
- Sofortige Erhöhung des Cashflows und des freien Cashflows pro Aktie
- Ergänzt das komplementäre Offshore-Management-Geschäft und die Produktionsoperationen
- Erwartet, dass die Investment-Grade-Kreditbewertung erhalten bleibt
- Erwartete Synergien von etwa 25 Millionen Dollar bis 2026
Die Übernahme erhöht H&Ps Größe und Diversifizierung und positioniert das Unternehmen als einen der größten Anbieter von Bohrgeräte im Markt des Mittleren Ostens. Der Abschluss der Transaktion wird vor Ende 2024 erwartet, vorbehaltlich üblicher Bedingungen und behördlicher Genehmigungen.
- Acquisition establishes H&P as a global leader in onshore drilling
- Immediately accretive to cash flow and free cash flow per share
- Increases Middle East rig count from 12 to 88, becoming one of the largest rig providers in the region
- Adds $5.5 billion contract backlog, enhancing revenue resilience and earnings visibility
- Expected to generate double-digit free cash flow accretion by 2025
- Anticipates ~$25 million in run-rate synergies by 2026
- Significant cash outlay of $1.9725 billion for the acquisition
- Increase in debt to fund the transaction, with net-debt-to-Operating EBITDA ratio rising to 1.7x at close
- Suspension of supplemental dividend during near-term deleveraging period
- Integration challenges and risks associated with large-scale acquisition
This acquisition marks a significant strategic move for Helmerich & Payne (H&P), substantially expanding its global footprint and diversifying its revenue streams. The
Key financial implications include:
- Immediate accretion to cash flow and free cash flow per share, with double-digit free cash flow accretion expected by 2025.
- Addition of
$5.5 billion in contract backlog, enhancing revenue visibility and stability. - Increase in combined LTM Operating EBITDA to approximately
$1.2 billion . - Expected run-rate synergies of
$25 million by 2026. - Initial net-debt-to-Operating EBITDA ratio of 1.7x, with a target to reduce to 1.0x or below.
While the transaction will be financed through cash on hand and new borrowings, H&P expects to maintain its investment-grade credit rating. The company's focus on debt reduction in the near term, coupled with the suspension of supplemental dividends, indicates a prudent approach to financial management post-acquisition.
This deal significantly alters H&P's revenue mix, with international land operations expected to grow from
Rating: 1
This acquisition positions Helmerich & Payne as a major player in the global onshore drilling market, particularly in the Middle East. The strategic importance of this move cannot be overstated, given the region's prominence in global oil and gas production.
Key industry implications include:
- H&P's Middle East rig count will surge from 12 to 88, making it one of the largest rig providers in the region.
- The deal provides immediate scale in core Middle East markets, which would have been challenging to achieve organically.
- The acquisition includes 71 rigs in Saudi Arabia, Oman and Kuwait - key players in OPEC and global oil markets.
- Addition of an asset-light offshore management contract business, diversifying H&P's service offerings.
- Access to KCA Deutag's manufacturing and engineering capabilities, potentially enhancing H&P's technological edge.
The Middle East rig market is expected to continue growing, which bodes well for H&P's future prospects. This acquisition aligns with the broader industry trend of consolidation and geographical diversification among oilfield services companies.
The deal also reflects the increasing importance of the Middle East in the global energy landscape, as companies seek to capitalize on the region's vast reserves and stable production outlook. H&P's expanded presence in this market could provide a competitive advantage and more stable revenue streams compared to the more volatile North American market.
Rating: 1
This acquisition by Helmerich & Payne represents a bold strategic move that could significantly reshape the company's market position and investor perception. From a market strategy perspective, several key points stand out:
- Geographic Diversification: The deal dramatically shifts H&P's revenue mix, reducing its reliance on the North American market and increasing exposure to the more stable Middle East region.
- Market Positioning: H&P will emerge as a global leader in onshore drilling, potentially commanding a premium valuation compared to more regionally focused peers.
- Revenue Stability: The addition of KCA Deutag's
$5.5 billion contract backlog should provide more predictable cash flows, which investors typically reward with higher multiples. - Growth Potential: The Middle East's expected rig market growth offers H&P a clear path for future expansion.
- Synergies and Efficiency: Expected run-rate synergies of
$25 million by 2026 could boost profitability and demonstrate management's ability to integrate large acquisitions.
However, investors will likely focus on the execution risks associated with such a large deal, particularly in managing debt levels and integrating operations across diverse geographies. The suspension of supplemental dividends during the deleveraging period may also impact income-focused investors in the short term.
Overall, this transaction has the potential to reposition H&P as a more diversified, global player in the energy services sector, which could attract a broader investor base and potentially lead to a re-rating of the stock if successfully executed.
Rating: 1
- Establishes H&P as a global leader in onshore drilling
- Immediately accretive to cash flow and free cash flow per share
-
Enhances scale and diversification, now with leading positions in the
U.S. andMiddle East , the two most prominent oil and gas producing regions in the world -
Increases H&P’s
Middle East rig count(1) from 12 rigs to 88 rigs; positioning the Company as one of the largest rig providers in theMiddle East market - Expects to maintain its high-quality investment grade credit rating
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Adds complementary, asset-light global offshore management contract business and manufacturing and engineering operations in
Europe andMiddle East - H&P to host a conference call to discuss its fiscal third quarter results and transaction today at 7:30 a.m. CT
KCA Deutag is a diverse global drilling company. The company has a significant land drilling presence in the
President and CEO of H&P, John Lindsay, commented, “This is a historic and transformative transaction for the Company, and we are excited about what this means for H&P’s future, as it accelerates our international expansion particularly in the
“H&P has a history of having a thoughtful and managed approach to running and investing in the business and is well versed in the challenges brought about by crude oil and natural gas volatility. Our experience in the industry combined with a
CEO of KCA Deutag, Joseph Elkhoury, also commented, “This announcement represents a significant milestone in the strategic transformation journey of KCA Deutag and delivers benefits to all stakeholders: our employees, customers, shareholders and the communities where we live and work. We look forward to joining H&P, combining the strengths of our people together with our geographical footprint, to create an organization with an unrivalled global network, service capability and technology offering. The size, scale and financial strength of the combined organization will provide a stable foundation for long-term growth and diversification to safeguard a sustainable and prosperous future for our people. With similar customer-centric cultures, focused on safety and delivering incident-free, quality services and innovative technology, we will leverage H&Ps operational processes and practices to accelerate efficiencies and optimize operational excellence for our customers. Once completed, this transaction is expected to deliver multiple growth opportunities for our people and customers while facilitating value realization for our investors.”
John Lindsay concluded, “As a combined company, we will maintain our shared customer-centric approach and safety focus. We look forward to welcoming KCA Deutag’s talented employees to the H&P family and working together to provide exceptional performance and value to customers across our global markets, now on a much larger scale.”
Compelling Strategic and Financial Benefits:
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Accelerates international growth strategy, significantly increasing
Middle East presence: This acquisition provides immediate and significant exposure to land operations in key markets in theMiddle East , which generated a large majority (~70% ) of KCA Deutag’s calendar year 2023 Operating EBITDA. Through the transaction, H&P will increase itsMiddle East rig count from 12(1) to 88 rigs, 71 of which are inSaudi Arabia ,Oman andKuwait . Based on award activity to date, the pro forma company would be one of the larger rig providers in theMiddle East .
-
Enhances scale and diversification: With KCA Deutag, H&P will have a robust geographic and operational mix across the
U.S. and international crude oil and natural gas markets and diversified geographical exposure in earnings and cash flow streams. The transaction adds a complementary asset-light offshore management contract business, primarily comprising 29 offshore platform rigs under management, and a manufacturing and engineering business with three facilities serving the energy industry. H&P expects this transaction to grow its international land operations from ~1% (2) on a standalone basis to ~19% (2) on a pro forma basis based on calendar year 2023 Operating EBITDA. Offshore operations are expected to grow from ~3% (2) on a standalone basis to ~7% (2) on a pro forma basis based on calendar year 2023 Operating EBITDA.
-
Strengthens cash flow and durability: The
Middle East rig market is expected to continue to grow in the coming years. With an additional~ (3) billion contract backlog from KCA Deutag, supported by a blue-chip customer base, the Company will have highly resilient revenues and cash flow and increased earnings visibility. On a combined company basis, the last-twelve months (LTM) Operating EBITDA is ~$5.5 .$1.2 billion
- Generates attractive returns: The transaction is expected to be immediately accretive to cash flow and free cash flow per share, and increasingly accretive thereafter, with double-digit free cash flow accretion expected as soon as 2025. Transaction returns are expected to exceed cost of capital by 2026.
- Committed to balanced and sustainable financial practices and investor returns: H&P expects to maintain its high-quality investment grade credit rating with debt reduction a capital allocation priority for one to two years post-close. The focus will be on reducing the net-debt-to-Operating EBITDA ratio from 1.7x at close to at or below 1.0x. The Company intends to maintain its current base dividend and intends to pay the fourth and final installment of the fiscal 2024 supplemental dividend as declared on June 5, 2024. Thereafter, the Company does not anticipate providing a supplemental dividend during the near-term deleveraging period. As the Company reduces debt, it will continue to target select investment opportunities with strong return profiles and will consider additional opportunistic returns to shareholders beyond the base dividend through the several years following close.
-
Opportunity to realize synergies: Despite little geographic overlap, H&P expects to realize
~ in run-rate synergies by 2026, driven primarily by reduction in overhead and procurement savings. H&P also expects to refinance KCA Deutag’s existing debt, which will enable the Company to reinvest in the acquired business at a lower cost of debt.$25 million
Transaction Details:
Under the terms of the agreement, which has been unanimously approved by the H&P Board of Directors, H&P will acquire KCA Deutag International Limited for
The transaction will be funded with cash on hand and new borrowings. Given the Company’s projected cash flow generation and increased visibility with long-term contracts, H&P will be well positioned to quickly reduce debt utilizing pre-payable term loans, newly issued bonds with staggered maturities and strong cash flows. H&P expects to refinance KCA Deutag’s existing debt at a lower cost of capital.
Post-Close Operations:
Following the completion of the transaction, H&P will remain headquartered in
Upon closing the transaction, H&P expects to have three primary operating segments: North America Solutions, International Solutions, and Offshore Solutions. H&P’s North America Solutions segment will remain unchanged.
Conference Call and Webcast:
A conference call will be held on Thursday, July 25, 2024 at 7:30 a.m. (CT) with John Lindsay, President and CEO, Mark Smith, Senior Vice President and CFO, and Dave Wilson, Vice President of Investor Relations, to discuss the transaction and the Company’s third quarter fiscal year 2024 results. Dial-in information for the conference call is (800) 343-4849 for domestic callers or (203) 518-9848 for international callers. The call access code is “Helmerich1”. You may also listen to the conference call by logging on to the Company’s website at http://www.helmerichpayne.com and accessing the corresponding link through the investor relations section by clicking on “Investors” and then clicking on “News and Events - Events & Presentations” to find the event and the link to the webcast and the accompanying presentation materials.
This conference call will replace the previously scheduled conference call scheduled for 10 a.m. CT today.
Advisors:
Morgan Stanley & Co. LLC acted as financial advisor to H&P, and Morgan Stanley Senior Funding, Inc. is providing committed financing to H&P for the transaction. Kirkland & Ellis LLP acted as legal advisor to H&P. Veriten has served as independent strategic advisor, and Joele Frank, Wilkinson Brimmer Katcher served as investor relations advisor to H&P. Moelis & Co and PJT Partners acted as financial advisors to KCA Deutag, and A&O Shearman acted as legal advisor.
About Helmerich & Payne, Inc.
Founded in 1920, Helmerich & Payne, Inc. is committed to delivering industry leading drilling productivity and reliability. H&P operates with the highest level of integrity, safety and innovation to deliver superior results for our customers and returns for shareholders. Through its subsidiaries, the Company designs, fabricates and operates high-performance drilling rigs in conventional and unconventional plays around the world. H&P also develops and implements advanced automation, directional drilling and survey management technologies. For more information, visit www.helmerichpayne.com.
About KCA Deutag
KCA Deutag is a leading drilling, engineering and technology partner in current and future global energy markets, delivering innovative solutions to ensure a secure, affordable and sustainable energy future. With over 135 years of experience our global network of operations spans 26 countries, where we employ approximately 11,000 people in our Land, Offshore and Kenera business units. We currently operate or own 167 drilling rigs across the
(1) |
H&P’s |
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(2) | Percentages of 2023 calendar year-end Operating EBITDA based upon operating segment contributions only and exclude corporate level amounts. |
|
(3) |
KCA Deutag’s backlog at May 1, 2024 included |
Disclaimer:
This news release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included in this news release are forward-looking statements. Forward-looking statements may be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “predict,” “project,” “target,” “continue,” or the negative thereof or similar terminology, and such include, but are not limited to, statements regarding the proposed acquisition (the “Acquisition”) by Helmerich & Payne, Inc. (“H&P” or the “Company”) of KCA Deutag International Limited (“KCAD”), the anticipated benefits (including synergies and cash flow and free cash flow accretion) of the Acquisition, the anticipated impact of the Acquisition on the Company’s business and future financial and operating results, the anticipated impact of the Acquisition and the related transactions on the Company’s credit ratings, the expected timing of the Acquisition, including the expected closing date of the Acquisition and the timing of expected synergies and returns from the Acquisition, statements regarding our ability to continue to pay dividends following the Acquisition, and statements regarding our future financial position, estimated revenues and losses, business strategy, projected costs, prospects and plans and objectives of management. Forward-looking statements are based upon current plans, estimates, and expectations that are subject to risks, uncertainties, and assumptions, many of which are beyond our control and any of which could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. The inclusion of such statements should not be regarded as a representation that such plans, estimates, or expectations will be achieved. Factors that could cause actual results to differ materially from those expressed in or implied by such forward-looking statements include, but are not limited to: our ability and the time required to consummate the Acquisition; our ability to achieve the strategic and other objectives relating to the proposed Acquisition; the risk that regulatory approvals for the Acquisition are not obtained or are obtained subject to conditions that are not anticipated; the risk that we are unable to integrate KCAD’s operations in a successful manner and in the expected time period; the volatility of future oil and natural gas prices; contracting of our rigs and actions by current or potential customers; the effects of actions by, or disputes among or between, members of the Organization of Petroleum Exporting Countries and other oil producing nations with respect to production levels or other matters related to the prices of oil and natural gas; changes in future levels of drilling activity and capital expenditures by our customers, whether as a result of global capital markets and liquidity, changes in prices of oil and natural gas or otherwise, which may cause us to idle or stack additional rigs, or increase our capital expenditures and the construction, upgrade or acquisition of rigs; the impact and effects of public health crises, pandemics and epidemics, such as the COVID-19 pandemic; changes in worldwide rig supply and demand, competition, or technology; possible cancellation, suspension, renegotiation or termination (with or without cause) of our contracts as a result of general or industry-specific economic conditions, mechanical difficulties, performance or other reasons; expansion and growth of our business and operations; our belief that the final outcome of our legal proceedings will not materially affect our financial results; the impact of federal and state legislative and regulatory actions and policies affecting our costs and increasing operating restrictions or delay and other adverse impacts on our business; environmental or other liabilities, risks, damages or losses, whether related to storms or hurricanes (including wreckage or debris removal), collisions, grounding, blowouts, fires, explosions, other accidents, terrorism or otherwise, for which insurance coverage and contractual indemnities may be insufficient, unenforceable or otherwise unavailable; the impact of geopolitical developments and tensions, war and uncertainty involving or in the geographic region of oil-producing countries (including the ongoing armed conflicts between
Additional factors that could cause actual results to differ materially from our expectations or results discussed in the forward‑looking statements are disclosed in H&P’s 2023 Annual Report on Form 10-K, including under Part I, Item 1A— “Risk Factors” and Part II, Item 7— “Management’s Discussion and Analysis of Financial Condition and Results of Operations” thereof, as updated by subsequent reports (including the Company’s Quarterly Reports on Form 10-Q) we file with the Securities and Exchange Commission. All forward-looking statements included in this presentation and all subsequent written and oral forward-looking statements, express or implied, are expressly qualified in their entirety by these cautionary statements. All forward-looking statements speak only as of the date they are made and are based on information available at that time. Because of the underlying risks and uncertainties, we caution you against placing undue reliance on these forward-looking statements. We assume no duty to update or revise these forward-looking statements based on changes in internal estimates, expectations or otherwise, except as required by law.
Market & Industry Data:
The data included in this news release regarding the oil field services industry, including trends in the market and the Company's position and the position of its competitors within this industry, are based on the Company's estimates, which have been derived from management's knowledge and experience in the industry, and information obtained from customers, trade and business organizations, internal research, publicly-available information, industry publications and surveys and other contacts in the industry. The Company has also cited information compiled by industry publications, governmental agencies and publicly-available sources. Although the Company believes these third-party sources to be reliable, it has not independently verified the data obtained from these sources and it cannot assure you of the accuracy or completeness of the data. Estimates of market size and relative positions in a market are difficult to develop and inherently uncertain and the Company cannot assure you that it is accurate. Accordingly, you should not place undue weight on the industry and market share data presented in this news release.
We use our Investor Relations website at https://www.helmerichpayne.com/ as a channel of distribution for material company information. Such information is routinely posted and accessible at such site.
Use of Non-GAAP Financial Measures:
This news release contains certain financial measures that are not prepared in accordance with GAAP, including Operating EBITDA, net-debt-to-Operating EBITDA and Free Cash Flow.
- Operating EBITDA is defined as Operating Income plus depreciation and amortization and excluding the impacts of select items. Select items are non-GAAP metrics and are excluded as they are deemed to be outside the Company’s core business operations.
- Net-debt-to-Operating EBITDA is defined as total debt less cash and cash equivalents and short-term investments divided by Operating EBITDA.
- Free Cash Flow is defined as net cash provided by/used in operating activities less capital expenditures.
We believe that Operating EBITDA, net-debt-to-Operating EBITDA and Free Cash Flow are useful measures to assess and understand the financial performance of the Company. These financial measures are not substitutes for financial measures prepared in accordance with GAAP and should therefore be considered only as supplemental to such GAAP financial measures.
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HP Contacts:
Dave Wilson, Vice President of Investor Relations
investor.relations@hpinc.com
(918) 588‑5190
Media
Stephanie Higgins
Director of Communications
Stephanie.Higgins@hpinc.com
(918) 588-2670
Source: Helmerich & Payne, Inc.
FAQ
How much is Helmerich & Payne (HP) paying for KCA Deutag?
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When is the HP-KCA Deutag acquisition expected to close?
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