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ADES Signs PSA for Three Operational Offshore Jack-up Rigs in the Arabian Gulf.

M2 EQUITYBITES-December 21, 2017-ADES Signs PSA for Three Operational Offshore Jack-up Rigs in the Arabian Gulf


21 December 2017 - UK-based oil and gas drilling and production services provider ADES International Holding Ltd. (LSE: ADES) has signed a purchase and sale agreement with US-based Nabors Industries Ltd's (NYSE: NBR) Nabors Drilling International II Ltd. subsidiary to acquire three operating offshore jack-up rigs currently contracted by a major national oil company in the Arabian Gulf for a total purchase price of USD 83m, the company said.

This consideration is payable in a combination of cash and ADES shares.

The PSA also provides for the existing drilling contracts associated with the rigs to be transferred to ADES.

Consideration for the transaction will include a cash payment equivalent to 75% of the total Transaction value and the remaining 25% will be paid in the form of newly issued shares of ADES.

The total number of consideration shares was calculated using the closing mid-market price of ADES shares on 18 December 2017, being the business day prior to the transaction signing date.

Consideration shares issued to Nabors as part of the transaction will be subject to a three-month lockup period.

In total, the acquisition is expected to add approximately USD 60m annually to ADES' Group revenue, while maintaining margins and thereby further enhancing group earnings.

This transaction is expected to close in 1Q18, subject to the fulfilment of the conditions precedent as agreed in the PSA, including the renewal of current drilling multi-year contract terms.

The three ultra-shallow drilling rigs have each been in continuous service for more than 10 years, making them among the most in-demand assets in the region.

These rigs have recently been refurbished, with five-year inspections already implemented on two rigs and the third is due in 2018.

Once completed, the transaction will bring the number of the group's rigs under contract in the Arabian Gulf to six, further cementing ADES' position as a major low-cost operator of offshore drilling rigs in the region.

ADES and Nabors will collaborate to advance the integration and automation technology initiatives of Nabors Drilling Solutions and Canrig, including automating rig surface and downhole activities, within the offshore drilling space in the Middle East and beyond.

Specifically, the companies will set up a high level technical, operational and commercial taskforce with the objective of introducing the Nabors value proposition within the region utilising ADES rigs.

ADES shall, in due course, invite its shareholders to vote on a special resolution for the issuance and allotment of shares to be issued to Nabors in connection with this transaction.

The company is also finalising a separate PSA with Nabors to acquire two stacked offshore jack-up rigs in a similar cash and shares deal which, in line with the company's strategy of minimising risk, will be contingent on the awarding of specified drilling contracts.

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Publication:M2 EquityBites (EQB)
Date:Dec 21, 2017
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