Norwegian drilling company Awilco has fallen prey to COSL, China’s largest offshore oil services group, in a deal worth $2.5billion.
As far as can be ascertained, this is the first time a European drilling firm has been stalked and captured by cash-rich Chinese interests and may be a portent of further such transactions. However, while money is not an issue, finding targets of the right quality is more difficult.
That said, snapping up Awilco gives China Oilfield Services Ltd a foothold in north-west Europe, potentially introducing unwelcome competition to existing North Sea drilling, drilling-related and offshore support vessel players. COSL is an arm of China’s top offshore oil&gas producer, CNOOC, and will pay 85 Norwegian crowns per share for the Oslo-based company in what will be the fourth largest cross-border acquisition by a Chinese company in this sector, according to Thomson Reuters.
The price is an 18.7% premium over Awilco’s July 4 closing price and 42% above where it traded before May 30, when Awilco said a third party had expressed an interest. Buying Awilco expands COSL’s overseas operations, which accounted for just 18% of the state-run company’s revenue last year. China Oilfield’s sales rose 42% last year, to 9.01billion yuan ($1.3billion).
The deal allows China Oilfield to bring the number of drilling rigs it owns to 22 from 15, with operations in Europe and Asia. It also gives it access to international management expertise and technology.
“Our aim is to become an international oilfield services company with strong competence in global markets by 2010 … that cannot be achieved just by organic growth,” China Oilfield CFO Zhong Hua said at a press conference, adding that the company was keen to make more acquisitions.
Zhong said the Awilco deal would help China Oilfield enter the high-end North Sea drilling market and further consolidate its position in south-east Asia. Awilco’s board has apparently unanimously decided to recommend the offer. The combination of COSL and Awilco will create the world’s eighth largest rig fleet, consisting of 34 operated rigs (including rigs under construction) with operation and growth opportunities in most major international markets.
The Norwegian company said its modern high-specification rigs and cutting-edge technology for offshore drilling is a good strategic fit for COSL and that the offer is expected to close in September this year. COSL is a leading international integrated oilfield service company providing services to each phase of offshore oil and gas exploration, development and production. Its four core business segments are drilling services; well services; marine support and transportation services, and geophysical services.
Besides its fleet of rigs, the Chinese group also owns and operates among the largest and most diverse fleets in offshore China, including 75 support vessels and four oil tankers, five chemical tankers, eight seismic vessels and four geotechical survey vessels. It also has a vast array of modern facilities and equipment for wire-line logging, drilling fluids, directional drilling, cementing, well completion, acidulation and well work-over services.