Diamond Offshore's stock gets a big boost from Noble's $1.6 billion buyout bid

By Barbara Kollmeyer

Diamond's heads for its biggest one-day gain in 15 months after driller Noble's cash-and-stock bid

Consolidation in the oil industry continues, with offshore drilling contractor Noble Corp. on Monday announcing a cash-and-stock deal to buy rival Diamond Offshore Drilling Inc.

Diamond (DO) shareholders will receive 0.2316 Noble shares (NE) and $5.65 in cash for each Diamond share, in a deal valued at $15.52 per share when using Friday's closing price, or about $1.6 billion overall.

The deal, which has been unanimously approved by both company's boards, represents an 11.4% premium to Diamond's closing share price of $13.93 on June 7. At the deal's closing, expected by the first quarter of 2025, Diamond shareholders will own 14.5% of Noble's, the companies said in statement.

Shares of Diamond shot up 10% toward a nine-month high in morning trading, and were on track for their biggest one-day gain in 15 months. And Noble's stock gained 4.2%.

Year to date, Diamond shares have rallied 17.9% and Noble's stock has lost 7.8%. In comparison, the Energy Select Sector SPDR ETF XLE has tacked on 8.3% this year while the S&P 500 index SPX has advanced 12%.

Noble, based in Texas along with Diamond, said the deal will add four 7th generation drillships and one of the world's most high-specification harsh environment semisubmersible rigs to its fleet.

"Additionally, Diamond's five conventional deep water and midwater rigs have averaged above 85% utilization over the last three years and currently have strong forward contract coverage," said Noble's president and chief executive officer, Robert Eifler. Diamond is considered a leading player in deep-water drilling.

"Supported by Diamond's $2.1 billion of backlog and $100 million of anticipated cost synergies, we expect the transaction to be immediately accretive to our free cash flow per share and contribute to accelerated growth in our return of capital to shareholders," Eifler said.

Noble said its board of directors has also approved a 25% boost to its quarterly dividend to 50 cents per share, starting with the dividend that will be paid in the third quarter.

Consolidation within oil services, as well as refining and other parts of the industry has been expected after ConocoPhillips' (COP) $17.6 billion deal for Marathon Oil (MRO) last month. That tie-up, to some, marked the last of the big major oil deals that have come in the wake of COVID, when the industry was struggling to survive.

Read: ConocoPhillips is buying Marathon Oil for $17.5 billion in what may be the last big oil deal

-Barbara Kollmeyer

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

06-10-24 1043ET

Copyright (c) 2024 Dow Jones & Company, Inc.