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KCA Deutag and Dalma enter agreement to combine to form enlarged drilling and engineering group creating an excellent platform to capture growth opportunities in major markets
Prior to publication, this document contained inside information under Regulation (EU) 596/2014 on market abuse.
KCA Deutag ("KCAD"), a leading global drilling and engineering contractor, today announces that it has entered into an agreement with the shareholders of Dalma Energy LLC to combine their respective businesses through the acquisition by KCAD of Dalma's Omani and Saudi Arabian businesses (the "Dalma Business"). Consideration for the acquisition, based upon an Enterprise Valuation of $660 million, will consist of $100 million of cash and shares to be issued to Dalma's shareholders valued at $220 million.
KCAD had revenue of over $1.16 billion1 and EBITDA of $219-224 million in the year ending 31 December 2017. The Dalma Business had revenue of $3122 million and EBITDA of $110 million in the year ending 31 December 2017.
Upon completion, the KCAD group as enlarged by the Dalma Business (the "Enlarged KCAD Group") will continue to operate under the KCA Deutag brand name and will have approximately 9,700 employees.
Norrie McKay, CEO of KCAD, said: "The acquisition of Dalma's operations in Saudi Arabia and Oman will significantly strengthen our foothold in the Middle East, and provide us with a stronger platform to develop and grow our business in what is an exceptionally attractive region.
Dalma's operations are an excellent strategic fit, not only consolidating our position in Oman as the country's leading owner and operator of onshore drilling rigs but also enabling us to offer our operational expertise in the substantial Saudi Arabian onshore drilling market, which has been a key target for KCAD."
Terms of the acquisition
Under the terms of the agreement, as consideration for the acquisition, Dalma's shareholders will receive $100 million in cash and an equity shareholding of approximately 22 per cent. in the Enlarged KCAD Group, valued at $220 million. This will be subject to final adjustment on completion of the acquisition which is currently expected to occur in the second quarter of 2018, subject to the fulfillment of certain conditions precedent. The Enlarged KCAD Group expects to keep KCAD's existing financing in place and finalise $425 million of financing for the acquisition, which may include raising new debt in the loan or bond markets and/or amendments/extensions to existing financing.
Dalma's shareholders will have the right to nominate two representatives to the board of directors of KCAD at group level. In order to ensure a smooth transition, it is contemplated that all operational Dalma staff deemed critical to ensure the continuation of the Dalma Business post-closing will transfer to the Combined Group.
Financial effects of the acquisition
KCAD is holding its Q4 2017 Earnings Call on Thursday 8 March when audited financial information for KCAD and the Dalma Business will be available. KCAD will provide further information regarding the key financial effects of the acquisition, which is expected to have a deleveraging effect, at that time. Such information will also be made available on the KCAD website.
Overview of the Enlarged KCAD Group
The combination of KCAD and the Dalma Business will join together two leading onshore drilling contractors with market leading knowledge and operational experience in the Middle East.
Established in 1888 KCAD has a long history of operating both onshore and offshore in various locations around the world including Africa, Europe, Russia, The Caspian Sea and South East Asia.
In all of these locations KCAD is committed to not only delivering value to local communities, but also developing local skills and providing employment opportunities.
The KCAD group established its land drilling presence in Oman in 1964, and currently owns and operates eight rigs in the country, five of which were constructed between 2014 and 2015. The transaction will add 29 high quality land rigs to the group's portfolio, twenty in Oman and nine in Saudi Arabia.
As a result, the Enlarged KCAD Group will be one of the largest owners and operators of land rigs in the Middle East. This enhanced scale should enable the group to deliver operational gearing, as well as potential cost synergies that have been identified.
KCAD's drilling rig and oilfield equipment manufacturer, Bentec, has a substantial manufacturing facility located in Nizwa (operating as IDTEC), which can easily service the market in the Middle East, and in Oman in particular.
In connection with the transaction Allen & Overy acted as legal advisor to KCA Deutag.
King & Spalding acted as legal advisor to the shareholders of Dalma in connection with the transaction.
Visit source siteKCA DEUTAGDalma EnergyDrillingJVjoint ventureKCADSaudi Arabia