Intelligence Oilfield Services

H&P goes global, agreeing to buy KCA Deutag for nearly $2B

byJoseph Gyure, Editor, Enverus Intelligence

Helmerich & Payne Inc. reached a definitive agreement to acquire Aberdeen-based KCA Deutag International Ltd. for $1.9725 billion cash, dramatically accelerating its international expansion. Tulsa, Oklahoma-based H&P is the most active drilling contractor in the U.S. land market, which continues to slump in contrast to the growth in international drilling, especially in the Middle East.

“Acquiring KCA Deutag gives H&P immediate scale in core Middle East markets in a way that would be challenging to replicate organically,” H&P CEO John Lindsay said in a July 24 release. “Furthermore, as there is very little geographic overlap, we view this transaction more than just acquiring assets, but rather acquiring operations with quality people.”

kca-deutag-deal-creates-a-globally-diversified-driller

H&P averaged 150 active U.S. rigs and 12 active international rigs in its fiscal 3Q24, which ended June 30, and in the current quarter will activate the first of seven rigs secured with long-term contracts with Saudi Aramco. Still, H&P’s international operations have paled against rival Nabors Industries, which in Q2 averaged 84 active international rigs and 75 in the U.S.

KCA Deutag would increase H&P’s Middle East rig count from 12 to 88

KCA Deutag brings a significant land drilling presence in the Middle East, which accounted for 71% of the company’s 2023 operating EBITDA. Through the transaction, H&P will increase its Middle East rig count from 12 to 88, 71 of which are in Saudi Arabia, Oman and Kuwait. KCA Deutag also operates rigs in South America, Europe and Africa.

In addition to its land operations, KCA Deutag has offshore management contract operations in the North Sea, Angola, Azerbaijan and Canada. The asset-light business has 29 offshore platform rigs under management and a manufacturing and engineering business with three facilities serving the energy industry.

The transaction is expected to close before YE24, subject to customary conditions and regulatory approvals. H&P said the acquisition will be funded with cash on hand and new borrowings. The company has already secured a $1.975 billion bridge loan facility from Morgan Stanley Senior Funding.

The acquisition will muddy up what has been a clean balance sheet. On June 30, the company had $201 million of cash and equivalents, $550 million in senior note debt and an undrawn $750 million credit facility.

Aiming to cut debt ratio from 1.7x at closing to <1.0x in a couple of years.

In addition to the cash consideration, H&P will assume KCA Deutag’s debt, which it expects to refinance at improved terms. It expects the combined company’s net debt to operating EBITDA ratio to be 1.7x at closing. Based on H&P’s projected cash flow generation and KCA Deutag’s $5.5 billion contract backlog, the company aims to get the ratio below 1.0x in a couple of years.

To help with its debt paydown, H&P will not award a supplemental dividend in FY25 while maintaining its regular dividend. For each quarter of FY24, H&P has been paying a supplemental dividend of $0.17/share on top of a regular dividend of $0.25/share. The final FY24 quarterly dividend payment, set for August, will include the supplement.

Despite little geographic overlap, H&P expects to realize $25 million in run-rate synergies by 2026, driven primarily by overhead reduction and procurement savings. H&P will remain headquartered in Tulsa with Lindsay remaining as CEO.

The acquisition spiced up H&P’s quarterly earnings announcement. For its fiscal Q3, H&P reported $698 million in revenue, up $10 million sequentially but down $26 million YOY. Net income was $89 million in fiscal Q3, compared with $85 million in fiscal Q2 and $95 million in fiscal 3Q23. H&P predicted it would exit FY24 with 147-153 contracted rigs in North America after finishing fiscal Q3 with 146.

Find more great news and exclusive data on the oilfield services sector in the latest issue of Oilfield Pulse

About Enverus Intelligence Publications

Enverus Intelligence Publications presents the news as it happens with impactful, concise articles, cutting through the clutter to deliver timely perspectives and insights on various topics from writers who provide deep context to the energy sector.

Picture of Joseph Gyure, Editor, Enverus Intelligence

Joseph Gyure, Editor, Enverus Intelligence

Joseph Gyure has covered midstream and oilfield services since 2017 and joined Enverus from PLS. He previously worked at ICIS, the Houston Chronicle, and the Waco Tribune-Herald. Joseph is a graduate of the University of Texas at Austin.

Subscribe to the Enverus Blog

A weekly update on the latest “no-fluff” insight and analysis of the energy industry.

Related Content

Enverus Press Release - Heightened natural gas price volatility expected amid supply and demand challenges
Oilfield Services
ByAdriana Bickford

In today’s oil and gas industry, standing out and securing visibility with operators has become increasingly challenging.  As traditional marketing channels lose their effectiveness, oilfield service providers are left looking for powerful ways to showcase their strengths and seize valuable...

Enverus Blog - Oil and gas procurement automation: End project delays and overspending
Operators
ByEnverus

Multilateral wells have transformed Canada's Clearwater and Lloydminster Mannville plays, among others, into some of the best resource plays in North America today.

energy-transition
Energy Transition
ByChris Griggs

With 2025 less than two months away, it's time to prepare yourself with key energy insights and the latest energy trends for the new year. The highlight anticipated Enverus e-book, slated for release in early January 2025, has the energy community buzzing. Today,...

Enverus Press Release - Enverus Integrates With Fendahl to Enhance Energy Trading and Risk Management Solutions
Analyst Takes Intelligence
ByAl Salazar, Enverus Intelligence® | Research (EIR) Contributor

The following blog is distilled from an interview on the CBC’s “The Eyeopener,” hosted by Loren McGinnis who interviewed Enverus Intelligence® Research’s very own Al Salazar. Click here to listen to the full radio segment.  In its recent World Energy...

bA
Oilfield Services
ByMac Graham

Make strategic supply chain decisions faster with data in a single source-to-pay platform In the world of oil and gas, the importance of data and efficient supply chain management cannot be overstated. These elements are the backbone of successful operations,...

two-women-shaking-hands
Analyst Takes Financial Services
ByAndrew Dittmar

Q3 2024 saw a significant dip in U.S. upstream M&A activity, with $12.4 billion in deals reflecting broader shifts in the energy market. Key trends include a geographic shift in deal focus, notably towards the Williston Basin, as well as...

nuclear-worker
Energy Transition
ByAmyra Mardhani

The rapid growth of AI has created a surging demand for data centers. Tech giants like Microsoft, Google and Amazon are seeking reliable, low-carbon electricity to power future data processing hubs.

risk-manager-sector
Trading and Risk
ByChris Griggs

Are you struggling to find reliable, transparent benchmarks for your energy trading and analytics? Do you often face challenges in accessing consistent pricing data that is compliant with industry standards?

Enverus Press Release - Returning to growth: US power demand forecast highlights impact of data centers, EVs and solar
Power and Renewables
ByJim Schumacker

The data center industry has undergone profound changes in recent years, spurred by the surge in digital services, advancements in technology and shifting energy strategies. According to Enverus Intelligence® Research, these factors are reshaping how data centers are planned, sited...

Let’s get started!

We’ll follow up right away to show you a quick product tour.

Let’s get started!

We’ll follow up right away to show you a quick product tour.

Sign up for our Blog

Register Today

Sign Up

Power Your Insights

Connect with an Expert

Access Product Tour

Speak to an Expert