Oman: US firm acquires drilling services contractor KCA Deutag for $1.97bln

MUSCAT: Prominent US based drilling services provider Helmerich & Payne (H&P) has confirmed that it has acquired leading drilling services contractor KCA Deutag International Limited in a deal worth $1.9725 billion. The move will position Oklahoma-based H&P as one of the biggest onshore drilling operators globally, particularly in the Middle East, where KCA Deutag has enjoyed a substantive presence over the last several decades.

In the Sultanate of Oman, KCA Deutag has been operating for well over 60 years, providing drilling related services to a number of leading oil and gas producers, notably Petroleum Development Oman (PDO), the country’s biggest oil and gas company. KCA Deutag has also invested in a local rig manufacturing and servicing entity as part of its contribution to in-country value (ICV) development in the domestic drilling services space.

Under the terms of the agreement, H&P will acquire Scotland-headquartered KCA Deutag International Limited for $1.9725 billion in cash. The transaction is expected to close prior to calendar 2024 year end, subject to customary closing conditions and regulatory approvals, the two companies announced in a statement.

Established in 1920, H&P is a key player in the design, fabrication and operation of high-performance drilling rigs in conventional and unconventional plays around the world. H&P also develops and implements advanced automation, directional drilling and survey management technologies.

KCA Deutag, with over 135 years of experience, operates a global network spanning 26 countries. The company currently owns or operates a total of 167 drilling rigs across the Middle East, Europe, Africa, Caspian Sea, Latina America and Canada, overseen by a workforce of around 11,000 people globally.

As the result of the acquisition, H&P is set to ramp up its presence in the Middle East in particular, which accounts for around 70 per cent of KCA Deutag’s operating EBITDA in a calendar year. H&P’s rig count in the Middle East will soar from 11 to 88 presently, 71 of which are in Saudi Arabia, Oman and Kuwait.

“KCA Deutag’s assets and operations will add resilient revenues, providing greater earnings visibility and cash flow generation. As a result, we expect to generate sizeable incremental cash flows and are confident this transaction will deliver near- and long-term growth and value creation for H&P shareholders,” said John Lindsay, President and CEO of H&P. “Once completed, this transaction is expected to deliver multiple growth opportunities for our people and customers while facilitating value realization for our investors,” CEO of KCA Deutag, Joseph Elkhoury, added.

In Oman, KCA Deutag is currently executing drilling services contracts worth hundreds of millions of dollars. In 2022, the company said it had secured a 10-year contract from PDO for the provision of drilling services with four new locally-built, highly automated rigs. The ten-year contract, valued at $550 million, came with options to extend for a further two years.

The high-tech rigs, constructed by Oman-based International Drilling Technology Co (IDTEC), majority owned by the KCA Deutag Group, are the first of their kind to be built locally. Since that announcement, KCA Deutag has won several other drilling services contracts in Oman.