Credit Suisse Analyst Gregory Lewis says he envisions Noble Corporation (NE) as a likely acquirer of offshore drillers. But, he says he doesn’t expect much M&A activity in the sector this year.
“I think there is the opportunity for consolidation in the offshore drilling space and in the offshore supply boat sector, but I think it’s more of a longer-term event. I don’t think it is a 2014 event,” Lewis says. “But I think it makes sense given the synergies and economies of scale in both industries. The driver of consolidation could be unlocked as some companies pursue strategic corporate initiatives that could increase their valuation.”
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Lewis says Noble Corporation will be in a better position to acquire offshore drillers after the company completes the process of spinning off what he calls “lower-quality assets.”
“Spinning off the lower-end assets is something other companies are doing as well. There is a company called Shelf Drilling, which bought lower-end assets from Transocean (RIG) in late 2012,” Lewis says. “So yes, there is an appetite by some players for lower-tier or standard equipment. In a good market all equipment works; it’s in a more challenged market where the lower-generation equipment goes idle.”
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