Helmerich & Payne Inc. announced Thursday that it reached a deal to acquire KCA Deutag International Ltd. for $1.97 billion.
The acquisition of KCA Deutag, headquartered in Scotland, is described by H&P CEO John Lindsay as “historic and transformative” for the century-old Tulsa-based company.
“It accelerates our international expansion, particularly in the Middle East, and enhances the company’s global leadership in onshore drilling solutions,” Lindsay said.
The deal increases H&P’s rig count in the Middle East from 12 to 88 rigs, with additional operations in South America, Europe and Africa. KCA Deutag also has asset-light offshore management contract operations in the North Sea, Angola, Azerbaijan and Canada with “super major” customers.
Under the terms of the agreement, which has been unanimously approved by the H&P Board of Directors, H&P will acquire KCA Deutag for $1.9725 billion in cash. The transaction is expected to close before year-end if it clears regulators.
H&P said the transaction will be funded with cash on hand and new borrowings paid for through increased cash flows brought by its higher visibility in the global market. H&P also expects to refinance KCA Deutag’s existing debt at a lower cost of capital.
Morgan Stanley acted as financial advisor to H&P, and Morgan Stanley Senior Funding is providing committed financing to H&P for the transaction. Veriten served as independent strategic advisor and Joele Frank, Wilkinson Brimmer Katcher served as investor relations advisor to H&P.
Moelis & Co. and PJT Partners acted as financial advisors to KCA Deutag.
On the legal side, Kirkland & Ellis acted as legal advisor to H&P and A&O Shearman counseled KCA Deutag.
The Kirkland team was led by Houston partners Sean Wheeler, Debbie Yee and Camille Walker and UK corporate partner Stuart Boyd and associates Ray Aryal and Moose Sarfraz, all in London; and included debt finance partner Rachael Lichman in Houston; and tax partners Rob Sharpe in London on international tax matters and Michael Ehret in Munich on German tax matters.
The A&O Shearman team that advised KCA Deutag was led from London by M&A partner John Geraghty and M&A senior associate Cathy Gilmartin and included M&A partners David Broadley in London and Rory O’Halloran in New York; tax partner Tim Harrop and debt finance partners James Graham and John Kicken advised from London, along with Michael Chernick in New York.
Upon closing the transaction, H&P expects to have three primary operating segments: North America Solutions, International Solutions and Offshore Solutions. H&P’s North America Solutions segment will remain unchanged.
H&P will remain headquartered in Tulsa, Okla., and Lindsay will continue to serve as president and CEO. There will be no changes to the existing H&P board.
H&P expects the transaction to grow its international land operations from about 1 percent on a standalone basis to around 19 percent on a pro forma basis based on calendar year 2023 operating EBITDA. Offshore operations are expected to grow from about 3 percent on a standalone basis to 7 percent on a pro forma basis based on calendar year 2023 operating EBITDA.
Despite little geographic overlap, H&P expects to realize approximately $25 million in run-rate synergies by 2026, driven primarily by reduction in overhead and procurement savings.