E&P Helmerich & Payne Inc. (H&P) has agreed to acquire global drilling company KCA Deutag for approximately $1.97 billion in cash, according to a July 25 press release.

H&P expects the deal to expand its international footprint, particularly in the Middle East, and enhance its global onshore drilling role, H&P President and CEO John Lindsay said.

“Acquiring KCA Deutag gives H&P immediate scale in core Middle East markets in a way that would be challenging to replicate organically,” Lindsay said. “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 has significant operations in the Middle East, which generated two-thirds of the company’s 2023 operating EBITDA. KCA also operates onshore in South America, Europe and Africa and offshore contracts in the North Sea, Angola, Azerbaijan and Canada.

Through the transaction, H&P will increase its Middle East rig count to 88 rigs from 12 rigs; 71 of the rigs will be in Saudi Arabia, Oman and Kuwait, cementing the company as one of the largest rig operators in the region.

The deal also adds asset-light offshore contract business to H&P’s portfolio. The contract comprises 29 offshore platform rigs and a manufacturing and engineering business with three facilities.

H&P expects this transaction to grow its international land operations from ~1% on a standalone basis to ~19% on a pro forma basis based on calendar year 2023 operating EBITDA. Offshore operations are expected to grow from ~3% on a standalone basis to ~7% on a pro forma basis based on calendar year 2023 operating EBITDA.

H&P expects to close the deal prior to year-end 2024 and will be funded with cash on hand and new borrowings.

Morgan Stanley & Co. LLC acted as financial adviser to H&P, and Morgan Stanley Senior Funding Inc. is providing committed financing to H&P for the transaction.

Kirkland & Ellis LLP acted as legal adviser to H&P. Veriten served as independent strategic adviser, and Joele Frank, Wilkinson Brimmer Katcher served as investor relations adviser to H&P.

Moelis & Co and PJT Partners acted as financial advisers to KCA Deutag, and A&O Shearman acted as legal adviser.

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