Oilfield services firm Helmerich & Payne Inc will acquire Britain's KCA Deutag International for $1.97 billion in cash, making the combined company one of the biggest rig providers in the Middle East, the companies said on Thursday.
Oilfield service providers have in recent quarters bet on growth overseas as well as on deepwater projects to offset weak demand in North America, which has seen a wave of mergers among producers and lukewarm natural gas demand.
The deal will increase H&P's Middle East rig count to 88 from 12. The company's shares jumped about 12% in morning trade.
"This transaction gives H&P immediate scale for (the) Middle East market in a way that would be challenging to replicate organically," H&P CEO John Lindsay said on a call with analysts.
It also expects to realize about $25 million in savings by 2026.
The transaction, which will be funded with cash on hand and new borrowings, is expected to close before the end of the year.
RBC Capital Markets analysts said the deal accelerates H&P's international growth strategy but would also likely lower near-term shareholder returns.
The deal will also immediately add to H&P's free cash flow per share.
Industry insiders have said that improving balance sheets and margins could help kickstart dealmaking in the oilfield services sector.
Top U.S. oilfield services firm SLB made a nearly $8 billion bid for ChampionX earlier this year.
Offshore rig contractor Noble last month agreed to buy smaller rival Diamond Offshore Drilling in a cash-and-stock deal valued at $1.59 billion.
(Reuters - Reporting by Sourasis Bose and Mrinalika Roy; Editing by Sonia Cheema and Maju Samuel)
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