KCA Deutag to acquire Dalma Energy’s Omani, Saudi Arabian businesses

KCA Deutag (KCAD) has entered into an agreement with the shareholders of Dalma Energy to combine their respective businesses through the acquisition by KCAD of Dalma’s Omani and Saudi Arabian businesses. Consideration for the acquisition, based on an enterprise valuation of $660 million, will consist of $100 million of cash and shares to be issued to Dalma’s shareholders.

KCAD had revenues of over $1.16 billion and EBITDA of $219 to $224 million in the year ending 31 Dec 2017. Dalma had revenues of $312 million and EBITDA of $110 million in the year ending 31 December 2017.

Upon completion, the KCAD group as enlarged by the Dalma Business will continue to operate under the KCA Deutag brand name and will have approximately 9,700 employees.

Strategic Highlights

• Consolidates KCAD’s position as an international drilling and engineering contractor;
  • Enlarged KCAD group will own and operate a fleet of 83 land rigs globally.
• Strengthens KCAD’s core Middle Eastern operations and provides KCAD entry to the substantial Saudi Arabian onshore drilling services market;
  • 2^nd largest international owner and operator of 46 land rigs in the Middle East, of which 28 are in Oman and nine in Saudi Arabia.
• Areas for potential cost synergies have been identified, and the enlarged KCAD group will be working towards delivering these efficiency improvements;
  • The acquisition is expected to generate more than $10 million of run-rate cost savings synergies per annum for the enlarged KCAD group.
• Creates an excellent platform to capture growth opportunities in the enlarged group’s major markets.
• Provides enhanced opportunities for Bentec, the group’s drilling rig and oilfield equipment manufacturer.
• Adds $1.1 billion of backlog with blue chip clients to an already healthy KCAD order book of $5.2 billion (as of 1 February 2018).

Norrie McKay, CEO of KCAD, said, “The acquisition of Dalma’s operations in Saudi Arabia and Oman will significantly strengthen our foothold in the Middle East and provide us with a stronger platform to develop and grow our business in what is an exceptionally attractive region. Dalma’s operations are an excellent strategic fit, not only consolidating our position in Oman as the country’s leading owner and operator of onshore drilling rigs but also enabling us to offer our operational expertise in the substantial Saudi Arabian onshore drilling market, which has been a key target for KCAD.”

Terms of the acquisition

Under the terms of the agreement, as consideration for the acquisition, Dalma’s shareholders will receive $100 million in cash and an equity shareholding of approximately 22%. in the enlarged KCAD group, valued at $220 million. This will be subject to final adjustment on completion of the acquisition which is currently expected to occur in the second quarter of 2018, subject to the fulfillment of certain conditions precedent. The enlarged KCAD group expects to keep KCAD’s existing financing in place and finalize $425 million of financing for the acquisition, which may include raising new debt in the loan or bond markets and/or amendments/extensions to existing financing.

Dalma’s shareholders will have the right to nominate two representatives to the board of directors of KCAD at group level. In order to ensure a smooth transition, it is contemplated that all operational Dalma staff deemed critical to ensure the continuation of the Dalma Business post-closing will transfer to the combined group.