Noble will get 'ever pickier' on M&A after Diamond deal: CEO

Oil driller Noble Corp (NE) is set to acquire Diamond Offshore Drilling (DO) in a stock-plus-cash deal valued at $1.6 billion. Noble Corp. CEO and President Robert Eifler sits down with the Market Domination team to talk more about the acquisition and Noble's drilling operations amid recent forecasts on crude oil (CL=F, BZ=F) demand.

"We drill for some of the largest companies in the world, and they have a lot of needs. And in order to meet those needs globally, we need to have enough assets so that we can spread our investments, around technology and innovation across a bigger base," Eifler says on the company's push to increase its scale.

For more expert insight and the latest market action, click here to watch this full episode of Market Domination.

This post was written by Luke Carberry Mogan.

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Video transcript

The oil and gas industry has seen a wave of deal making.

Now, the offshore oil drilling sphere is getting in on the action Noble Corporation among the latest names, I an acquisition, the offshore drilling contractor, putting in a cash and stock deal to acquire diamond, offshore drilling and noble corporations.

Eo Robert Iler is joining us now for a closer look at consolidation in the energy sector.

Robert, thank you for being here.

Uh It's great to be here.

Thank you so much for having me.

So you guys recently announced this acquisition $1.6 billion to buy diamond offshore.

Um and this would bring up the number of offshore rigs that you guys have.

Talk to me about sort of economies of scale in your business and this is not the first acquisition you've made in the past few years.

Why it has been a good idea to try to get bigger?

Yeah, it's great.

Thank you very much.

Um Look scale is really important right now.

Uh And I think throughout all of the energy space uh as well as as in services, investors are rewarding scale and our business specifically in offshore drilling.

Um we have uh a, a large number of very sophisticated customers across the globe.

So we drill for some of the largest companies in the world.

Uh and they have a lot of needs and uh in order to meet those needs globally, we need to have enough assets so that we can spread our investments uh around technology uh and in uh across a bigger base.

And so we've been on a journey here for the, the last few years where we've made uh three major mergers and acquisitions culminating this week with, with the diamond acquisition uh that really has given us uh uh a new level of scale that's letting us uh do a lot of really interesting things for our customers across the globe.

Robert, I, I am curious with this acquisition, any concern for regulatory risk, in, in your opinion?

Well, we, we've announced a closing date uh of uh first quarter next year and, and perhaps even a little bit quicker than that.

Uh And so, uh we're very confident around that timeline.

Of course, we will uh apply with uh uh a handful of regulators around the world.

Uh But uh this is still a very competitive uh business.

Uh It remains fragmented and uh we're, we're very confident around uh around the path forward.

Um As I mentioned earlier, Robert, this is not the first acquisition you've made.

It's not even the biggest one.

You bought a Maersk drilling back in 2022 after diamond you done or is there still room to, to grow after that?

Well, look what, what we said when we did the May's deal is uh we said that this is the transformative merger for us.

Uh and it really has been and I think, I think the results have proved that, but we also said that if we were to do a deal after that, uh that we would be very picky.

Uh And we would make sure that it was the exact right deal uh for, for our shareholders uh among a number of potential deals out there.

Uh And so I think when we announced this deal earlier this week, uh we've been extremely pleased with the results from that.

In fact, I think the entire sector traded up the day we announced it.

Uh and, and, and including ourselves, of course.

Uh So I guess what I would say is, um like, like any company, we will continue to look at things that are creative for our shareholders.

Uh But we will get ever pickier each time Robert, I wanna get your take on a headline uh that made some news here from the IE A saying global oil demand, they, they forecast gonna peak by 2029 and that's gonna be begin contract the following year.

They say as the us other non opec countries add to supply I, is that what you see, Robert?

Does that sound accurate to you.

Yeah, look.

What, what I would say is that uh for sure we see an expanding market uh for the next five plus years.

Uh And then, uh from there, it is extremely difficult to predict.

That's one of the unique features I think of the energy industry right now is that the range of predictions passed around 2030 particularly when you get out to 2045 or 2050 is massive.

You've got everything from OPEC and others.

Uh predicting that uh that, that oil demand could be up by 10 or 15% from today uh to uh other outcomes where it could be down at 25% of current.

Uh And so look, we're a service business.

Um We uh have a scale to, to, to last through cycle.

Uh And uh we have some of the best assets uh in the world in our fleet.

So we're positioned uh for whatever range of outcomes might come.

Uh But it is, it is uh remarkable just how wide the, the set of predictions is.

And there are some predictions as well that as we see growth in um the shale region in the US start to taper a little bit that we'll see more demand for offshore um exploration and production.

You know, I was taking a look at the offshore uh rig count just globally.

The as track by Baker Hughes and you know, it's rebounded, but we still see lower than where it was pre pandemic.

Do you think that in general you're gonna see more of an expansion in your industry as we see the demand for oil and gas persist and the need to look in different places to get it, uh kind of persists as well.

We do, we think uh we think we'll see demand increase particularly in, in the deep water segment of our business.

Uh All of the leading indicators for our business are up.

So our customers budgets have been increasing sequentially year on year.

Uh F I DS which is kind of a predictor, you know, sanction projects, which is a predictor of future years are up and are predicted to continue to go up.

You've got uh things like sub tree orders that, that show positive signs for the future and just looking more specifically at our own business, our backlog of tenders, our open tenders uh I think is the highest and it's been in 10 years.

Uh So we are seeing a return uh to offshore drilling uh And we are seeing a deep water uh increa uh get increased focus here.

Uh And, and we expect that to continue Robert.

Thanks so much for your time.

I appreciate it.

Well, it's great to be here.

Thank you very much for having me back.

Uh And especially on a really nice occasion like this week for us.

Yeah.

Well, we'll catch up with you again, maybe when the deal closes.

Thanks a lot.

Sounds great.

Thank you.