Tender rig specialists Atlantica Tender Drilling and Energy Drilling are planning to merge into what is expected to become the second largest tender drilling contractor. The two companies on Friday signed a letter of intent for the merger.

“The contemplated transaction will create a stronger company with improved capabilities and geographical presence, a starting point for further growth and consolidation in the drilling industry,” the duo said in an announcement.

Atlantica’s semi-submersible tender drilling rigs operate in the Atlantic Ocean, While, Energy Drilling operates barge tender drilling rigs offshore South-East Asia, and has a newbuild semi-submersible tender drilling rig ready for delivery.

“The combined company will be the second largest tender drilling contractor, with five rigs representing 17% of the tender drilling market. The fleet will be the most modern among competitors, with an average age of 5 years,” the company statement further reads.

According to data on Bassoe Analytics tool, which has recently launched a database for tender rigs, Sapura Energy is currently the world’s largest tender rig manager with 16 units, half of which have been cold stacked.

According to the announcement, operations are backed by solid backlog against Petrobras and Total and a strong track record operating for Thai national oil company PTTEP. For the year ended 2018, the combined company had revenues of $211 million and an EBITDA of $114 million.

“This merger represents the starting point for an attractive growth strategy targeting to consolidate and expand in the drilling industry. Atlantica and Energy Drilling have the right assets, backlog and balance sheet to be a forward-leaning partner in the industry”, says Kerry Kunz, CEO of Atlantica.

“The two companies have performed drilling operations in multiple geographical locations for top clients such as Petrobras, Total and PTTEP. Our goal is to grow our combined company to provide our clients with cost-effective, productive and safe drilling operations”, says Marcus Chew, CEO of Energy Drilling.

The transaction is expected to be completed early third quarter 2019, subject to shareholder approval, refinancing of existing credit facilities, satisfactory due diligence, and other customary conditions.

The boards of directors of both companies have unanimously supported the proposed merger. The two companies have said that the proposed transaction has also received support from the majority of shareholders in Atlantica and Energy Drilling.

Illustration: EDrill-3 rig owned by Energy Drilling – Image source: Energy Drilling