Through TheFLY's Eyes: Diamond, Noble, & Ensco
from Joseph Lazzaro of Theflyonthewall.com
Takeover Talk Surrounds Diamond Offshore, Noble Drilling, and Ensco
An old axiom is, “Where there’s smoke, there’s fire.”
In the Concrete Canyons of Wall Street, “smoke” is when several companies in a segment or sector start to move upward/downward, in unison, absent macroeconomic changes.
That was the case Friday with U.S. drillers Diamond Offshore (DO), Noble Drilling (NE), and Ensco (ESV) as talk that Norway driller SeaDrill was positioning itself for a possible acquisition of one of the three U.S. companies.
The smoke, specifically? All three U.S. drillers had moved up sharply by Friday at mid-day. Diamond surged $2.94 to $80.52, Noble rose $2.11 to $79.35 and Ensco climbed $1.78 to $53.64 - all on above-average volume. SeaDrill closed up NOK1 to NOK101.75 or to about $16.55.
The catalyst? SeaDrill shareholders were expected to vote Friday on a proposed NOK40B or $6.5B share issuance – money that could provide takeover-size capital for the Nordic driller. The company said it expected to announce late Friday whether the share issuance had won approval.
One analyst sensed that Seadrill was positioning itself: "They’ve said for a long time that they want to be a consolidator in the industry, (so) if it makes sense for shareholders, they will buy something," a Norwegian equity analyst told The Royal Gazette Friday.
Meanwhile, investment firm Morgan Keegan commented Friday that SeaDrill remains active in the industry, and, in the firm’s view, following an offering SeaDrill would be capable of buying any deepwater driller, including Diamond, Noble or Ensco.
Jon Olav Osthus, SeaDrill’s director of contracts, confirmed that SeaDrill has interest as an acquirer, but was opaque beyond that: "We are looking into all kinds of projects on a continuous basis," Olav Osthus told The Gazette. "Whatever is feasible (strategically) we are considering," he added