The broader trend of consolidation in the U.S. energy sector continues. Shares of Diamond Offshore (NYSE:DO) are up by 8% in the premarket session today after the contract drilling services provider agreed to be acquired by Noble Corp. (NYSE:NE) in a cash and stock deal.
The Details of the Deal
Under the deal, investors in Diamond will receive 0.2316 Noble shares plus $5.65 per share for each DO share they hold. The consideration represents an 11.4% premium over DO’s closing share price on June 7.
The deal combines two leading contract drilling solutions providers in the U.S., with complementary fleets and customer coverage. The combined entity will have a strong order backlog of $6.5 billion and a fleet of 41 rigs. Furthermore, the transaction is expected to lead to $100 million in annual cost synergies and to be immediately accretive to Noble’s free cash flow per share.
The transaction is anticipated to close by Q1 2025. Upon closing, investors of Diamond will own around 14.5% of Noble’s outstanding shares.
And Noble’s Juicy Interim Dividend
Importantly, Noble has announced an interim dividend of $0.50 per share. This distribution is on top of the $0.40 per share dividend the company announced previously. Noble’s interim dividend is payable on September 26 to investors of record on September 12.
Is Diamond Offshore Drilling a Buy, Sell, or a Hold?
Today’s price gains further add to the nearly 16% jump in Diamond Offshore’s share price over the past six months. Overall, the Street has a Moderate Buy consensus rating on the stock, alongside an average DO price target of $22.
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