| NEW YORK/SAN FRANCISCO
NEW YORK/SAN FRANCISCO After being jilted in its half-decade-long courtship of offshore oil driller Pride International Inc PDE.N, Seadrill Ltd (SDRL.N) should not have any trouble finding a new partner.
Seadrill was still trying to woo Pride when that company agreed in February to a $7.3 billion union with Ensco Plc (ESV.N), according to a recent filing by Ensco with U.S. regulators.
A combined Ensco/Pride would have the second-largest fleet after Transocean Ltd RIGN.VX(RIG.N) and would also challenge Seadrill for the sector's number-two spot by market value.
But Norway-listed Seadrill could nurse its wounds with another partner, either as a buyer or seller, bankers said.
According to the filing, Seadrill first approached Pride about a possible deal in July 2005. It acquired a stake nearing 10 percent in the U.S. driller, although never quite made an offer.
Still, as recently as the day the Ensco deal was announced, Seadrill told Pride it still wanted to make it happen.
That spurred some arbitragers and investors to speculate that Seadrill might launch a rival bid, noting that Seadrill shares are up about 10 percent since it suggested it could make a cash-and-stock bid for Pride in November.
"I think they're going to keep all their options open until right before the shareholder vote and then make a decision," one investor said. "But they've had a shot at this forever."
Yet Brian Uhlmer, an analyst at Global Hunter Securities, felt that Pride investors were unlikely to abandon Ensco for heavily indebted Seadrill.
"Because if we're looking at using stock as currency, I don't think that the Pride shareholders have the same philosophy as the people that own Seadrill, who believe in much higher leverage ratios," Uhlmer said.
A Pride spokeswoman said the date of the shareholder vote on the Ensco offer has not been fixed.
"HIGH-FIVES AND CRISTAL" FOR SEADRILL
Bankers agree a Seadrill counter-offer is unlikely because it would have difficulty topping the 21 percent premium Ensco offered, apart from the fact Seadrill will collect a tenth of what Ensco pays for Pride anyway.
"I think the Seadrill guys were high-fiving each other and opening bottles of Cristal when Ensco came in. They got a premium on their stake," said one industry investment banker, who could not be named because he was not cleared to speak about the matter.
At the end of 2010, Seadrill had more than $900 million of cash on hand. Moreover, the company suggested to Pride it would be able to put up to $2.5 billion in cash in a possible deal, according to the filing. Add $700 million if Ensco completes the Pride deal -- cash one banker expected the company would want to spend on something else -- and Seadrill is well positioned to find a new partner.
"If you look at that group of companies, they are acquisitive by nature -- they've done more deals than anybody else has over the last five years," he said.
Run by billionaire John "Big Wolf" Fredriksen, who is known more as a master financier than a driller, Seadrill has made no secret of its desire to grow its fleet through acquisitions.
Seadrill has had a New York Stock Exchange listing since last April, signaling its intent to chase U.S. companies. Then in September, Fredriksen said he was targeting smaller companies with four to six deepwater rigs.
Among U.S. players, Atwood Oceanics Inc (ATW.N) would fit the bill, but analysts see an impediment to any deal in the stake, which now stands at 12 percent, that onshore driller Helmerich & Payne Inc (HP.N) has held in Atwood for more than four decades.
Other possibilities Uhlmer sees would be Aker Drilling AKD.OL, which completed an initial public offering last month in Oslo, or the offshore drilling division of Denmark's Maersk MAERSKb.COi -- owner of four deepwater rigs and 12 jackups.
Uhlmer also saw the potential for a deal with Houston-based Pacific Drilling, which has interests in six ultra-deepwater rigs and has indicated it is also looking at an IPO.
"You could cash out for the same amount," he said.
Mike Breard, with Hodges Capital Management in Dallas, said broader economic conditions made the timing for buying a rig contractor better than ever, since oil prices above $100 per barrel ensured a quicker recovery in rig earnings.
"The easiest way to spend more money is to drill with it," Breard said. "Day rates are probably going to be much higher by the end of this year than anybody suspects.
"At $100 oil or $80 oil, it doesn't matter what the price of the rig is."
Seadrill was not available for comment.
(Reporting by Mike Erman and Braden Reddall; editing by Andre Grenon)