On Monday, Transocean Ltd announced the acquisition of Valaris Ltd. for $5.8 billion. The deal marks a new chapter in the offshore drilling industry. Soon, only two U.S. publicly owned offshore drilling contractors will remain – Transocean and Noble Corp. The news was not a complete surprise, as the challenges of operating in the international offshore drilling market force companies to seek scale and operating efficiencies.
Valaris had an interesting history, full of high-profile and often colorful industry executives. We had the good fortune of knowing and learning from many of them. We actually worked for one of Valaris's building blocks in its formative days and for one of the industry’s great leaders. Seeing Valaris enter the next chapter of its history is somewhat sad but understandable, as the demands of international drilling and the need to deal with massive state-owned and independent international oil companies are realities of the business today.
Here is a brief history for those unfamiliar with Valaris. The roots of the company go back to 1975, when John Blocker, a senior oil services executive with Dresser Industries, left the company and purchased Choya Energy, a six-rig land driller based in Alice, Texas. The name was changed to Blocker Energy, and the company became public in 1980. Not long after, the downturn in oil prices and the overleveraged balance sheets of drillers and oil service companies led to many bankruptcies across the industry.
In 1983, Blocker Energy avoided bankruptcy by restructuring its debt, giving the banks 64% ownership of the new company in exchange for forgiving $240 million in debt. The six-rig company expanded to 24 rigs by 1984.
The banks sold their ownership interest to Fort Worth investor Richard Rainwater. He had previously been the financial guru for the Sid Richardson family money, left by the Texas multi-millionaire oilman. Rainwater took control of Blocker Energy and installed Carl Thorne, a former senior executive of SEDCO, the Dallas-based international drilling company founded and run by Bill Clements and his son, Gill. SEDCO had earlier been sold to Schlumberger Ltd.
In 1987, Blocker Energy was renamed ENSCO (Energy Service Company), and the company moved its headquarters from Houston to Dallas in 1990. We joined ENSCO that year, working with Cris Gaut, CFO, and Thorne. During the next several years, ENSCO pursued the purchase of Penrod Drilling, owned by the Hunt brothers, children of wildcatter H.L. Hunt.
In 2010, ENSCO moved to London, and the following year, it purchased Pride International, another drilling company with an interesting history. Founded in 1966, it was acquired by DeKalb Corp. in 1978 and was spun out as a public company a decade later. It acquired the largest driller in Argentina, and a French land and offshore driller, Forasol-Foramer. It spun off its land drilling operations, purchased 12 rigs from Noble Corp. in 1997, and purchased Marine Drilling in 2001. In 2009, Price spun off Seahawk Drilling, which had a fleet of 20 jackup rigs.
CONSOLIDATION
In 2017, ENSCO acquired Atwood Oceanics for $860 million. John Atwood founded the company in 1968, and it began operations in 1970.
In 2019, ENSCO and Rowan Drilling merged and created Valaris. Rowan was known for its long-time CEO, Bob Palmer, a giant in the offshore drilling industry. The merged company was able to pre-arrange a bankruptcy in 2020 and emerged as a strong company the following year.
Now the next chapter is unfolding. For those of us with long histories in the offshore drilling industry, we understand how significant the Valaris/Transocean merger is.
