TULSA, Okla. - Helmerich & Payne, Inc. (NYSE: HP (NYSE:HPQ)), a U.S.-based drilling contractor, has announced the definitive agreement to acquire KCA Deutag International Limited for $1.9725 billion in cash. This strategic move is set to significantly expand Helmerich & Payne's footprint in the Middle East, increasing its rig count in the region from 12 to 88 and positioning the company as a leading rig provider in the Middle East market.
The acquisition of KCA Deutag, a global drilling company with substantial operations in the Middle East, is expected to contribute to Helmerich & Payne's diversification and scale. The deal adds complementary offshore management contract operations and manufacturing and engineering operations in Europe and the Middle East to Helmerich & Payne's portfolio.
John Lindsay (NYSE:LNN), President and CEO of Helmerich & Payne, expressed confidence that the transaction will provide substantial incremental cash flows and drive growth and value creation for shareholders. He emphasized the acquisition's alignment with the company's international expansion goals, particularly in the Middle East.
The transaction, unanimously approved by the Helmerich & Payne Board of Directors, is anticipated to be immediately accretive to cash flow and free cash flow per share.
The deal is scheduled to close prior to the end of the calendar year 2024, subject to customary closing conditions and regulatory approvals. Helmerich & Payne plans to fund the acquisition with cash on hand and new borrowings and intends to refinance KCA Deutag’s existing debt.
Following the completion of the transaction, Helmerich & Payne will reorganize its operations into three primary segments: North America Solutions, International Solutions, and Offshore Solutions, with no changes to the existing Board of Directors. The company also expects to realize approximately $25 million in synergies by 2026, primarily through overhead reductions and procurement savings.
This acquisition is a significant step in Helmerich & Payne's strategic transformation, as it seeks to leverage its operational processes and practices to optimize operational excellence for customers on a global scale. The information for this article is based on a press release statement.
Helmerich & Payne, a key figure in the oil and gas drilling industry, had its stock target reduced by an investment firm due to a revised EBITDA forecast for 2025. The firm recalibrated the price target to $39.00, down from $44.00, while maintaining a Neutral rating on the company's stock. The new target is based on 5 times the projected 2025 enterprise value to EBITDA ratio, assuming an EBITDA of $844 million, net debt of $352 million by Q2 2024, and 99 million fully diluted shares.
InvestingPro Insights
As Helmerich & Payne (NYSE: HP) gears up for its strategic acquisition of KCA Deutag International Limited, the financial metrics from InvestingPro paint a promising picture for investors. With a market capitalization of $3.73 billion and a revenue growth over the last twelve months (as of Q2 2024) sitting at 2.93%, the company shows a steady increase in its financial capacity. This growth is particularly relevant as it aligns with Helmerich & Payne's expansion goals and its ability to fund the cash acquisition of KCA Deutag.
InvestingPro Tips highlight the company's robust financial health, noting that Helmerich & Payne trades at a low Price-to-Earnings (P/E) ratio of 11.61 relative to near-term earnings growth, suggesting a potentially undervalued stock in light of its future earnings potential. Additionally, the company's stock is characterized by low price volatility, providing a degree of stability for shareholders amidst the acquisition process. These insights suggest that Helmerich & Payne is positioned to manage this significant transaction effectively, maintaining shareholder value and potentially enhancing it through strategic growth.
For investors looking for deeper analysis and additional insights on Helmerich & Payne, InvestingPro offers a range of tips that could further inform investment decisions. There are 9 additional InvestingPro Tips available, which can be accessed by visiting https://www.investing.com/pro/HP. For those interested, use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, unlocking a wealth of data and expert analysis to guide your investment strategy.
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