On Tuesday, Barclays (LON:BARC) reaffirmed its Overweight rating on Noble Corporation (NYSE:NE), with a steady price target of $59.00. Noble Corporation recently announced its intention to purchase Diamond Offshore Drilling Inc (OTC:DOFSQ). (DO) in a transaction that includes both cash and stock, offering approximately an 11% premium over the closing price of DO shares last Friday.
The acquisition is expected to provide Noble Corporation with a combined fleet of 41 rigs, which includes 28 floaters and 13 jackups, and notably features 15 dual BOP 7G drillships, creating what is considered the industry's top tier one drillship fleet.
The analyst from Barclays views the transaction positively from a valuation standpoint, especially considering the strong contract coverage through 2025 that DO brings to the table, along with the significant EBITDA increase anticipated from recent contract wins.
From a financial perspective, assuming the merged entity trades at Noble Corporation's pre-deal 2025 EBITDA multiple of 4.8x, the deal could imply a pro forma equity value of approximately $44 per share. This would represent an uplift of around 4% from Noble Corporation's last closing price on Friday of $42.60 per share.
The closing of the deal is expected to occur between the fourth quarter of 2024 and the first quarter of 2025. Barclays has indicated that it does not foresee any significant regulatory challenges or hindrances to the completion of the deal, despite some operational overlap of drillships in the U.S. Gulf of Mexico (GoM).
The acquisition comes at a time when the offshore drilling sector is experiencing an upcycle, and the combined company's enhanced fleet is poised to capitalize on this market phase. Noble Corporation's strategic move is set to solidify its position in the offshore drilling market with a more robust and diverse rig portfolio.
InvestingPro Insights
In light of Noble Corporation's (NYSE:NE) recent move to acquire Diamond Offshore Drilling Inc., real-time data from InvestingPro provides a clearer picture of the company's financial health and market position. Noble Corporation is currently trading at a P/E ratio of 13.43, which, when adjusted for the last twelve months as of Q1 2024, stands at a more attractive 12.17. This positions the company favorably, trading at a low P/E ratio relative to near-term earnings growth. Additionally, the company's revenue growth is robust, with a 45.87% increase over the last twelve months as of Q1 2024, indicating a strong upward trajectory.
From a liquidity standpoint, Noble Corporation's liquid assets exceed its short-term obligations, providing financial flexibility and stability. Furthermore, with analysts predicting profitability for the year and a track record of profitability over the last twelve months, the company appears to be on solid ground. According to InvestingPro Tips, Noble Corporation operates with a moderate level of debt, which is a favorable sign for investors concerned about financial leverage.
For those considering an investment in Noble Corporation or seeking to deepen their analysis, InvestingPro offers additional insights. There are more InvestingPro Tips available, which can be accessed by visiting the company's page on Investing.com. To enhance your investment research, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. These tips could provide valuable guidance in understanding Noble Corporation's performance and potential in the evolving offshore drilling market.
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