Any visitor to the high-end designer stores of London or Paris or Milan soon notices the influx of big spending shoppers from the Gulf in the summer, as the Emiratis and Qataris flee the sizzling temperatures of the Arabian peninsular for the slightly less sizzling air-conditioned jewellers on Bond Street, and the fashion houses off the Champs-Elysées.
It is not just the oud-scented halls of Harrods that have been attracting wealthy Saudis, nor the Four Seasons Hotel George V, however. The first week of August saw another cashed-up visitor from Riyadh making a lavish purchase in Europe… this time on the Oslo Stock Exchange.
On Tuesday, August 5, ADES announced it planned to buy Shelf Drilling and its fleet of 33 jackup drilling rigs for an equity price of US$380 million, a 62 per cent premium on the Shelf share price on the day before the take-over proposal was announced.
ADES will also assume around US$1.3 billion of Shelf’s long-term debt and bonds. ADES is owned by the Public Investment Fund (PIF) of Saudi Arabia and will fund the purchase using its existing credit facilities.
The deal is likely to go through, as Shelf shareholders Castle Harlan and Perestroika, as well as the Company’s CEO and CFO, and board members, together holding 15 per cent of the outstanding shares in the company, have already committed to supporting it.
The take-over requires the approval at an extraordinary general meeting of Shelf’s shareholders by the affirmative vote of two-thirds of the votes cast, which is likely unless a higher bid emerges. The extraordinary general meeting is planned to be held in September 2025. If the bid succeeds, Shelf will be delisted from the Oslo Stock Exchange and will become a wholly owned subsidiary of ADES
For whom is this a good deal?
The 62 per cent premium on the Shelf stock price seems impressive, until you realise that Shelf had traded above the NOK14 (US$1.36) offer price from ADES all the time between August 2022 and the middle of November 2024.
When you look at the five-year stock graph for Shelf, it quickly becomes clear that the ADES offer for Shelf is incredibly opportunistic on the part of ADES, taking advantage of a stock price at one of the lowest levels since the Russian invasion of Ukraine turbocharged offshore shares and the oil and gas price in 2022.
Shelf’s stock price was hammered in 2024 by the waves of jackup rig suspensions by Saudi Aramco and by lower oil prices. Shelf had seven jackups suspended or released in Saudi Arabia in 2024. At the start of 2024, Shelf had nine rigs working in the kingdom; today, just two remain on-hire.
The Middle East and India remain the company’s largest markets, however, with 15 rigs there, although two remain suspended by Saudi Aramco (Harvey H. Ward and High Island IV) and a third (Parameswara) is idle in India, as per the company’s latest fleet status report.
However, I don’t see a better offer likely emerging in the next six weeks before shareholders vote on the sale of the company.
Shelf has one of the oldest and least attractive fleets in the jackup segment. Shelf’s fleet has an average age of 30 years. By comparison, the Borr Drilling fleet has an average age of seven years.
Shelf’s elderly fleet would not be a fit with Transocean, which is a deepwater only player, as is Seadrill; it would not be a good fit with Valaris, which sold several of its own jack-ups to ADES previously and has its own Saudi Arabian joint venture, ARO. Even if Noble Corporation wanted to buy Shelf, which is unlikely, the competition authorities in the UK would be unlikely to approve a Noble offer given the Shelf/Noble history.
COSL, the Chinese state-owned behemoth, has enough problems trying to put its own fleet to work and to soak up the excess abandoned jackups left in Chinese shipyards. Shelf has no business in Brazil, so would not be of interest to Foresea, Constellation or Ventura.
Borr has a much more modern jackup fleet with 24 units and a big overhang of its own debt, over US$2 billion, without adding another US$1.3 billion; Saipem is busy with the merger with Subsea 7 and the merged entity is focused on offshore construction and installation, not offshore drilling; Stena Drilling is a pureplay deepwater player.
Thirty jackups working internationally would not be of interest of TPAO, the recent buyer of two modern deepwater rigs from Eldorado for service in Turkey.
A private equity buyer is also unlikely, because Shelf already has a large debt load and so is not susceptible to the classic private equity strategy of loading up its target with debt and paying itself big dividends from the new loans.
Shelf was founded in 2012 when three private equity companies (Castle Harlan, CHAMP Private Equity and Lime Rock Partners) put together a US$1.05 billion deal to buy 37 standard jackup drilling rigs, one swamp barge, and all the associated operations from Transocean.
Since its inception, Shelf has worked to sell off its older units and to incrementally add more modern and higher specification units. This culminated in the purchase of five harsh environment rigs (the so-called "remedy rigs," which we covered at the time) from Noble, which was compelled by the UK competition authorities to sell them in order to win regulatory approval for the purchase of Maersk Drilling. Shelf also bought nine premium benign water jackups from 2018 onwards.
However, Shelf’s fleet is aging, and ADES’ purchase price of US$51 million per rig on an enterprise value basis reflects this. Strip out the US$375 million paid for the five remedy rigs in 2022, and the average rig price is even lower.
Without significant investment in the next decade, the Shelf fleet will be substantially smaller, as aged units are forced to retire for scrap. ADES has already highlighted in its first half results presentation that the average age of scrapping for jackups since 2011 is 35.
ADES is already talking about “selective retirement” of certain Shelf rigs, This is great news to the industry as a whole if further supply is removed.
I don’t see another bidder emerging, but I stand ready to be proved wrong. Time is tight and the Shelf fleet is not especially attractive.
ADNOC Drilling of Abu Dhabi with its fleet of 36 jackups or Gulf Drilling International in Qatar, both of which are state-owned and dominant in their home markets in the Gulf, are the only two players whom I see could have the firepower to muster a quick bid higher than the NOK14 price pitched by ADES.
Stepping on the toes of a subsidiary of the Saudi sovereign wealth fund would be a political move as much as a business decision. I don’t rule it out, but I don’t see it as likely, either.
It wouldn’t be the first time that rival Gulf buyers have jostled over high-status, big-ticket items in the department stores of Europe, if it happened, however. For ADNOC Drilling, buying Shelf would make it bigger than ADES, which might be a brag it would want to make.
For ADES, the Shelf deal gives the company scale and access to new markets. When its fleet is combined with Shelf’s, ADES will operate a fleet of 83 rigs, making it far and above the largest jackup owner in the world, especially since most of COSL’s fleet of around 48 jackup units work mainly in China, with just seven in the Middle East and three in South East Asia.
The year 2024 saw ADES suffer a major setback when Saudi Aramco slashed 34 out of 92 jackup rigs it had either contracted or planned to contract in Saudi Arabia, either suspending or releasing them from contracts in three phases between January and November. Six ADES rigs were hit with suspension notices, although one was re-contracted for a ten-year charter in April this year.
ADES needs to go international. Shelf provides the platform for that aspiration.
Things got worse last month when ADES suffered one of the worst accidents in the recent history of the drilling history when the antique rig Admarine XII built in 1966 sank in Egyptian waters on July 1, with the tragic and completely unnecessary death of seven crewmembers onboard, as we covered.
The company had the gall to completely gloss over the accident and the seven fatalities in its recent results announcement, instead offering a slide entitled, “sustaining world class safety and operational excellence,” which is not a slogan usually associated with a rig sinking with multiple fatalities.
Then again, there is a little footnote on the slides reading, “data as of June 30, 2025,” which was the day before the disaster.
Even before this disgraceful operational incident, ADES had struggled to market its rigs outside the Kingdom, Qatar and Egypt, where 38 of its 50 rigs are located. ADES had done a reasonable job of winning new business by slashing prices, winning five rigs in Southeast Asia, three rigs in India, three in West Africa, and one in Brazil, at rates well below the prevailing prices offered by its competitors. In 2025, as a result, ADES has forecast it would generate around US$10 million in free operating cash flow per rig.
However, with Aramco’s long-term rig demand seemingly reset back to 2022 levels of around 60 jackups, ADES has a problem in that its experience operating rigs outside the Gulf and Egypt is limited. The sinking of Admarine 12 did not help that problem, as it demonstrated very visible safety failings, as videos of the sinking rig were widely circulated.
We have called for a transparent and public investigation report into the loss of the rig and the deaths of the seven crew. We have questioned whether the Egyptian authorities will actually publish a credible report into what happened and why. And we asked whether ADES will commit to improving its standards and procedures across all its remaining 50 offshore rigs, so that such an accident never happens again.
It would be nice to think that ADES will be taking Shelf’s safety culture on board. This seems unlikely, as ADES is already boasting of expected cost synergies of US$40 to US$50 million through what ADES describes as “shore-based support savings.”
This is code for a bunch of office workers will be fired. Everything we hear from sources within the Middle East suggests that more work could be done to improve standards in ADES, so there is an opportunity here, although PIF would be better served by replacing the entire ADES senior team with the Shelf team, in my opinion.
Instead, Shelf provides an operational platform to support the operation of ADES' 12 rigs working outside its core Middle Eastern markets, where it has a weak track record, and Shelf provides a pipeline through which to market ADES' own fleet. With its Saudi sovereign backing, ADES reckons it can refinance Shelf's debt at interest rates three per cent lower, saving around US$40 million just in debt servicing costs.
The deal is a win for Shelf’s shareholders compared to where they were last month, but a big setback for any who invested in 2023 or 2024. The upside goes to ADES, but with that company’s operational track record and with its existing debt burden of US$3.2 billion being topped up with another US$1.3 billion of Shelf debt, the future looks interesting.
I don’t trust the management of any company that can gloss over seven fatalities so glibly. But if and when it buys Shelf, ADES will be bigger than the size of the Valaris and ADNOC jackup fleets combined, being the number two and number three jackup operators internationally.
How ADES manages such a large fleet and the integration of a company with a very different heritage remains to be seen. We’ll keep you posted.
Shelf’s stock price jumped over 50 per cent on the news that it was subject to ADES’ offer. Last week also saw Tidewater’s stock price shoot up. The stock surged 20 per cent after the company announced its second quarter results last week to around US$60 per share.
The results themselves were good, but not stellar, and showed a business that is healthy, but really waiting for improved market conditions in 2026. Utilisation continues to plateau around 75 per cent. The business showed some incremental improvement in the second quarter over the first, but not as much as you would expect from the standard seasonality (December to March typically sucks in both the South China Sea and the North Sea).
Tidewater showed quarterly revenue of US$341 million against US$333 million in the first quarter, a two per cent improvement, and free cash flow was at US$97.5 million against US$94.7 million in the first quarter, a three per cent improvement. Average day rates were US$23,166 per vessel per day against US$22,303 in the first quarter, a four percent improvement.
With its fleet of 189 platform supply vessels (PSVs) and anchor handling tug supply vessels (AHTS), Tidewater is undoubtedly the clear market leader in offshore supply and it is still moving forward, albeit slowly and mainly through rate resets of vessels on legacy contracts.
What drove the stock price 20 per cent high was the news that the company planned a US$500 million share repurchase program, which would represent around 20 per cent of the current market capitalisation. After the company refinances its Nordic bonds into a new US$650 million note due payment in 2030, Tidewater has the flexibility to buy back more of its own shares, and the market loved the idea.
The Saudis are shopping for rigs, whilst Tidewater is shopping for its own shares.
There are also rumours that Tidewater will make an acquisition in the Americas in the coming year, with either Hornbeck or Harvey Gulf being the possible targets. That would be a gamechanger. CBO in Brazil has also been considered in the past, we understand, but there is a valuation gap too large to bridge, apparently.
The evidence of stock buybacks is mixed. They do nothing to improve the underlying business performance, and they typically reward management who hold stock options and make out like bandits by using the company’s money to reduce the number of outstanding shares, thus driving up earnings per share, simply because there are fewer shares in the denominator.
Perish the thought that this could be the rationale at Tidewater.
We believe the money would be better spent buying laid-up vessels from Bourbon in the current auction process and scrapping them ostentatiously to quash supply, or in newbuilds, given the continued fleet age issue that Tidewater faces.
Nobody seems to be shopping for what the Industrial and Commercial Bank of China (ICBC) wants to sell, sadly.
Last week, we told you that between August 6 and 8, ICBC would be auctioning nine of the ten unsold Bourbon vessels left over from the failed auctions in July. That proved a total flop, with nothing selling, no bids offered at the reserve prices.
So, this week will see another round of auctions on August 13 and 14, with seven vessels offered again, including the 2013-built subsea vessel Bourbon Evolution 803 added back into the mix, with a reserve price of US$19.45 million, alongside sister vessel 2011-built Bourbon Evolution 801, which has a reserve of US$19 million. Both ships have been laid up for years and both are expected to cost more than the reserve price to reactivate.
Now, the trio of Liberty 100 series laid up PSVs will be offered for a third time with a lower reserve of US$10.75 million en bloc. After three failed processes, the PSV Bourbon Horus, the stand-alone small PSV Bourbon Liberty 153, and the 80-ton bollard pull AHTS Bourbon Liberty 206 have been withdrawn from the auction site, and are not advertised for sale in this round. But don’t worry… I am sure they will be back with “everyday lower prices” later, along with whatever fails to sell this week.
I don’t think this will be a case of third fourth time lucky for ICBC, partly because the reduced prices are mostly still too high for the risks that the buyers are expected to bear, and partly because ICBC has decided to add four additional vessels of much higher quality for sale as well at the start of September, as we highlighted last week.
Our updated table of the auction status is here:
Obviously, all details are given in good faith without guarantee, based on the listings here.
As before, vessels shaded with the same colours are being sold en bloc. The en bloc reserve price in our table is the total of the individual vessel prices for the vessels marked as being sold together.
So, for example, the reserve price for the 80-ton bollard pull AHTS Bourbon Liberty 202 and Bourbon Liberty 203 is now US$4.86 million (down from US$6 million when the process started), and an interested buyer must bid on both vessels together.
Background reading
The Guardian has a great scoop on historic corruption in military procurement contracts in Saudi Arabia here. When he moved to Riyadh in 2010 to work for a British defence contractor, Ian Foxley discovered some strange large payments from his employers to a mysterious offshore entity.
Who could suspect that a prince could be receiving kickbacks? Since Foxley’s own father had been found guilty in a massive UK defence procurement kickback scheme in the 1980s, where his own dad was the one taking bribes (and never had to pay them back due to some issues with the prosecution), I was surprised Mr Foxley was surprised…
Tidewater’s updated August 2025 investor presentation is here. Slide nine shows its market dominance, slide 15 the reversal of day rates for the highest specification vessels this year and slide 16 the mixed bag of leading edge day rates. Tidewater’s management is to be commended for its transparent and open reporting.