Eurasia Drilling Company Receives Privatisation Proposal

Eurasia Drilling Company (ECD), the largest provider of onshore drilling services in Russia, is trying to leave the failed deal with US-headquartered Schlumberger behind, announcing that its managers and core shareholders filed a Merger Proposal with an offer consideration of $10 per share. 

“The Board is focused on preserving shareholder value following the failure of the Schlumberger transaction which would have been extremely beneficial to shareholders” Lord Clanwilliam, Chairman of the Special Committee, commented in a note. 

The Board formed a special committee to negotiate the terms of the potential merger, claiming that the privatisation would help the company undertaking rationalisation of the business.  

‘While EDC's fundamentals are still robust in the long-term, the current performance is significantly impacted by a combination of challenging macro-economics, acceleration in ruble depreciation, continued geopolitical risks, upstream capex cuts by the Russian oil majors on the back of oil price pressure, compounded by changes in tax regulations for the oil sector, weak pricing for drilling, poor forward visibility on offshore activity and uncertainty in the services market stemming from sanctions. Given all of these challenges, the management of EDC believe they require maximum flexibility to manage the business, which is best facilitated by being a private company at this time’ reads the press release.  

It remains unclear the exact reasons why Schlumberger gave up its plan to buy a 45.65% stake in ECD. The deal, initially endorsed by Russian authorities, has been postponed several times, and some analysts said the delays had to do with geopolitical complexities and tensions between the US and Russia.