Ocean Rig UDW Inc (NASDAQ:ORIG) share prices are up 22.58% to $2.28 after the company announced its purchase of a UDW drillship through its subsidiary.
Ocean Rig UDW Inc (NASDAQ:ORIG) announced early on this week that a subsidiary of the company had bought a sixth generation UDW drillship at auction for $65 million. This drillship had been owned by the Schahin Group, which is a Brazilian industrial firm that filed for bankruptcy protection last year.
This particular rig known as the Cerrado unit was built in 2011. However, the market for rigs has been weakening due to the continuous slump in oil prices, and it didn’t help Schahin Group that Petrobras announced numerous contract terminations with the company last year.
Ocean Rig UDW Inc (NASDAQ:ORIG) had been under contract to manage this drillship since September last year before the purchase was made. The deal was made at a largely discounted purchase price to both newbuild prices and comparable sales regarding similar units. The company has also been busy taking steps to enhance shareholder value through a major share repurchase deal and debt buybacks substantially below par value.
A rebound in the oil market could allow Ocean Rig UDW Inc (NASDAQ:ORIG) to make a lot of money on this purchase, although the company doesn’t seem to be in such a financially strong position to make acquisitions. Analysts are skeptical as to why Ocean Rig had to create a subsidiary to facilitate this purchase while bulls remain hopeful that the company could be able to leverage this acquisition later on.
Ocean Rig UDW Inc (NASDAQ:ORIG) specializes in UDW (ultra-deepwater) drillships and its fleet is entirely comprised of UDW drillships and UDW semi-submersible rigs. It is based in Cyprus and drilling units include Leiv Eiriksson, Ocean Rig Corcovado, Ocean Rig Poseidon, Ocean Rig Mykonos, Ocean Rig Mylos, Ocean Rig Skyros and Ocean Rig Athena.
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