Offshore contractor Noble Corporation is acquiring Pacific Drilling in an all-stock deal that is set to beef up the buyer's footprint in the ultra-deepwater drilling market.

The merger of two players that have both recently been through a Chapter 11 bankruptcy process comes as the rig market continues to struggle with generally low dayrates as oil and gas companies keep a tight rein on costs.

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The merger agreement, revealed on Thursday, has already been unanimously approved by the board of directors of each company and by a majority of Pacific Drilling’s equity holders.

No shareholder vote is required for Noble to close the transaction.

Pacific’s equity holders will receive 16.6 million shares — representing about 24.9% of Noble’s outstanding shares — at closing of the transaction, which is expected in April.

Noble will realise an annual pre-tax cost synergy of at least $30 million by the end of the year as a result of the deal.

It will own and operate a high specification fleet of 24 rigs, with 11 drillships, one semi-submersible, and 12 jack-ups.

Noble said the Pacific Bora and Pacific Mistral rigs will be “expeditiously” disposed.

"The Pacific Bora and Pacific Mistral rigs are currently stacked and will be classified as 'held for sale' after the close of the acquisition. Disposing of the Bora and the Mistral will eliminate the associated stacking costs, which we estimate to be approximately $10 million on an annual run rate basis," said Noble chief executive Robert Eifler in a call with investors.

"It is consistent with our decision to dispose of five cold-stacked Noble rigs late last year and our commitment to capital discipline. We will continue to take a hard look at idle assets going forward."

Additionally, Noble will have a backlog of about $1.7 billion, split across a diverse set of customers and regions of operation, including its re-entry into the Mexican and West African markets.

"The acquisition of Pacific Drilling will enhance our position in the ultra-deepwater market through the addition of its technologically advanced ultra-deepwater drillships, which are highly complementary to Noble's existing fleet.

"By bringing these modern drillships into the Noble fleet, we will be able to better serve the needs of our customers globally and to participate in a wider range of drillship tender activity,” said Eifler in a statement.

Pacific Drilling chief executive Bernie Wolford said: "Bringing together the Pacific Drilling and Noble fleets creates a stronger and more stable combined company with the scale to provide solutions for our clients on a global basis.

"This combination will advance the ongoing recovery in the industry and will allow Pacific Drilling equity holders to fully participate in that recovery.”

The two companies recently emerged from Chapter 11 bankruptcy protections brought on by the disruption of oil markets caused by the Covid-19 pandemic.

Noble filed for protection in July, emerging some seven months later in February having eliminated more than $3 billion in debt.

Pacific Drilling entered into bankruptcy protection in October, exiting at year-end under a plan to eliminate more than $1 billion of funded debt obligations.