HOUSTON, Nov. 20 -- Shareholders of Global Marine Inc., Houston, and Santa Fe International Corp., Dallas, approved Tuesday the merger of the two companies through a stock-swap transaction to form GlobalSantaFe Corp., the world's second largest offshore drilling contractor.
"The most important thing now is the continuation of our transition into a single, integrated unit. We've been working toward that from the moment we signed the initial merger agreement," said Sted Garber, former president and CEO of Santa Fe who now holds the same position at Houston-based GlobalSantaFe. Robert E. Rose, chairman, president, and CEO of Global Marine, is chairman of the new firm.
"Our first priority is to get the two companies properly integrated. We want to show the industry that a merger of equals can be done in a way that will have sound results from Day 1," Garber told OGJ Online.
With official closure of the merger Tuesday, he said, "Now we can start working on our joint marketing operations."
That might sound like overkill for the combination of two already well known drilling contractors -- Global Marine, with a major presence in the Gulf of Mexico and some international operations, and Santa Fe, which is international.
But with so many of the large international operators now opting for longer term contracts with a smaller number of preferred contractors, Garber said, "We have to sell them that we basically can provide whatever equipment they want in virtually any major drilling market in the world." When the two companies announced their merger plans more than 2 months ago, he said then that the move was driven in part by that trend (OGJ Online, Sept. 4, 2001).
The new company owns a fleet of 59 offshore and 31 land drilling rigs, plus operating another 13 rigs for other owners. It also is a major provider of drilling management services.
"We're telling our customers to watch GlobalSantaFe because we are a different kind of drilling contractor. Just look at the quality of our fleet, the areas where we work, and the spread of services we offer," Garber said.
With the recent drop in market prices for international oil and US natural gas, Garber acknowledged, "There are some real question marks in the coming year." But like others in the offshore drilling industry, he claimed the current soft market in the Gulf of Mexico cannot continue.
The recent decline in drilling for gas in the gulf will soon pull down available gas deliverability, just as the last price collapse in 1998 decreased gulf gas production by 19% in early 1999, he said. "By mid-year, I think we'll see more drilling in the gulf," Garber said.
Meanwhile, Garber said he's not concerned about low oil prices today since most producers "didn't get too optimistic about high prices" during the last upturn.
"Most operators are still basing their plans on oil prices of $14-$16/bbl," he said. "If oil prices fall to $17 or $16/bbl, most of those projects will still be drilled."
Even the threat of a price war by the Organization of Petroleum Exporting Countries against nonmember producers doesn't cause Garber much concern. "If oil falls to $12/bbl, the financial pain among OPEC members will be so great they will have to take action, he said.
"When oil prices collapse, we fear for our cash flow. But many of those OPEC countries fear for their governments," said Garber.
