(Reuters) - Offshore driller Ocean Rig UDW Inc ORIG.O is preparing to explore a sale amid pressure from some of its largest shareholders to review its strategic alternatives, according to three people familiar with the matter.
The move will be a key test of Ocean Rig’s value after it emerged from Chapter 15 bankruptcy in September. Its business has suffered as low oil prices have made offshore drilling less economically attractive and pushed more oil exploration onshore.
Ocean Rig has interviewed investment banks in recent weeks to appoint a financial adviser that will help it explore a sale, the sources said this week.
There is no certainty that the company will end up agreeing to any deal, said the sources, who asked not to be identified because the matter is confidential.
Ocean Rig did not respond to a request for comment.
Shares jumped as much as 7 percent on the news, and were up 4.3 percent at $25.90 in morning trading in New York on Wednesday, giving the company a market capitalisation of $2.4 billion (£1.8 billion).
Based in Grand Cayman, Ocean Rig specializes in ultra-deepwater and harsh environment projects undertaken by oil exploration companies in the offshore drilling industry.
Within a month of exiting bankruptcy, Ocean Rig’s largest shareholder, hedge fund Elliott Management Corp, called for the company to review strategic options, adding it planned to recruit the company’s second largest shareholder, BlueMountain Capital, in its efforts.
It was joined a day later by Avenue Capital Group, the company’s fifth-largest shareholder, in demanding that it evaluates a possible sale. These three funds collectively own 39 percent of Ocean Rig’s stock.
The tough times in the offshore drilling industry have spurred consolidation. Ensco Plc (ESV.N) acquired Atwood Oceanics Inc in October for $839 million, while Transocean said in August it would buy Songa Offshore for $1.1 billion.
The chief executive of Norway’s Borr Drilling (BDRILL.OL), which is backed by the world’s biggest oil services company, Schlumberger NV (SLB.N), told Reuters in August he aimed to expand the company’s fleet.
At the same time, other offshore drillers have failed to avoid bankruptcy. Seadrill Ltd (SDRL.OL), for example, entered Chapter 11 protection in September.
Reporting by David French in New York; Editing by Bernadette Baum