Newspaper article THE JOURNAL RECORD

Several Bidders Seek Control of Penrod Drilling

Newspaper article THE JOURNAL RECORD

Several Bidders Seek Control of Penrod Drilling

Article excerpt

DALLAS - With the Hunt brothers of Texas removed from any role in Penrod Drilling Corp., a syndicate of 10 banks and an investor group headed by Richard E. Rainwater of Fort Worth are expected to decide soon who will control the world's largest offshore oil and natural gas driller.

Several bidders for Penrod have emerged, including the Tisch family, Houston-based driller Rowan Companies and a Norwegian investor group.

But negotiations with the banks could leave Rainwater in command, even though his group has committed far less cash to the deal than what was offered by other bidders.

The Tisch family has offered $450 million for Penrod, Rowan $325 million, and other bids higher than $500 million have been reported.

But the Rainwater group may find that its $95 million investment for a 27 percent stake in Penrod is enough to give it operating control.

The Rainwater-controlled Energy Service Co., a drilling company that is part of the Penrod investment group, is pushing for a recapitalization of Penrod that might include a public sale of common shares.

Other drillers, including Odeco, Oceanics Engineering and the Western Company of North America, have been successful in selling stock in the last year, and a Penrod offering could draw a large crowd.

Penrod's lenders, headed by Manufacturers Hanover and First Chicago, could thus avoid new write-offs, recoup some past losses and have a role in whatever recovery unfolds in the coming years in the drilling industry.

Values for used drilling rigs are up more than 50 percent in the last year, to $16 million for models operating in 250 feet of water.

Penrod has 39 offshore rigs and 45 more rigs used for drilling on land.

With oil prices firming, drilling budgets rising at big oil companies and prospects for further increases in the rigs' value, many Penrod lenders are unwilling to sell their notes at a discount, officials said.

Founded more than 60 years who was considered the world's richest man when he died in 1974, debt-laden Penrod has been starved for cash since oil prices plunged four years ago and leading oil companies pulled the plug on their drilling budgets.

At first, three of Hunt's sons who controlled Penrod, William Herbert, Nelson Bunker and Lamar Hunt, filed costly lawsuits to stall the banks' attempt to seize rigs to cover more than $750 million in unpaid loans.

In a partial truce two years ago, the banks wrote off $250 million of the loans in exchange for 50 percent of Penrod's stock.

Last week, with a March 31 deadline looming for the first of 32 consecutive quarterly principal payments on $525 million in remaining principal and accrued interest, and Penrod's cash flow still depressed, the Hunts handed over the rest of their holdings.

The note holders, including the Rainwater group, agreed to drop a potential claim on up to $300 million in future profits from Placid Oil Co. …

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