Pacific Drilling SA, an offshore oil-rig contractor, is gaining notice as a takeover candidate. The $786 million company, controlled by Israeli billionaire Idan Ofer, operates some of the newest, most sophisticated rigs for drilling in water more than 2 miles (3.2 kilometers) deep, Bloomberg reported June 12.

The year-long rout in crude oil has eroded the value of energy-related companies, slicing Pacific Drilling’s market value by about two-thirds. The company is now cheaper than most of its peers.

“They’re trading well below replacement value for the rigs that they own,” James West, an analyst at Evercore ISI in New York, said in a phone interview.

The depressed valuation is increasing Pacific Drilling’s allure for operators looking to strengthen their presence in ultradeep water drilling. Already, the company has attracted interest from larger rivals such as Ensco Plc, Transocean Ltd. and Seadrill Ltd. in the last 12 to 18 months, according to a person familiar with the matter. One of those approaches was made as recently as this year, the person said, asking not to be identified as the information is private.

Pacific Drilling, which is legally based in Luxembourg and operates out of Houston, isn’t actively exploring a sale and the approaches so far have been rebuffed, according to the person.

Amy Roddy, a representative for Pacific Drilling, said the company doesn’t comment on speculation of any transaction. A representative for Quantum Pacific, Ofer’s holding company, also declined to comment. Representatives for Ensco and Transocean didn’t respond to requests for comment, nor did a London-based representative for Seadrill.

Deal Pressure

The drop in oil has forced producers to cut their budgets. That translates into slashed profits and valuations for energy- services providers, creating an incentive for them to combine and insulate themselves from the downturn.

Halliburton Co., the second-biggest provider of oilfield services, agreed in November to buy Baker Hughes Inc. in the industry’s biggest deal yet.

There were $243 billion of oil and gas deals last year -- the most in at least 12 years. With Royal Dutch Shell Plc planning to buy BG Group Plc for about $80 billion including debt, 2015 is on track to surpass that. More deals are likely to follow as companies seek to pool capital.

Rig Woes

Rig contractors have been dealing with the double blow of a glut of new deepwater rigs and waning demand. More than 70 new rigs are expected to roll out of the construction yards and enter an already oversupplied global market over the next two years, West of Evercore ISI said.

Whereas in the past, companies have chosen to build their own rigs in order to grow, that’s no longer the case.

“Building your own is kind of out,” West said. Rig owners are instead looking to buy existing companies that already have contracts for their vessels, he said.

Five of Pacific Drilling’s seven vessels are under contract, working off the coast of Nigeria and in the U.S. Gulf of Mexico. The company is building an eighth rig that’s expected to be available for work in the fourth quarter.

Pacific Drilling may be forced to sell at some point if oil prices don’t improve. The company has $3 billion of debt -- more than three times its current market value.

Offshore