Offshore rig firm Borr Drilling Ltd., controlled by Norwegian investor Tor Olav Troeim, is proposing to buy its rival Paragon Offshore Ltd. for $232.5 million in a push to consolidate the fragmented rig market, it said Feb. 21.

A plunge in oil prices in 2014 forced oil firms to cut back on offshore exploration, reducing demand for drilling rigs at a time when new rigs ordered during the boom years were entering the market, pushing rates down to, or below, operating costs.

Borr said it was likely to scrap 21 older jackup rigs, which have been stacked in various locations, out of Paragon's total fleet of 32 rigs due to the high costs of reactivating them, as well as safety and efficiency standards.

"As almost 50% of the global rig fleet is more than 30 years old, responsible owners should take steps to rationalize their fleets and consolidate the fragmented market," Tor Olav Troeim, Borr's chairman, said in the statement.

Troeim is a high-profile investor in Norway who for years helped build the fortune of shipping billionaire John Fredriksen but has now struck out on his own. He sold his shares in insurer firm Storebrand on Feb. 21.

Following the transaction, at a price of $42.28 per share, Borr Drilling would own 24 premium jackup rigs built after 2000, making it the world's largest premium jackup rig operator, Borr said. Jackup rigs drill in shallow waters.

Shares in Borr Drilling were up 5.4% at 2:39 a.m. CST (8:39 GMT) against an Oslo benchmark index down 0.7%.

Market Bottoming Out?

Borr Drilling said it expected dayrates to start rising into 2019 as oil firms increase capital spending, a view shared by rival Maersk Energy, owned by A.A. Moller-Maersk, in a Reuters interview Feb. 20.

"There are clear signs that we have passed the bottom of the offshore drilling cycle and the activity level is picking up," Borr said.

Still, Borr said it would not rush to sign new long-term contracts at current low rates and that many of its rigs would remain uncontracted in 2018.

As of Jan. 31, Paragon, which last year emerged from Chapter 11 bankruptcy in the United States, had a revenue backlog of $204 million. It was spun off by U.S. firm Noble Corp. Plc (NYSE: NE) in 2014.

The deal's closure is subject to Paragon completing all actions necessary to acquire ownership of certain rigs currently subject to Chapter 11 proceedings.

Borr said it has received commitments from holders of 67.9% of Paragon's shares for its tender offer, and expects the transaction to close in March.