Offshore rig firm Odfjell Drilling plans to expand its floating rig fleet to between six and 10 from four now, it said April 20, the latest sign of recovery in the energy industry.

After cuts in exploration spending following an oil price plunge that began in 2014, energy firms are now hiring rigs as crude prices have recovered some ground.

Odfjell raised $175 million via a new share issue on April 19 to help buy semisubmersible Stena Midmax Rig from Samsung Heavy Industries Co. Ltd. for $505 million. The new issue sent the Norwegian firm's shares down 10%.

Akastor ASA, an investment company controlled by Norwegian billionaire Kjell Inge Roekke, also plans to invest $75 million to help finance the acquisition.

"Financially it's a very attractive deal, which should give us a return of 12% to 20% over the next six years," Akastor CFO Leif Borge told Reuters, adding that his firm wanted closer ties with Odfjell.

In total, Odfjell plans to raise $618 million, including $325 million in secured bank debt, to pay for the rig, upgrades, project supervision and working capital.

Odfjell told investors it was talking with yards for pricing potential newbuilds for further fleet expansion to compete with companies such as Transocean Ltd. (NYSE: RIG) or Seadrill Ltd. (NYSE: SDRL).

Odfjell operates four modern harsh-environment floating rigs, working in the North Sea under long-term contracts with BP Plc (NYSE: BP), Statoil ASA (NYSE: STO) and Aker BP.

The North Sea has seen the biggest increase in demand for harsh-environment floating rigs, with utilization rates rising to more than 90% in 2018, Odfjell's presentation to investors showed.

Historically, utilization rates at 85% or above were needed for drillers to demand higher prices from oil companies.

To finance its new rig, Odfjell issued 38 million new shares on April 19 at 36 Norwegian crowns (US$4.61). The company also said it planned to offer 4.3 million shares at the same price to other shareholders to reach the initial target of 1.56 billion crowns.

The stock was trading at 35.55 crowns at 8:05 a.m. CT (13:05 GMT). (US$1 = 7.8171 Norwegian crowns)

Offshore