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Third Avenue Comments on The Drilling Company of 1972

The Drilling Company of 1972 A/S (OCSE:DRLCO) ("Drillco") - Drillco is a newly formed company that was spun out of its parent company, Maersk A/S, in April of this year. Maersk A/S is the world's largest container shipping company. Previously, The Drilling Company of 1972 was known as Maersk Drilling and the two names continue to be used almost interchangeably. The company arrived on the Copenhagen exchange earlier in 2019 with a very respectable balance sheet, an unusually high quality portfolio of offshore drilling rigs and a substantial backlog of future work. Similar to several other offshore drilling rig portfolios, Maersk Drilling operates jack-ups, semi-submersibles and drillships. However, what is unique to Maersk is a portfolio of ultra-harsh environment jack-up rigs. These particular rigs are a technical innovation developed within Maersk and are specifically designed to operate in deeper water, and in harsher conditions, than a typical jackup while simultaneously providing the advantages that a jackup offers as compared to a floating rig. Because of these very unusual capabilities, Maersk operates these rigs in a small niche, benefiting from minimal competition, which results in high utilization and good pricing for its services. Maersk's floating rig fleet is also quite modern and of high quality. We view the company to be conservatively and competently run and certainly in position to take advantage of offshore drilling industry conditions as they continue to improve. We were also attracted to the company's relative obscurity and that the shares had become depressed, we believe, at least partly, because some holders of its parent company chose not to keep the shares they received in the spin-off.

From the Third Avenue Value Fund (Trades, Portfolio)'s third-quarter 2019 commentary.
This article first appeared on GuruFocus.