Offshore drilling firms Ensco PLC (NYSE: ESV) and Atwood Oceanics Inc. (NYSE: ATW) announced Tuesday morning a definitive merger agreement valued at about $839 million in an all-stock transaction in which Ensco will acquire Atwood.

Under the terms of the deal, Atwood shareholders will receive 1.60 shares of Ensco stock for each share of Atwood stock, for a total value of $10.72 per Atwood share based on Ensco’s closing price of $6.70 per share last Friday. The price represents a premium of 33% of Atwood’s closing price on the same day.

Both companies have struggled with faltering demand for offshore drilling services since oil prices collapsed in the late summer of 2014. Since August of that year, Atwood’s share price has fallen by nearly 80% while Ensco’s has dropped by 88%.

The combined company will own a fleet of 26 floating rigs and 27 jack-up rigs and will have operations in the Gulf of Mexico and offshore of Brazil, West Africa, the Middle East, the North Sea and the Mediterranean.

Ensco expects annual expenses will fall by $45 million in 2018 and by $65 million in 2019 and beyond. The estimated enterprise value of the combined company is $6.9 billion, based on the closing price of each company’s shares on 26 May 2017. The combined company will have approximately $3.7 billion in revenue backlog.

The companies expect the deal to close in the third quarter of this year, and there are no financing conditions on the transaction. Shareholders of both companies must still approve the deal.

Atwood’s stock has gained nearly 27% in early trading Tuesday to $10.26, in a 52-week range of $5.12 to $15.37.

Ensco shares traded down about 3.3%, at $6.48 in a 52-week range of $6.11 to $12.04. The low was posted early this morning.

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