Italian oilfield services company Saipem has agreed to sell its onshore drilling business to UK-based drilling company KCA Deutag (KCAD) for $550m.

As per the terms of the deal, Saipem will also receive a 10% stake in KCAD, which operates approximately 110 rigs in 20 countries, and employs nearly 8,300 people.

Employing approximately 4,000 people, Saipem’s Drilling Onshore business has a portfolio of 83 land rigs. It has operations in 13 countries, with a focus on the Middle East and Americas.

The sale forms part of the Italian energy services group’s strategy to increase its finances and focus on offshore drilling activities.

In a press statement Saipem said: “The transaction for Saipem is a further step towards a more focused and resilient business model based on the growing trends of Saipem’s reference markets, concentrating efforts in the drilling offshore, while supporting the achievement of its capital structure and liquidity objectives.”

Saipem said the cash proceeds from the deal would be used to reduce its net debt and fund its 2022 to 2025 business plan.

The transaction, however, excludes financial debt transfered to KCAD from Saipem.

The combined entity will have more than 11,000 employees.

KCA Deutag CEO Joseph Elkhoury said: “This milestone acquisition of Saipem Onshore Drilling allows us to significantly upgrade our business by expanding in core geographies in the Middle East and key markets in Europe and Latin America.”