August 12, 2005
SeaDrill takes up option for second ultra deep semi
The market for ultra deepwater rigs looks to be hotting up. On August 3, Sembcorp Marine's Jurong Shipyard announced it had received a letter of intent from PetroMena AS covering construction of a sixth generation ultra-deepwater semi-submersible drilling rig based on the Friede & Goldman ExD-design at a price in the region of $400 million. Delivery is slated for the end of 2009 or early 2010.
Petromena AS is a unit of Larsen Oil & Gas (LOG)-- a Norwegian company fully owned by Berge Gerdt Larsen. LOG acts as the business manager to Petrojack ASA and Petrolia Drilling ASA, two drilling companies listed on the Oslo Stock Exchange.
Today, John Fredriksen's SeaDrill Ltd. announced that it is to execute an option at Jurong Shipyard to built a second sixth generation ultra deep water semi submersible drilling rig based on a Friede & Goldman design.
SeaDrill also said it is to apply for a listing on the Oslo Stock Exchange. The aim is to have the shares by the end of September or the beginning of October 2005.
The second semi ordered by SeaDrill is scheduled to be delivered in November 2008.
The contract price for the unit is $390 million with further USD 14 million to be paid in order to achieve 70% payment on delivery. The contract price is based on a turnkey contract with all owner furnished equipment (OFE) including 7500 feet of riser and BOP. In connection with declaration of the option SeaDrill has been awarded an option for a third unit on comparable terms. The option is declarable through August 2006.
SeaDrill says it is also in discussion with major yards with respect to building a harsh environment semi sub with further options for delivery of the first unit in first quarter 2008. A clarification of this project is expected within the next month.
SeaDrill says the decision to execute the second option at Jurong and pursue further semi opportunities is taken after a thorough research of the future supply demand balance in the semi market. The aging fleet and the limited yard availability to build semi subs combined with strong rig demand driven by high oil price and increased development drilling is likely to create a good market situation for rig owners in the next three to five years.
In evaluating its options, SeaDrill considered alternative investments including a further increase in its holding in Ocean Rig position as well as investment in other assets and in public companies controlling modern semis or semi newbuildings. Particular emphasis has been put on cash flow generated before the Jurong newbuilding is delivered. The conclusion reached was that contracting the Jurong unit was "significantly more financially attractive than any alternative investments."
Chairman of SeaDrill, John Fredriksen, says in a comment: "We are pleased that we through immediate action and through a good relationship to the yard have secured some very attractive semi sub newbuilding slots for our company. A combination of the contract price, delivery time and payment terms make this into a very competitive project. The project will, based on existing day rates, give a large boost to SeaDrill's earnings and cash flow when the rigs will be delivered. The heavy back ended payment terms will minimize the negative financial carrying cost of the project until the rigs are in operation. SeaDrill's newbuilding program, which now includes two semisubs and four jackups, is a clear message to prospective charter that we are serious in our ambition to build a premium offshore fleet. With a total fleet of 12 units plus two further options, and strategic ownership positions in Ocean Rig and Apexindo we are on track to make SeaDrill into one of the leading offshore contractors within the next five years. The existing units and the newbuilding program give SeaDrill a unique position among the drilling contractors, as one of the only contractors who are positioned for significant organic growth in the coming years."