March 20, 2007
Ship Finance in seismic vessel acquisition and leaseback
John Fredriksen controlled Ship Finance International Limited (NYSE:SFL) has agreed to acquire three newbuilding high capacity 3D vessels, including complete seismic equipment, from Norway's SCAN Geophysical ASA, based on a total price of $ 210 million, or $ 70 million per vessel. The agreement includes a lease-back over 12 years with purchase options after 6, 10 and 12 years.
The vessels are being built at the ABG Shipyard in India and are specifically designed for efficient 3D seismic acquisition with high streamer capacity of 10 tow points and streamer lengths of up to 10 km (applies for up to 8 streamers), corresponding to a total capacity of 80 km streamers. The largest known streamer tow in the seismic industry to date has been 72 km.
Delivery dates from ABG are scheduled to be the end of January, April and July 2008.
SCAN plans to deploy the vessels in the high end 3D contract seismic market to third party clients internationally within the oil and gas industry. Currently, the market for modern 3D seismic vessels is very strong.
SCAN has a current fleet of three seismic vessels in addition to the vessels Ship Finance has agreed to acquire. SCAN is listed on the OTC-list in Norway with a market capitalization of approximately $270 million, and the management team has extensive experience in the offshore seismic market. A listing on the Oslo Stock Exchange is expected during 2007.
Ship Finance is financing the transaction by a senior loan facility of $120 million ($40 million per vessel) and an equity contribution of $30 million ($10 million per vessel). SCAN will provide a non-interest bearing seller's credit of $60 million ($20 million per vessel).
Upon delivery from the shipyard, the vessels will commence 12 year bareboat contracts to SCAN, and the charter rate per vessel payable to Ship Finance to service the net investment of $50 million per vessel is agreed to be approx.:
The seller's credit from SCAN will be fully amortized over the first 6 years after delivery through a non-cash additional charter rate of $9,132 per day per vessel.
SCAN has been granted fixed price purchase options for each of the vessels after 6, 10 and 12 years at approx. $20 million, $14 million and $9 million, respectively. The charter contracts are on bareboat basis and SCAN will therefore be responsible for all operating and maintenance costs during the charter period.
Ship Finance says that as with all its recent acquisitions, the purchase of the vessels and corresponding financing will be through separate subsidiaries. Ship Finance's guarantee obligation will be $16.3 million per vessel prior to delivery, reducing to $10 million per vessel after delivery from the shipyard.
Ship Finance says the transaction is another verification of its strategy of diversifying both its asset base and customer portfolio. It says: "There is a high activity level in the offshore related markets with significant cashflows and there is a positive market outlook. We therefore anticipate further growth opportunities in this segment."
Including newbuildings and adjusted for announced sales, the Ship Finance fleet will consist of 60 vessels, essentially all on medium to long term charters.
"We are very pleased to team up with Ship Finance for our core seismic vessel fleet, as their total fleet is one of the largest in the world", commented Lars Johan Frigstad, President and CEO of SCAN. "The seismic market is currently very healthy and we see promising outlook for the three state of the art vessels in the years to come."