Hyundai Heavy gets $1.12 billion drillship order from Rowan Companies

Hyundai Heavy Industries reports that it has won a $1.12 billion order to build two drillships for drilling contractor Rowan Companies Inc. The contract, signed yesterday by Mr. Kim Oi-hyun, senior executive vice president & CEO of Hyundai Heavy and Mr. W. Matt Ralls, President and Chief Executive Officer of Rowan Companies Inc. also includes an option exercisable by Rowan to order an additional same class drillship.

Winning this order brings Hyundai Heavy’s total drillship new orders this year to 9, worth USD 5 billion with options to build three more drillships. This is the largest drillship orderbook of any shipbuilder in the world.

Mr. Ralls commented, “Our long-stated strategy has been to focus on and diversify our offshore drilling business, and we are excited to take this first step into the ultra-deepwater sector.  This investment will expand the breadth of Rowan’s drilling services and enable us to address significant market and customer opportunities in the deepwater arena.”

The construction cost is expected to be funded from available cash, cash flow from operations and short-term borrowings.  Construction cost includes commissioning, project management, owner-furnished equipment, spares and rig inventory, but excludes capitalized interest.  The agreement with HHI also includes an option for an additional drillship of the same specification, exercisable in the third quarter of 2011, for delivery in the last quarter of 2014.

The drillships are of the GustoMSC P10,000 design and are capable of drilling wells to depths of 40,000 feet in waters of up to 12,000 feet.  The DP-3 compliant, dynamically-positioned drillships will be equipped with retractable thrusters, dual-activity capability, five mud pumps, dual mud systems and a maximum hook-load capacity of 1,250 tons.  Each will also be equipped with a seven-ram BOP incorporating full acoustic backup control and storage and handling facilities for a second BOP.  The drillships feature hull integration with below-deck riser storage, four million pounds riser tensioning, main load path active-heave drawworks with crown-mounted compensation, three 100-ton knuckle boom cranes, an active-heave 165-ton crane for simultaneous deployment of subsea equipment, a variable deck load capacity of 20,000 tons and accommodations for 210 personnel.

The construction cost of $605 million presented above is based on a 12,000 foot capable rig equipped with 10,000 feet of riser in order to enable comparison to previous newbuild drillship announcements by other companies.  It is the company’s intention to equip these rigs with 2,000 feet of additional riser so they will be fully outfitted upon delivery to conduct operations in waters of up to 12,000 feet.  In addition, each drillship will be equipped with a second BOP for minimizing well and between-well non-productive time.  Further, the company will incur operational training and personnel ramp-up costs in readying the drillships to commence well operations.  The cost of the added equipment discussed above, plus these training and ramp-up costs, is estimated to be approximately $50 million per drillship.

Mr. Ralls added, “These drillships will enable us to offer our customers unmatched capabilities at a competitive construction cost. With the innovative design and redundancies built into them, they should deliver significant efficiencies in well construction and field development for our customers.  In addition, they will meet current country-required specifications and anticipated regulatory requirements.  We believe these drillships, when delivered, will be the most capable in the global floating rig fleet and, given our proven operating reputation throughout the world, should find strong acceptance among oil and gas operators.”

“The proven capabilities of HHI and this Gusto design coupled with the strength of our deepwater management team make us highly confident that these drillships will be delivered on time and within budget.”

June 1, 2011