Freddie splashes out at Samsung

Two companies controlled by John Fredriksen are splashing out with newbuilding orders at Korean shipbuilder Samsung Heavy Industries Co. Ltd. Golar LNG Limited has entered into firm contracts with Samsung for a further two LNG carriers, while Seadrill has entered into turnkey contracts with Samsung to build two new ultra-deepwater drillships.

The two additional Golar LNG vessels, each with a capacity of 160,000 cu.m have a combined total cost of slightly above $400 million. The first of the carriers is scheduled for delivery in the second quarter of 2014 and the second in early 2015. Each contract includes an option for a further carrier for 2015 delivery. Both options give Golar the right to select an FSRU alternative and the vessel contracted for delivery in early 2015 includes the option for construction as an FSRU.

As with Golar’s existing new building orders, the vessels will be delivered with tri-fuel diesel electric engines and the lowest boil off rates in the industry making them extremely attractive prospects to charterers.

Mr. Fredriksen, who is Golar’s Chairman says: “With a total of 13 newbuilings and a further 4 options Golar LNG has secured a strategically unequaled position to meet our customers’ demand in the fast growing LNG industry. The Board has already seen strong interest for short and long term charters and expects that a solid charter portfolio can be developed prior to the individual deliveries of the new buildings. The increased activities in the LNG market including possible U.S. export also supports a strong spot market in the years to come. The Board is of the opinion that current weakness in global shipbuilding prices creates limited downside in building prices and an attractive chartering upside. With the existing newbuilding program in place both Golar LNG and Golar Partners have secured the strategic position to have strong growth in cash flow and earnings in the period up to 2016.

Meantime, Seadrill says that, based on market developments and analysis of the rig market, it has concluded that it is highly likely that lack of sufficient rig availability in the deepwater market will become a key bottleneck until significant new drilling capacity is added. If oil prices remain at present levels, this tight supply demand balance will force oil companies to postpone field developments with negative impact on the net present value of these discoveries. Seadrill is of the opinion that the present and foreseeable developments represent a unique investment opportunity. In order to benefit from this opportunity, Seadrill is currently in discussions with several shipyards to further increase the company’s rig availability in 2014 and thereafter.

As a first step, Seadrill has entered into turnkey contracts to build two new ultra- deepwater drillships at Samsung in South Korea. The construction of the drillships is scheduled for completion in the second and third quarter 2014. Total project price per drillship is estimated to be under US$600 million, which includes a turnkey contract with the yard, project management, drilling and handling tools, spares, capitalized interest and operations preparations. Seadrill has also a fixed price option to order an additional drillship for delivery in 2014.

The drillships are of the same design as the three previous dual derrick drillships that Seadrill ordered at Samsung late 2010 and early 2011, with increased water depth, technical capabilities and accommodation capacities. These dynamic positioning drillships will have a hook load capability of 1,250 tons and a water depth capacity of up to 12,000 feet targeting operations in areas such as the Gulf of Mexico, Brazil as well as West and East Africa. In addition, these units will be outfitted with seven ram configuration of the Blow out Preventer (BOP) stack and with storing and handling capacity for a second BOP.

Mr. Fredriksen, who is also Chairman of Seadrill, says: “We are pleased to see the success of the strategy that the company was based upon in 2005. Through significant investments in modern high specification equipment and our focus on quality operations, we have been able to differentiate this company from its competitors and create a basis for a strong sustainable cash flow and a solid return to our shareholders. Our long relationship with Samsung has given us access to a proven rig design and favourable delivery slots. In combination with attractive global yard prices, this has created an opportunity to continue to organically build Seadrill with very compelling economics. Seadrill will have five new ultra-deepwater rigs scheduled for delivery in the period 2013 – 2014 and four existing units coming off current contracts in the same period. There has already been specific discussions regarding chartering of part of this capacity. We believe the open ultra-deepwater exposure position will serve Seadrill well and create a unique exposure to one of the fastest growing and most profitable energy businesses in the world. We also believe that this open exposure can be used to further strengthen our relationship with fast growing and dynamic oil companies. The recent increase in daily rates for drilling rigs will generate excess cash that can be used for a balanced combination of organic growth and a strong long-term dividend distribution. It is likely that Seadrill’s commitment to tender and ultra-deepwater newbuildings will be further increased in the weeks to come.”

February 27, 2012