Standard Drilling to sell two of six jack-ups under construction at Keppel FELSWritten by
JUNE 26, 2012 — Oslo Axcess listed SD Standard Drilling Plc has today entered into a final agreement for the sale of one of the six K-FELS class B jack-ups it has under construction at the Keppel FELS shipyard in Singapore and issued the buyer an option to purchase a second of the six. If the option is exercised the gross combined price will be $ 426 million. The option for the second has to be declared by September 27, 2012. The buyer is UMW Oil and Gas, a company incorporated in Malaysia.
Chairman Gunnar Hvammen commented: “A start-up company like Standard Drilling needs to balance the changes in the financial market with the changes in the offshore drilling market. Sale of two rigs gives Standard Drilling increased flexibility to grow the company when the timing is right. Further, the deleveraging increases the likelihood of competitive financing of the remaining fleet and secures the equity value for our shareholders. The paradox is that reducing the fleet in the current environment increases the chance of becoming a strong long term player in the jack-up drilling market. Standard Drilling continues with full force to build a first class operator of modern state of the art drilling fleet to supply premium service to the industry.”
The sale of the first rig will give an estimated net profit of $8.5 million and if the option is declared for the purchase of the second rig, the estimated net profit from this transaction is $16.3 million. The book equity of Standard Drilling will be approximately $416 million after the transactions or USD 1.59 per share (NOK
9.52 per share).
Net cash proceed from the sale of the first rig is $68 million. If the option is declared the net proceeds from the two transactions will be $123 million.
Following exercise of the option, Standard Drilling will have four similar MOD B V drilling rigs under construction at Keppel FELS with contractual deliveries in June, November and December 2013 respectively and in May 2014. Construction is progressing well for all four units with no delays.
The sale of the two rigs will reduce Standard Drilling’s future capital investments (obligations to Keppel FELS) by $297.6 million. The total remaining commitment to the shipyard will correspondingl be reduced from $902.4 million to $604.8 million. After the transactions, Standard Drilling will have a net cash position of about $ 237 million. It says the net unfunded investments are therefore about $368 million plus running costs and investments in spares and loose drilling equipment.
The Board of Directors of Standard Drilling is “pleased with the sale of the two rigs. The net funding need for the remaining four rigs is comfortable” and the board expects the company to be able to finance the four remaining rigs at attractive terms in the commercial bank market.
Standard Drilling reports that it is currently building a strong management- and operating team based in Singapore with senior personnel with extensive experience from the drilling industry. Most senior positions have been filled and the management now consists of an 11 person team that has started to market the rigs and is preparing for rig operation from mid 2013.
The preparation for hiring the offshore staff for the four remaining rigs is said to be going according to plan and Standard Drilling says it is already in discussion with oil companies for the hire of the first rig and expects to sign the first drilling contract before the rig is delivered.
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