Monday, October 23, 2017

Borr Drilling in USD 1.3bln Sembcorp Deal

October 9, 2017

Photo: Sembcorp Marine Ltd

Singapore-based Sembcorp Marine (SMBMF) said its wholly-owned subsidiary PPL Shipyard (PPLS) has agreed to sell nine Pacific Class 400 jackup drilling rigs to Borr Drilling and its subsidiaries for a total of US$1.3 billion.

 
It will also be entitled to a market-based fee, based on an uplift in value of the rigs sold.
 
Under the terms of the Agreements, which is subject to conditions precedent being met by both parties, Borr Drilling will take delivery of the nine jackup rigs progressively over a 14-month period, from 4Q 2017 to 1Q 2019. Borr Drilling will make an upfront down payment of about US$500 million.
 
The balance amount of approximately US$800 million (“Balance Amount”) will be paid at any time within five years from the respective delivery dates of the Rigs. Borr Drilling will pay interest at market rates from the respective delivery dates of the Rigs to full payment of the Balance Amount. The Balance Amount and all interest payable will be secured by a first priority mortgage over the Rigs and a corporate guarantee from Borr Drilling Limited.
 
The nine rigs sold include all six rigs from contracts which PPLS had earlier terminated with its original customers, and three rigs presently under various stages of construction completion. The sale demonstrates the quality and ability of PPLS’s high-specification jackup rigs to attract demand despite challenging market conditions.
 
Excluding all interest and Market Fee payable by Borr Drilling, the transaction for the sale of the nine jackup rigs will collectively result in a loss of approximately S$15 million. Had this transaction occurred in the financial year ended 31 December 2016, it would have the effect of reducing the Company’s 2016 earnings per share by S$0.0072, but would not have any material impact on the net tangible assets of the Company for the financial year ended 31 December 2016.
 
The above transaction will significantly improve the liquidity position of the Company and help strengthen its ability to offer quality solutions to customers, ride through the current cycle trough and be well-positioned for the industry’s recovery.
 

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