Fredriksen’s Northern Drilling orders another newbuild at a discount price

Offshore drilling firm Northern Drilling has ordered another newbuild rig, exercising its previously held option for the Cobalt Explorer drillship to be delivered by Daewoo Shipbuilding & Marine Engineering.

Northern Drilling, established by billionaire John Fredriksen to pursue opportunistic acquisitions, will pay $350 million for the rig and will have a flexible delivery date until the end of the first quarter of 2021.

The Cobalt Explorer, a 7^th generation DP3 and ultra-deepwater drillship, had been ordered from DSME by Vantage Drilling and canceled in August 2015.

“Cobalt Explorer is a high-spec Tier 1 UDW drilling ship being purchased at close to 50% discount to the previous owner’s estimated total project cost of $660 million. Cobalt Explorer is the only stranded UDW drillship from Korean yards that comes with additional spare parts including two blow out preventers, which are conservatively estimated to have an additional value of $25 million each,” the company said in a statement on Tuesday.

Northern Drilling will pay the consideration in three installments; $12 million in December 2018, $93 million will be paid in five installments of $18.6 million over ten months, beginning June 2019; $245 million final installment at delivery.

“With back-end loaded payment terms and flexible delivery schedule, the Company can comfortably wait for further market improvements in the benign deep-water market before electing to take delivery. The market for Tier 1 drillships continues to strengthen with several data-points of day rates approaching $300,000 per day for start-up in 2020 and beyond. The company believes the fundamentals will continue to tighten and is ideally positioning itself with three high-spec drillships due for delivery in 2021,” the company said.

‘Deepwater shows clear signs of recovery’

The driller has since its establishment bought two newbuild harsh-environment semi-submersibles and three drillships, including the Cobalt Explorer.

It bought the West Mira semi-submersible rig from Hyundai Heavy Industries after Seadrill had canceled the contract due to the yard’s inability to deliver the rig on time. Northern also bought the Bollsta Dolphin semi-submersible from Hyundai in 2017. The original client for the rig, Fred. Olsen Energy, canceled the order in 2015 as a result of the delays in the delivery date.

The two harsh-environment semi-subs the West Mira and the West Bollsta have secured long term contracts with Wintershall and Lundin. As with the Cobalt Explorer, the first two drillships ordered a year ago and built by Daewoo have flexible delivery schedules into 2021.

Commenting on the Cobalt Explorer order Scott McReaken, CEO, commented: “With the Cobalt Explorer acquisition, Northern Drilling continues to execute on our strategy and adds to our premium fleet of Tier 1 drillships, all acquired at a substantial discount to replacement cost. The Company’s two harsh environment rigs were acquired on a similar forward delivery basis and we have successfully secured contracts with premium operators at leading day rates in the North Sea. The deepwater market is showing clear signs of recovery providing increased confidence our drillships will continue to appreciate in value and secure attractive contracts by their delivery in 2021.”

Offshore Energy Today Staff

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