Ezion to sell jack-up rig trio for three dollars to reduce cash burn

Singapore’s offshore services rig provider Ezion has entered into an agreement to sell three jack-up rigs. The buyer will pay $3 (three dollars) for the rigs and will take over Ezion’s liabilities linked to these units.

Ezion said on Tuesday that the jack-ups in question were the Atlantic Tiburon 1, Atlantic Tiburon 2, and Atlantic Tiburon 3 rigs.

The proposed disposal is expected to be completed by November 30, subject to the release of the mortgages over the AT rigs which the group is currently in the process of obtaining.

The sale consideration for the rigs includes a nominal cash consideration of $3.00 and the novation of liabilities of approximately $659,000 in respect of the AT rigs to the buyer, a Mexico-incorporated company providing marine support activities.

The aggregate carrying value and net tangible asset value of the AT Rigs as of June 30 is approximately $2.91 million. The scrap value of the rigs is approximately $1.1 million which is insufficient to cover the costs required to scrap the rigs and settle the liabilities relating to the rigs of around $600,000 and $659,000, respectively.

Ezion said there was a deficit of approximately $2.91 million of the proceeds over the book value of the AT rigs and the proposed disposal was expected to incur a loss on disposal of $2.25 million.

According to Ezion, the jack-up trio sale is in line with the company’s plan to reduce burn rates of the service rigs that are currently not deployed. The sale, Ezion said, will enable the group to improve the efficient use of its capital and cash flow.

Ezion last announced quarterly results (2Q) in August. The company then posted revenue of $24.4 million, a $1.3 million increase compared to 2Q 2018.

While revenue slightly grew due to an increase in liftboat utilization, Ezion’s result after tax was a loss of $363 million in 2Q.

Ezion’s assets as at June 30, 2019, amounted to $200 million, with the company’s total liabilities at ~$1.6 billion as at the same date.

The company at the time said while there had been some improvement in the market for its assets, the company was unable to benefit from this as it didn’t have the working capital necessary to deploy its liftboats.

Worth noting, Ezion had entered into a conditional agreement with Malaysia’s FPSO specialist Yinson in April. Under the agreement, Yinson would acquire the benefits and rights in respect of up to $916 million of Ezion’s debt in exchange for becoming a new majority shareholder with at 70 percent in Ezion. However, Ezion on October 1 said that the Conditional Debt Conversion Agreement and the Conditional Option Agreement with Ezion would be terminated as condition precedent have not been fulfilled.

Offshore Energy Today Staff

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