Noble buys Shell’s interest in two drillship JVs as Shell exits drilling contract

Offshore drilling contractor Noble Corporation and oil major Shell have completed their deal under which Noble received payout from Shell for a drillship contract and took over Shell’s interest in two drillship joint ventures. 

As reported in late October, Noble started discussions with Shell to receive payout of the Noble Bully II contract and to acquire Shell’s interest in the Bully I and Bully II joint ventures.

In an SEC filing on Tuesday, Noble said it had completed the previously disclosed transaction with Shell relating to the two joint ventures in which Noble and Shell each held a fifty percent interest.

In such transaction, Shell bought out the remaining term of its drilling contract for the drillship Noble Bully II, and Noble acquired Shell’s interests in the Bully I and Bully II joint ventures.

The amount agreed by the parties for Shell to buy out the drilling contract was based on a negotiated contract margin of approximately $206,000 per day for the remaining 888 days of the contract, Noble said.

The resulting gross value of $183 million was subject to a net present value adjustment and was further adjusted for amounts relating to a prior period, resulting in a buyout price of $166 million. In exchange for Shell’s JV Interests, Noble issued a note payable to Shell.

The parties agreed to a net settlement mechanism whereby Shell paid a portion of the buyout price to Noble in cash, and the remaining portion of the buyout price was satisfied by Shell’s assignment of the JV note back to Noble.

The ultimate cash amount owed to Noble was calculated by adjusting the buyout price by the fifty percent share owed to Noble as an equal partner in the Bully II joint venture, in addition to adjustments for working capital and other items, including a nominal amount of $10 million attributed to the remaining value of the JV Interests acquired by Noble.

Based on the foregoing considerations, the transaction was ultimately structured such that Noble made a non-cash payment to Shell for the JV Interests in the form of a $107 million note which was assigned back to Noble as part of the buyout price, and Noble received approximately $59 million in cash from Shell.

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