Odfjell Drilling buys former Stena rig, wins contract with Aker BP

Offshore driller Odfjell Drilling has bought the Deepsea Nordkapp drilling rig, former Stena Midmax, and won a contract for it from Aker BP. 

Odfjell revealed its intention to buy the Stena Midmax, a Moss CS60E semi-submersible drilling rig, from Samsing Heavy earlier in April.

With this in mind, the driller completed the private placement raising gross proceeds of approximately $175 million with the purpose of financing growth within its mobile offshore drilling fleet and general corporate purposes.

On Monday, April 30 Aker BP awarded Odfjell Drilling a two-year firm drilling contract with 1+1 year optional periods. The day rates for the drilling contract will be based on market terms to be determined prior to begining of drilling operations.

In addition to the market linked day rate, a performance bonus as agreed in the alliance agreement with Aker BP, as announced in November 2017, will apply. The contract has a minimum value of $245 million, subject to certain adjustments.

According to Odfjell, the start of drilling operations is expected in 2Q/3Q 2019.

For the purpose of the drilling contract with Aker BP, Odfjell Drilling has entered into an agreement with Samsung Heavy Industries to purchase the former called drilling unit Stena MidMax for $505 million. The unit is an enhanced Moss Maritime CS-60 winterized and purposely built for harsh environment areas.

Odfjell Drilling has agreed to pay a pre-delivery installment of approximately $220 million within April 30, 2018, while the remaining purchase price is payable on delivery of the unit. The unit will be named Deepsea Nordkapp.

Financing the acquisition 

Odfjell Drilling intends to finance the acquisition of the rig through a contemplated $325 million senior secured term loan facility, proceeds from the private placement, proceeds from a contemplated issue of preference shares to an affiliate of Akastor and a seller’s credit from Samsung Heavy of $48.25 million.

Odfjell Drilling is in constructive dialogue with bank lenders for the $325 million new senior secured term loan. The senior secured term loan is expected to have a similar structure as Odfjell Drilling’s existing term loans.

Furthermore, Odfjell Drilling has now signed a preference share investment agreement and a warrant investment agreement with an affiliate of Akastor to carry out a $75 million preference share issue and an issuance of warrants for 5,925,000 common shares in Odfjell Drilling to such affiliate. The issuance of the preference shares and the warrants is subject to the approval at a special general meeting of Odfjell Drilling which will be convened separately. The board of directors of Odfjell Drilling has resolved to propose to the special general meeting that the 16,123,125 preference shares and the warrants for 5,925,000 common shares be issued.

Simen Lieungh, CEO of Odfjell Drilling, commented: “Expanding our fleet with another modern harsh environment semi is an important step in our strategy of growth, and strengthens our position in the market as the preferred harsh environment drilling contractor.

“This drilling contract with Aker BP exemplifies the mutual benefits of the Alliance partnership, whereby Aker BP has now secured a second advanced harsh environment drilling unit, having secured a contract for the GVA unit Deepsea Stavanger in December 2017.”

It is worth reminding that the UK driller Stena Drilling ordered the Stena Midmax rig from the South Korea’s Samsung Heavy in 2013. However, the driller cancelled the order in 2017 claiming Samsung was unable to complete and deliver the unit within the contractually agreed timeframe.