Prosafe buying two Axis Offshore rigs

Offshore accommodation specialist Prosafe is looking to buy two new flotels from Axis Offshore, executing its plans on strategic consolidation, fleet renewal and scrapping of older assets.

The company has signed a letter of intent to acquire two harsh-environment semi-submersible accommodation rigs, the Axis Nova and the Axis Vega.

The two rigs are currently in the Cosco Qidong Shipyard in China, with their delivery schedules recently delayed by Axis Offshore.

To remind, Prosafe also has a flotel being built in the same shipyard, the Safe Eurus. The company has recently put off the delivery date until the fourth quarter of 2019.

Providing rationale for the potential Axis transaction, Prosafe noted that it is taking the lead in the consolidation, as the offshore accommodation market is in a very challenging situation due to growth in oversupply coupled with the oil and gas industry downturn.

The company said that should the transaction go through, it would have three accommodation vessels completed or nearing completion in a preserved, strategic stacking mode with Cosco Quidong Shipyard in China.

Prosafe will enter into negotiations with the yard and related parties for a workable delivery and financing of the two accommodation units, in addition to Safe Eurus. If no agreement is made with the yard and related parties Prosafe has the right to claim cancellation on the newbuilding contracts due to late delivery and claim deposit of $60 million fully secured by Bank of China.

Subject to the completion of the acquisition, and the talks with the yard, Prosafe would then scrap more accommodation units, in addition to the three units already scrapped in 2016.

In addition to the planned acquisition of the two newbuilds, Prosafe also plans to acquire a 25 percent ownership in Axis Offshore’s Dan Swift monohull unit. Subject to this, Prosafe would take over commercial, operational and technical management of Dan Swift for a fixed monthly fee of USD 20,000 + 2,50% of the vessel’s generated revenue.

As for the financial details of the Axis transaction the agreed consideration for the acquisition will be $70 million (NOK 579.2 million) settled by Prosafe, through the issuance of 585.8 million ordinary shares priced at NOK 0.30 per share, and a subordinated zero coupon convertible bond of NOK 403.4 million, convertible into 1,344.7 million shares at a conversion price of NOK 0.30 per share.