Saudi Arabia’s ADC Buys Rig from Standard Drilling

Cyprus-based SD Standard Drilling Plc (“Standard Drilling”) has entered into a final SPA for the sale of one rig (B325) under construction for a total consideration of USD 213,5m. The buyer is Arabian Drilling Company, a company incorporated in Saudi Arabia.

The sale of the rig will give an estimated net profit of USD 8,5m. The book equity of Standard Drilling will be approximately USD 425m after the transactions with ADC and UMW (announced 26th June – 12) or USD 1.62 per share (NOK 9.80 per share). Net cash proceed from the sale of B325 is USD 68m.

Following sale of B325 and assuming the UMW option rig is exercised by UMW, Standard Drilling will have 3 similar MOD B V drilling rigs under construction at Keppel FELS (the “Yard”) in Singapore with contractual delivery in November and December 2013 respectively and in May 2014. The construction is progressing well for all 3 units with no delays.

The sale of the rigs will reduce the future capital investments (obligations vs Keppel FELS) by USD 144m. The total remaining commitment vs the Yard will correspondingly be reduced from USD 604.8m to USD 461m. After the transactions, Standard Drilling will have a strong net cash position that will help reducing the net unfunded investments, running costs and investments in spares and lose drilling equipment to a manageable level.

“The Board of Directors in Standard Drilling is pleased with the sale of the rig. The net funding need for the remaining 3 rigs is comfortable and the Board of Directors expects the company to be able to finance the 3 remaining rigs at attractive terms in the commercial bank market,” sad the company in a press release.

Standard Drilling is currently building a strong management- and operating team based in Singapore with senior personnel that has extensive experience from the drilling industry. Most senior positions have been filled and the management now consists of an 11 person strong team that have started to market the rigs and preparing for rig operation from mid 2013. The preparation for hiring the offshore staff for the 3 remaining rigs is going according to plan. Standard Drilling is already in discussion with oil companies for the hire of rigs and expect to sign the first drilling contract before the first rig is delivered.

 The Chairman of Standard Drilling, Mr. Gunnar Hvammen, says in a statement “A start-up company like Standard Drilling needs to balance the changes in the financial market with the changes in the offshore drilling market. Standard Drilling originally ordered 7 similar rigs at Keppel FELSE in 2010 and 2011. The company has sold 4 (3 sold and 1 option) over the last 12 months at values that are USD 20-40m above the original contract price. The sale of the rigs is a consequence of the weakening of the banking industry world wide and in Europe especially. Standard Drilling do not plan to sell any more rigs and we would not rule out that Standard Drilling would buy second hand rigs or order new rigs if the financial markets improve again. In Standard Drilling we are very concerned about capital cost. Borrowing in the bond market at interest rates over or close to double digits will destroy value for shareholders. The paradox is that reducing  the fleet in the current environment increases the chance of becoming a strong long term player in the jack-up drilling market. Standard Drilling continues with full force to build a first class operator of modern state of the art drilling fleet to supply premium service to the industry.”

[mappress]
Press Release, July 12, 2012