Shelf Drilling, China Merchants wrap-up four-rig transaction

Jack-up rig operator Shelf Drilling has completed the previously announced transaction to buy two newbuild jack-ups and bareboat charter two additional units from China Merchants.

Shelf Drilling had in February reached an agreement to buy two newbuild jack-ups for $87 million apiece, and charter two more rigs with an option to buy, from China Merchants.

As part of the deal, Shelf entered into an agreement to “pay” for the rigs by issuing the company’s shares to CM and its affiliate, whereby the CM entities would subscribe for New Common Shares for a total subscription amount of $174 million, which equals the aggregate purchase price for the two jack-ups.

“The Transaction was completed today, on 9 May 2019,” Shef Drilling said in a stock exchange filing on Thursday.

David Mullen, Chief Executive Officer said: “The closing of this transaction marks an important milestone for Shelf Drilling and we would like to congratulate everyone involved in this process. The on-time delivery of the two premium CJ-46 jack-ups is the result of a truly collaborative effort between Shelf Drilling and China Merchants.

“Our alliance with China Merchants significantly strengthens our competitive position and creates tangible value for all our stakeholders. It also provides us access to the experience and resources of one of the largest state-owned enterprises in China and we look forward to welcoming their representatives to our Board. The addition of these four premium jack-up rigs creates exciting near-term opportunities for Shelf Drilling in an improving jack-up market.”

All four rigs are of Gusto MSC CJ46 design. Shelf has the option to acquire one or both of the CM bareboat rigs for $90 million per rig during the first year of the charter period, $92 million per rig during the second year of the charter period and $95 million during the third year of the charter period.