Singapore’s Keppel terminates two contracts and keeps four jack-up rigs

Singapore’s conglomerate Keppel Corporation has terminated two separate contracts for a total of four jack-up rigs, keeping the payments and ownership of the rigs.

In October 2013, Keppel received two jack-up orders from an affiliate of Clearwater Capital Partners for a total of $440 million. The rigs were scheduled to be completed in 4Q 2015 and 1Q 2016. In May 2014, Clearwater sold one of the rigs to Arabian Drilling Company (ADC).

Out of these two rigs, one rig – worth about $200 million – remains undelivered.

Furthermore, in February 2014, Keppel secured contracts to build three high-specification KFELS B Class jack-up rigs worth about $650 million from Fecon International Corp. The three rigs were scheduled to be delivered progressively within 2H 2016.

Keppel FELS, a wholly-owned subsidiary of Keppel Offshore & Marine, issued notices of termination for the relevant contracts on 13 April 2022. According to Keppel, the basis for termination is the failure of the respective clients without reasonable or legal justification to take delivery of the respective rigs – despite Keppel FELS’ readiness to deliver – and concurrently pay the outstanding instalments.

Following the termination of the contracts, Keppel FELS will retain all payments received to date under them and will retain ownership of the rigs, including the right to sell. The contracts are being terminated as part of ongoing efforts to explore other options, such as the sale and charter of these rigs, Keppel explained.

As a reminder, Keppel is looking into selling Keppel O&M’s legacy completed and uncompleted rigs and associated receivables to a separate Asset Co, which would be majority-owned by external investors as part of Keppel’s plans and discussions with Sembcorp Marine to merge their offshore and marine businesses. These two proposed transactions are inter-conditional and pursued concurrently.

The two companies have been participating in these merger talks since June 2021. In late March 2022, the two said that significant progress had been made in the process. However, more time and deliberation are needed to reach the final agreement to which both companies are committed.

Therefore, the two are working towards a definitive agreement by 30 April 2022. The objective of the proposed combination is to create a stronger combined entity, leveraging respective strengths to realise synergies and deliver sustainable value over the long term for shareholders.