SapuraKencana buying Seadrill tender rig business for $2.9bn

The two firms said in a stock market announcement that they have entered into a non-binding memorandum of understanding (MoU) to combine and integrate both companies' tender rig businesses based on an for an enterprise value of $2.9bn.

SapuraKencana said the amount included $363m in remaining capital expenditures linked to Seadrill's newbuilding programme and all the debt in the tender rig business, including existing bank facilities of about $800m as of December 31 2012.

Of the remaining consideration of $1.74bn, it said $350m will be met by issuing new shares, which will boost Seadrill's interest in the company to about 13% from 6.4% currently. The remaining amount of $1.39bn is expected to be financed through a mix of external borrowings, a seller's note to Seadrill amounting to up to $187m, internally generated funds and equity.

The enlarged tender rig business under SapuraKencana will comprise 16 wholly-owned tender rigs in operation, including the KM1 rig currently owned by SapuraKencana, five of which are currently 51% owned and managed through its existing joint venture with Seadrill via Varia Perdana Sdn Bhd and Tioman Drilling Company Sdn Bhd.

It will also include an additional five units that are currently under construction, three of which will be acquired through the proposed transaction and are expected to be delivered in 2013. The rigs and upcoming newbuilds are all currently contracted under long-term fixed price contracts with established oil companies such Chevron, Shell, PTTEP and Petronas Carigali. SapuraKencana said. Total order backlog amounts to $1.55bn as at end of October 2012, with the majority of the operating rigs currently deployed in Southeast Asian waters.

In addition, SapuraKencana will also be offered the right to be the manager for three tender rigs, West Vencedor, T-15 and T-16, which are currently either owned or planned to be owned by Seadrill Partners LLC and are therefore not included in the proposed transaction.

The agreement also commits the parties to growing their joint venture activities in Brazil where they were awarded three PLSV contracts by Petrobras in 2011.

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