Viking inks $180m rigbuilding deal at China Merchants

The jack-up drilling rig, valued at $180m, will be built at state-owned China Merchant Heavy Industries (CMHI). Construction is expected to start in December this year and completion is scheduled 26 months later for deployment in Southeast Asian waters.

The newbuilding deal is not attached to a charter contract yet, but the company has expressed confidence in securing a charter due to strong demand for new rigs, according to Andy Lim, chairman and of Viking O&M.

“Demand for new rigs will far outstrip supply in the next few years. The issue is whether owners can secure a slot at the rig building yards,” Lim commented.

He added that about 80% of the rigs worldwide are more than 20 years old, triggering a larger appetite for new rigs with higher capabilities to operate in deeper waters and harsher environments.

The rig building deal is sealed after Viking O&M partnered with co-founder of the then Singapore-listed Labroy Marine, Chan Kwan Bian. Viking has agreed to acquire a 30% stake valued at $5.4m in Smart Earl Investment, an investment vehicle belonging to Chan, that has the rights to build the jack-up rig.

The CJ46-X100-D GustoMSC model rig, capable for use in water depth up to 375 feet, has a “very attractive” payment term from the Chinese yard, according to JK Low, cfo of Viking O&M. While Low declined to reveal the payment terms, industry players have said Chinese yards can accept downpayment of 5% or less, and tail-heavy payment of 95% upon completion.

“What we are trying to achieve is to move up the value chain and go into owning and chartering of jack-up rigs. This rig building venture is one of the few moves that we will make in entering the offshore business,” Low said.

Low told Seatrade Global that the company is also planning to acquire OSVs such as anchor handling tug supply (AHTS) vessels and platform supply vessels (PSVs) when the opportunity arises.

However, the company did not reveal the specific number of rigs and OSVs that it intends to own, but believes that its foray into the mainstream offshore and marine business is in line with the asset-based strategic growth initiative it had planned for.

Meanwhile, Singapore billionaire and rigbuilding veteran Tan Boy Tee has entered into an agreement to buy up to 10.1% stake in Viking O&M. Tan's investment is seen as a key support for Viking O&M's venture into the fast-growing rig building and rig charter market.