HAMILTON, Bermuda – Borr Drilling Ltd. has signed a letter of intent with Transocean for the acquisition of 15 high-specification jackup rigs.
The transaction is expected to total around $1.35 billion, and consists of all of Transocean’s jackups, comprising 10 rigs in its existing fleet and five newbuilds under construction at Keppel FELS Ltd.
The consideration for the transaction also includes the remaining contract backlog and yard instalments to Keppel FELS for the newbuilds, whose board of directors has pre-approved the novation of the newbuilding contracts.
Borr said that a deposit in line with what has been agreed between the parties has been paid to Transocean. Financing has been secured through a private placement of equity securities, and the company also announced an $800 million equity offering to fund the acquisition.
Evercore ISI’s Oilfield Services, Equipment & Drilling group sent a flash note on the transaction, calling the confirmed deal “significant.”
Rumors that Borr was closing in on such a deal had surfaced earlier this month, as Evercore and others had reported, and the analyst firm noted that the final terms were up from the reported $1.125 billion.
“While the transaction ‘includes remaining contract backlog and remaining yard installments’ on the five newbuilds … the deal monetizes [Transocean’s] under-utilized jackup fleet and significantly reduces RIG’s debt and capex,” Evercore said.
The analyst firm estimates Transocean’s 10 active jackups at a book value of $1,133 million. Labeling the price paid per jackup as “murky” since the value of the newbuilds have likely been reduced, Evercore said that Transocean’s newbuild capex declines to $413 million in 2017, $70 million in 2018, $98 million in 2019, and $960 million in 2020.
In January, Borr Drilling took delivery of two 400-ft jackups from Hercules Offshore for $130 million after the two companies agreed to the deal in December 2016. The Borr Drilling Frigg (ex-Hercules Resilience) and Borr Drilling Ran (ex-Hercules Triumph) remain cold stacked off Cameroon and the Netherlands, respectively.
The transaction is subject to the parties executing definitive agreements and satisfying formal closing conditions, including a final approval from the boards of directors of both companies. It is expected to be completed before the end of May 2017.
Borr debuted on the Norwegian OTC on Dec. 19, 2016, after changing its name from Magni Drilling Ltd. Its CEO, COO, and two of its board members are formerly Seadrill Ltd. executives.