Cameron to sell offshore rig business to Keppel O&M for $100M

Keppel Offshore & Marine has, through its wholly owned subsidiary Keppel Offshore & Marine USA Inc., entered into a stock and asset purchase agreement with Cameron International Corp. (NYSE: CAM)  to acquire Cameron’s offshore rigs business (comprising the LETOURNEAU jackup designs, rig kit business, and aftermarket services) for $100 million. Cameron has recently entered into a merger agreement with Schlumberger Ltd. (NYSE: SLB).

The designs that Keppel is acquiring include the LETOURNEAU Super 116E, WORKHORSE, Super Gorilla XL, and Jaguar, and these designs will add to Keppel's offerings in the jackup market.

With the acquisition, Keppel will be able to offer customers the LETOURNEAU rig designs through the sale of rig kits to shipyards, or deliver ready-to-drill rig solutions from Keppel yards worldwide. The rig kits include jackup leg components, elevating units/jacking systems, and cantilever/skidding systems. Support equipment, such as cranes and anchor winches, are also options in the rig kits.

Another aspect of the business is the provision of aftermarket services. With approximately 100 LETOURNEAU rigs currently operating around the world, many operators require servicing and repair of their rigs. Keppel will be able to leverage its network of yards worldwide to meet these customers’ needs. Besides repairs, upgrades, and modifications, jackups are required to undergo five-year Class recertification special periodic surveys.

Chow Yew Yuen, CEO of Keppel O&M, said, "This is an opportune and strategic acquisition as it will not only broaden our suite of jackup design offerings in this highly competitive sector, but also provide us with enhanced capabilities to service customers through the provision of expanded aftermarket sales and services. We are confident that the long-term fundamentals of the offshore rig market remain positive. With the current low oil price, we have seen a slowdown in newbuild rig orders. Rig owners are instead looking at repairing and upgrading their current fleet."

Keppel O&M also has the expertise to build rigs of the LETOURNEAU design, having previously completed 16 such rigs.

“In our view, the divestiture of LeTourneau is a sound move given that this was not a good fit with SLB’s core competencies, allowing monetization of a modest $100MM sum (in the context of SLB’s $14.8B acquisition of CAM) while simplifying the transaction and reducing integration risk,” said Global Hunter Securities analyst Mark Brown in a note to investors Monday.

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