Nordic Winter rig

Awilco exploring options to finance rig order at Keppel

Offshore drilling contractor Awilco Drilling is looking into ways to finance its remaining commitments for a newbuild rig ordered at Keppel keeping in mind that there is also an option to delay the delivery and the next payment by up to a year.

Nordic Winter rig; Source: Awilco Drilling

Awilco owns and operates two semi-submersible drilling rigs.

During the second quarter of 2020, Awilco’s WilPhoenix rig started operations for Petrofac at the Rubie and Renee location where it remained until after the end of the quarter.

The rig’s revenue efficiency in 2Q 2020 was 100 per cent and contract utilisation was 68.1 per cent.

Awilco’s other rig, WilHunter, has been cold stacked in Invergordon for years now.

Awilco has also had two rigs on order at Keppel’s shipyard.

However, Awilco cancelled the construction contract for the first rig, the Nordic Winter, last June due to alleged breaches under the contract.

Keppel denied these allegations and the companies started the arbitration process to resolve the dispute in June.

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When it comes to the second rig, the Nordic Spring, Awilco said on Wednesday that the first steel for the rig was cut in 3Q 2019. The keel-laying ceremony was held on 31 July in Nantong, China.

According to Awilco, the situation at the yard in Singapore is uncertain due to Covid-19. There is delay in construction but the yard is unable to quantify this until the Covid-19 situation is under control and work is fully resumed in Singapore.

The rig is scheduled for delivery in March 2022.

Keel-laying ceremony for the Nordic Spring rig
Keel-laying ceremony for the Nordic Spring rig; Source: Awilco Drilling

Remaining capital commitment at the end of the second quarter in respect of this rig was $382.3 million.

Awilco is exploring all viable financing alternatives for the financing of the rig.

Awilco had a cash balance at the end of the second quarter of $16.7 million. It is recognised that the construction contracts with the shipyard are structured such that there is no recourse to the rest of the Group in the event of default by the contracting subsidiaries.

The next payment to the yard for the Nordic Spring rig is approx. $42 million and it is scheduled for March 2021.

Funding for the second instalment and the remaining balance at delivery will be required, by a combination of additional equity and debt.

There is also the option to defer the delivery of the rig, and the related payment, by up to one year.

Awilco noted that this decision will be taken at a later date.

More red ink for Awilco

Awilco Drilling also on Wednesday reported a total comprehensive loss for the second quarter of 2020 of $4.6 million compared to a loss of $392,000 in the same period last year.

Revenue earned in the second quarter was $6.4 million compared to revenues of $10.4 million in 2Q 2019.

Contract backlog at the end of 2Q was approximately $19.4 million compared to $13.8 million in 1Q.

Further rig retirements and cold stacking in the quarter reduced marketed floater supply across NW Europe.

Looking ahead, while the UK demand in 2021 is expected to remain seasonal, the impact of reduced supply and increased operator focus on P&A suggests a tighter supply/demand balance and reduced seasonality from Q1/2 2022, Awilco said.

The Norwegian tax incentive program has had an immediate positive impact on project sanctions and is expected to continue to support and accelerate rig demand in Norway.

Recent fixture levels in the upper part of that market indicate a degree of resilience to short-term market fluctuations, Awilco concluded.