Keppel hands over first of three newbuild jack-up rigs to ADNOC Drilling
Keppel Corporation’s subsidiary, Keppel Offshore & Marine (Keppel O&M), has delivered the first of three newbuild jack-up rigs to the UAE’s ADNOC Drilling. This is in line with the drilling giant’s fleet expansion strategy to meet ADNOC’s production capacity targets.
Originally, the three rigs were part of a series of five rigs that Keppel FELS had been building for Borr Drilling. Previously, Keppel and Borr delayed deliveries of these rigs first in June 2020 and then in January 2021, which resulted in the deferral of the rigs’ scheduled delivery to 2023. These rigs were supposed to be delivered progressively with the first delivery in May 2023 and the final delivery in December 2023.
However, Keppel O&M entered into an amended agreement with Borr Drilling and certain of its subsidiaries in October 2022 to, among other things, accelerate the delivery of three jack-up rigs to Borr Drilling – or a third party to whom Borr Drilling intended to sell the rigs – between October 2022 and July 2023. Since then, the construction contracts for the three rigs have been novated by Borr Drilling to ADNOC Drilling, and this is the first of three rigs to be delivered to the UAE player.
While explaining that the delivery of the jack-up was done through its wholly-owned subsidiary Keppel FELS, Keppel O&M disclosed on Thursday that a full payment of approximately $160 million was received upon the delivery of the first rig. As part of the novation agreement, the company will also receive full payments for each of the remaining two rigs on delivery.
To expand its fleet of rigs, ADNOC Drilling inked several deals earlier this year, including the ones on 30 May for two rigs, 10 June for one rig, and 24 August for another rig. The UAE giant also revealed earlier this month that it would be boosting its fleet with three new jack-up rigs.
Tan Leong Peng, Managing Director (New Builds) of Keppel O&M, commented: “We are pleased to support ADNOC Drilling in the growth of their rig fleet and drilling operations with the delivery of the first of three newbuild rigs. Keppel O&M stands ready to support our customer with additional modification services as they prepare their rigs for deployment.
“With the novation of the three jack-up contracts to ADNOC Drilling, we have even greater certainty of delivering these rigs, receiving more cash payments sooner, and reducing Keppel O&M’s financial exposure to the legacy assets.”
Furthermore, Keppel O&M expects to receive at least $352 million for all three rigs between 2022 and 2023 in addition to down payments initially received from the previous customers for the rigs. The first rig, which has now been delivered, is built to the KFELS Super B Class design, which is capable of operating in water depths of over 400 feet, drilling to depths of 35,000 feet, and drilling deep wells both vertically and horizontally.
The rig will be equipped with an advanced, fully-automated high-capacity rack and pinion jacking system, a self-positioning fixation system, and accommodation with full amenities for 150 people.
As part of the definitive agreements Keppel Corporation has signed in connection with the proposed Offshore & Marine transactions, these rigs are part of Keppel O&M’s legacy rigs, and such rigs as well as any sales proceeds will be transferred to Asset Co that is majority-owned by external investors, upon completion of the proposed combination of Keppel O&M and Sembcorp Marine.
“Our high quality and cost-effective KFELS B Class family of rigs have a strong track record in the Middle East. Since the start of 2022, all nine of our proprietary jack-up rigs have been contracted for deployment in the Middle East. As drilling rig utilisation rates continue to increase, we are seeing more demand for high-quality rigs that our legacy rigs are well suited to meet,” added Peng.
Regarding Keppel’s other activities, it is worth noting that the company recently completed the modification works for four KFELS B Class jack-up rigs, which were slated to be deployed on bareboat charters in Saudi Arabia in October 2022.
In addition, Keppel O&M secured assignments for two jack-up rigs in November 2022, which would be deployed in Saudi Arabia.