KS Drilling cancels another jack-up order in China

Singaporean offshore driller KS Drilling has canceled another newbuild rig order in China. This time with COSCO.

Following a recent rig order cancellation with ZPMC, KS Energy, KS Drilling’s parent company said this week that KS Drilling had agreed with COSCO to cancel the contract for the delivery of the KS Orient Star 2 jack-up drilling rig. The parties had entered into the rig construction contract back in 2011.

According to KS’ recent statements, after several revisions of delivery dates, the Shanghai Zhenhua Heavy Industry-built rig was to be delivered on December 31, 2018 (now canceled), and the Cosco rig in December 2019. Both deliveries have now been canceled.

In a statement this week announcing the KS Orient Star 2 order termination, KS Energy said:” There is no material impact on the operations of the Group due to the Termination Agreement
however the costs of construction, net of provisions, relating to the Rig which were previously capitalized with a book value of US$26.8 million as at 31st March 2019 will be written off. As such, the Termination Agreement is expected to have a material impact on the net tangible assets and earnings per share of the Group for the financial year ending 31 December 2019.”

As previously reported, Singapore Exchange in April sought an answer from KS Energy on whether the company and the group could continue to operate as a going concern, that is, if it would be able to meet its obligations as and when they fall due.

The SGX query followed a report by independent auditor KPMG, which at the time highlighted that KS Energy’s current liabilities exceeded current assets, and pointed to the Group’s capital commitments of $489 million as at December 31, 2018, with “currently no financing arrangements put in place to meet the obligations.”

Related: KS Energy in $4.9M rig deal as auditor casts doubt on driller’s ability to stay afloat

The $489 million commitment was related to the two newbuild jack-up rigs under construction in Chinese shipyards Cosco and Shanghai Zhenhua Heavy Industry Co, orders for which have now been canceled.

Offshore Energy Today Staff

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