Paragon proposes new board for Prospector Offshore Drilling

Paragon Offshore, the largest shareholder of Prospector Offshore Drilling since last week, has lodged a formal request for an extraordinary general meeting of  the shareholders of Prospector Offshore Drilling S.A. to be convened. At the meeting, Paragon will seek to appoint new board of directors.

To remind, Paragon Offshore last week acquired 93.5% of Prospector Offshore Shares, through several separate transactions for NOK 14.50 per share or approximately USD $2.13 per share. The total value of the transaction was NOK 1,283 million / USD $188.6 million.

Yesterday, Prospector Offshore Drilling confirmed it received the request to convene the shareholders meeting, along with names of new nominees to take over the Board positions.

Also, Paragon will propose the reduction of the number of directors from six to five, and the resignation of Prospector Offshore Drilling’s CEO Robert W. Rose.

Furthermore, Paragon will seek approval of the dismissals of Glen Rodland, Gunnar Hvammen, and Tomas Norrhy, as directors of Prospector Offshore Drilling. In their place, Paragon wants to appoint Steven A. Manz, Andrew W. Tietz, and William C. Yester as new directors of the company.

High-spec jack-ups

According to Paragon Offshore, the acquisition of Prospector Offshore Drilling will enable it to boost its position in the key North Sea market, since Prospector has two high specification jack-up rigs on contract with Total in the UK North Sea. Also, Paragon has seven standard jack-ups and one standard floater deployed in the North Sea.

Paragon has explained that the transaction would strengthen its relationship with Total, “already an important customer” with which Paragon has contracts in the Middle East and the North Sea.

The Prospector transaction will help Paragon Offshore, a standard specification offshore drilling company, enter into high specification rigs market.

Excluding two high-spec units owned by Prospector Offshore, the Prospector 1 and Prospector 5, Paragon’s drilling fleet consists solely of standard specification rigs and includes 34 jack-ups and eight floaters.

Standard specification rigs are generally 15 or more years old, have a “hook load,” or derrick hoisting capacity, of less than two million pounds, and have drilling equipment operated by mechanical, rather than electronic, means.

Three rigs under construction

In a webcast last week, Paragon Offshore’s plc President and Chief Executive Officer Randall D. Stilley, said that apart from the two Prospector Offshore rigs hired by Total, one of the most interesting aspects of the transaction was the fact that Prospector Offshore Drilling has three more hi-spec jack-up under construction at a Chinese yard. Stilley also said the three rigs are optional with no recourse to Prospector.

While Prospector has placed the under-construction rigs up for sale, Stilley said that Paragon would prefer to take delivery of the three units, and find them contracts. He also added that he hoped the Chinese yard would be flexible with delivery schedules.

Stilley said that the acquisition would enable Paragon Offshore to serve those clients who demand high specification jack-ups for high pressure/high temperature wells, deeper waters, and challenging environmental conditions like the ones in the North Sea. Furthermore, Stilley explained that, assuming Prospector’s fleet includes the two delivered rigs as well as the three rigs under construction, Paragon would become the second largest jack-up rigs operator with 39 rigs behind Ensco which owns 42.

The acquisition of the five rigs would also ‘rejuvenate’ the company’s fleet:

“If we would add all five units of Prospector fleet, it would reduce our average fleet age by almost five years,” Stilley said during the webcast.

This means that the average age of the Paragon Offshore fleet would drop from 35 years to 30, placing Paragon Offshore above Nabors, Hercules Offshore and Shelf Drilling by the average fleet age.