Seadrill Places Mega-Order for New UDW Drillships

Seadrill Limited (Seadrill) has entered into turnkey contracts to build four new ultra-deepwater drillships. Two drillships will be built at the Daewoo Shipbuilding & Marine Engineering (DSME) yard and the other two at the Samsung Heavy Industries shipyard, in South Korea.

The project value price is estimated to be below US$600 million per unit (including project management, drilling and handling tools, spares, capitalized interest and operations preparations). Delivery of the 4 units is scheduled for the second half 2015. Seadrill has in addition received fixed priced options for delivery of two further units for delivery in the first half 2016.

The drillships will have a hook load capability of 1,250 tons and a water depth capacity of up to 12,000 feet targeting operations in areas such as the Gulf of Mexico, Brazil and West and East Africa. Also, these units will be outfitted with seven ram configuration of the blowout preventer (BOP) stack and with storing and handling capacity for a second BOP. The units include design and equipment features, which makes them particularly attractive for development drilling. For two of the drillships, Seadrill has received options to include equipment which makes the units prepared for 20K BOP systems.

Seadrill’s construction program now totals 22 units, including 9 drillships, 2 harsh environment semi-submersibles, and 11 high specification jack-ups. In addition the Company has fixed priced options for two ultra-deepwater units.

The Board of Seadrill is of the opinion that the current order book for 2014 – 2016 of approximately 39 units will be fully absorbed, and utilization will continue at very high levels with solid dayrates for the modern equipment. Seadrill currently has an order backlog of approximately US$19 billion. Seadrill believes that the economic and administrative benefits of organic growth are far superior to large corporate acquisitions. The decision to move ahead with these four newbuilds is taken after a careful consideration of Seadrill’s financing capacity, and is partly a reflection of the increased financial flexibility created by the sale of the tender rig fleet to Sapura Kencana.

The Board has during the last year also seen significant improvement in Seadrill’s borrowing capacity. This trend is supported by strong improvement in operating results as well as increased credibility in the ECA market, the bond market as well as lower margins from commercial banks.

John Fredriksen, Chairman of Seadrill Limited, says: “We have been able to use the current weakness in the shipbuilding industry to order drilling units at very attractive price levels. At the same time we are securing future growth by continuing to build a homogenous fleet with all the operational benefits which come from fleet standardization. Through this latest newbuild order Seadrill remains uniquely positioned as a high growth – high dividend stock.”

The industry’s ordering of deep water drilling units for 2015 delivery has been lower than expected with only 7 un-contracted newbuilds available prior to this order.

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Press Release, July 15, 2013