Seadrill to sell seven jack-up rigs for $628 million
Offshore drilling contractor Seadrill has entered into a binding share purchase agreement (SPA) with subsidiaries of ADES Arabia Holding to sell the legal entities that own and operate seven jack-up rigs in Saudi Arabia.
Upon completion of the sale, the AOD I, AOD II, AOD III, West Callisto, West Ariel, West Cressida, and West Leda will be owned by ADES who will also employ the crews operating the rigs and will hold the drilling contracts related to the rigs, Seadrill revealed on Thursday.
According to Seadrill’s latest fleet status report, AOD I, AOD II, AOD III, and West Callisto are all under contracts with Saudi Aramco while the remaining three are being prepared for contracts for undisclosed clients in the Middle East.
The total consideration for the sale is $628 million in cash, subject to adjustment for working capital and other items, and reimbursement to Seadrill for any project costs spent at the time of closing in relation to the reactivation of the three stacked jack-ups, namely the West Ariel, West Cressida and West Leda.
This translates into approximately $100 million per rig on a ready-to-drill basis. The first two rigs are expected to start their contracts in March 2023 and the third one on April 2023.
Seadrill explained that the proceeds from the jack-up sale will enable it to significantly de-leverage its balance sheet and to eliminate outstanding capital expenditure for the reactivation rigs.
Simon Johnson, Seadrill Chief Executive Officer who took over the role in March this year, commented, “The sale of seven jack-ups to ADES is transformative for Seadrill. We are pleased to announce this transaction, which we believe crystallizes the valuation of these rigs at a substantially higher level than currently implied in Seadrill’s share price. It will also enable us to significantly de-lever our balance sheet, positioning us for future opportunities.”
The sale is subject to customary closing conditions, including approval of competition authorities in Saudi Arabia, and is anticipated to close within the fourth quarter of 2022. Seadrill will provide customary transition support services to ADES for a limited period of time following closing.
ADES has made several other rig purchases since late last year. In November 2021, ADES bought four jack-ups from Noble Corp. and in December it agreed to buy three jack-up rigs from Vantage.
In April 2022, India’s Aban Offshore agreed to sell four jack-up rigs, Maersk Drilling sold one jack-up, and Valaris sold two jack-ups to ADES.