Deepwater Aquila (ex-West Aquila) drillship; Source: DSME

Transocean raising cash to pay for its newbuild drillship

Transocean Aquila Limited, a wholly-owned indirect subsidiary of Transocean, has kicked off a multi-million dollar private offering of senior secured notes due 2028. The firm will use the net proceeds from the notes to partially finance the construction, acquisition, and improvement or alteration of a newbuild ultra-deepwater drillship and to fund the initial debt service reserve.

Deepwater Aquila (ex-West Aquila) drillship; Source: DSME

Transocean signed a purchase agreement at the end of last year as part of a joint venture – together with Perestroika and funds managed by Lime Rock Management – for the acquisition of the Deepwater Aquila (ex-West Aquila) seventh-generation drillship for $200 million from Daewoo Shipbuilding & Marine Engineering (DSME). This drillship is one of two rigs that were originally ordered in 2013 by Seadrill.

Transocean Aquila Limited revealed the start of a private offering of $300 million in aggregate principal amount of senior secured notes due 2028 on Tuesday, September 26, 2023, while explaining that the timing of pricing and terms of the notes were subject to market conditions and other factors. Later that same day, it was confirmed that Transocean Aquila Limited had priced an offering of $325 million in aggregate principal amount of senior secured notes due 2028.

This is being undertaken in a bid to partially fund the construction, acquisition, and any adjustments to the Deepwater Aquila drillship, including repaying any indebtedness incurred for that purpose, and to fund the initial debt service reserve. Transocean Aquila expects to receive aggregate net proceeds of approximately $319 million from the offering, after deducting estimated offering costs.

The notes will be guaranteed by Transocean Ltd., Transocean Inc., and a wholly-owned indirect subsidiary that will initially own the drillship. This will be secured by a lien on the rig and certain other assets related to it. According to the offshore drilling giant, the notes will bear interest at the rate of 8% per annum and will be callable after September 30, 2025.

The offering is expected to close on or about October 11, 2023, subject to customary closing conditions. If certain collateral and other security are not pledged on or prior to the issuance of the notes – including the mortgaging of the Deepwater Aquila rig by Transocean following delivery of the rig – an amount equal to the gross proceeds from this offering will be placed into escrow pursuant to an escrow agreement until the escrow release conditions are satisfied.

Following the acquisition of the Deepwater Aquila drillship, Transocean will own and operate eight of the twelve ultra-deepwater, 1,400 short-ton hookload drillships in the world. The rig is expected to be delivered from the shipyard in October 2023.

The drilling giant recently secured a three-year contract award for the Deepwater Aquila rig. The deal, which is expected to start in the third quarter of 2024 offshore Brazil, represents approximately $486 million in firm backlog, excluding a mobilization fee of around 90 times the contract day rate.

Transocean expanded its contract backlog with multiple new deals during the second quarter of 2023, bringing it to $9.2 billion. At the end of August 2023, the company secured another long-term deal for an ultra-deepwater drillship offshore India.