Offshore driller Rowan Companies has informed that ARO Drilling, a 50/50 joint venture with Saudi Aramco, started operations on October 17, 2017.
The two companies announced an agreement to create the 50/50 joint venture to own, operate, and manage offshore drilling rigs in Saudi Arabia back in November 2016. Rowan committed to contribute three and Saudi Aramco two of its jack-up drilling rigs at the beginning of operations.
Tom Burke, President and Chief Executive Officer, stated on Thursday, “We are extremely pleased to announce the launch of ARO Drilling. This is a groundbreaking joint venture that supports Saudi Arabia’s Vision 2030, and provides Rowan with an unparalleled long-term growth opportunity throughout the next decade and beyond.”
As part of the initial startup of ARO Drilling, Rowan and Saudi Aramco contributed equal amounts of cash into the joint venture. Following these contributions, Rowan sold three of its jack-up drilling rigs to ARO Drilling, including the J.P. Bussell, which was previously idle, and Saudi Aramco sold one of its jack-up drilling rigs to ARO Drilling. Following the purchase of these drilling rigs, ARO Drilling distributed excess cash in the amount of approximately $88 million to each of Rowan and Saudi Aramco maintaining each party’s 50% ownership interests in the joint venture.
Pursuant to the ARO Drilling shareholders’ agreement, Saudi Aramco will sell an additional jack-up rig in 2017 to ARO Drilling and Rowan will sell an additional two jack-up rigs to ARO Drilling once they complete their current contracts in late 2018.
ARO Drilling also now manages the operations of Rowan’s seven remaining jack-up rigs currently in Saudi Arabia. Rowan and Saudi Aramco have agreed that ARO Drilling will purchase twenty future newbuild rigs that will be constructed by a Saudi Aramco manufacturing joint venture and are expected to be delivered between 2021 and 2030. Each newbuild is expected to have a sixteen year drilling commitment upon delivery to ARO Drilling.
Back in February when the joint venture was announced, Bassoe Offshore’s analyst David Carter Shinn explained the significance of this pact in the Middle East.
According to the analyst, the Middle East is one of the most important offshore drilling rig markets in the world. For jack-ups, it’s the center of the universe: out of a total of around 530 jack-up rigs, 174 are in this region, he said. Read the rest of David Carter Shinn’s analysis here: http://bit.ly/2kbkWXT