Offshore driller Atwood Oceanics has agreed with Daewoo Shipbuilding & Marine Engineering Co. (DSME) to delay delivery of two newbuild ultra-deepwater drillships, the Atwood Admiral and the Atwood Archer.
The deliveries were postponed by two years to September 30, 2019, and June 30, 2020, respectively, with Atwood hoping to find contracts for the rigs in the meantime. The driller previously postponed deliveries for these two drillships in December last year.
In connection with the latest delay, Atwood said on Tuesday the company will make a payment of $125 million for the Atwood Archer on or before December 15, 2016, as well as a payment of $15 million on the earlier of June 30, 2018 or the delivery date.
In respect of the Atwood Admiral, Atwood will make a payment of $10 million on the earlier of September 30, 2017, or the delivery date. DSME will extend all remaining milestone payments, which include $83.9 million plus fees and interest for the Atwood Admiral and $165 million plus fees and interest for the Atwood Archer, until December 30, 2022.
The company has agreed not to terminate the construction contracts except in accordance with the terms of the supplemental agreements. Atwood will retain the option to take earlier delivery of each drillship, subject to a 45-day notice period to DSME, without affecting the final milestone payment date.
Rob Saltiel, President and Chief Executive Officer, commented, “The restructuring of payment and delivery schedules for the Atwood Admiral and Atwood Archer is an important step in our capital structure management, enhancing liquidity and improving capital commitment timing. The two-year extensions on the delivery dates greatly improve our confidence that we will secure suitable drilling services contracts on both rigs prior to taking delivery. We now have the opportunity to earn revenues on these rigs that will cover some or all of the final payments to the shipyard.
“We appreciate the flexibility that DSME has provided to Atwood Oceanics in response to this severe industry downturn.”
Mark Smith, Senior Vice President and Chief Financial Officer, added, “Our liquidity position is enhanced by approximately $250 million from June 30, 2018, until final payments are made to DSME on December 30, 2022. This lengthened time for making final milestone payments represents a staggering of our debt maturities. Following the December 15, 2016, payment, all interest expenses on the outstanding amounts due to DSME will be accrued and paid at the time of the final milestone payment, improving our free cash flows through 2022.”