Offshore driller Hercules Offshore, which in November last year emerged from Chapter 11 bankruptcy, has been given a deadline by Sembcorp Marine’s Jurong Shipyard in Singapore to take delivery and pay for the jack-up rig the shipyard is building for Hercules.
The newbuild jack-up rig Hercules Highlander is scheduled to work on Maersk Oil’s Culzean field in the UK North Sea in mid-2016, under a five-year drilling contract agreed in May 2014.
According to Hercules’ SEC Filing on Friday, Jurong Shipyard provided a notice of a default to the company under the construction agreement if the company does not accept delivery of the jack-up rig Hercules Highlander on or before Thursday, May 5, 2016. However, it is unclear what this default would mean for Hercules.
According to the rig construction contract between the shipyard and Hercules, the shipyard cost of the rig was estimated at approximately $236 million. Including project management, spares, commissioning and other costs, total delivery cost was estimated at approximately $270 million.
When the contract was signed, the pair agreed for Hercules Offshore to initially pay 10% of the shipyard cost, or approximately $24 million to Jurong, followed by a second 10% payment one year after the initial payment. The agreement stated that the final 80% of the shipyard payment was due upon delivery of the rig, which was previously estimated to be in April 2016.
Hercules CEO, John T. Rynd, said in March that the company reserved $200 million for the final shipyard payment on its newbuild rig the Hercules Highlander.
However, Hercules recently extended its forbearance agreement until the end of the month, May 31, 2016, and during the forbearance period, the company will not be able to receive funds held in escrow under the credit agreement. Accordingly, the company will not be able to fund or accept delivery of the Hercules Highlander during this time, Hercules explained.
Following Jurong’s notice, Hercules said it was in communication with its customer and the shipyard regarding these matters.
The new harsh-environment jack-up rig, based on the Friede & Goldman JU-2000E design, was designed to operate in waters of 400 feet and drill to depths of 30,000 feet. The rig has accommodation capacity for 150 personnel.
Offshore Energy Today Staff