Standard Drilling Selling Under Construction Rigs for USD 426 Mln (Cyprus)

Standard Drilling Selling Under Construction Rigs for USD 426 Mln

Cyprus-based SD Standard Drilling Plc (“Standard Drilling”) has today entered into a final SPA for the sale of one rig (B324) under construction and further issued the buyer an option to purchase a second rig (B337) under construction. If the option is exercised the gross combined price will be USD 426m.

The option to purchase B337 has to be declared within 27 September 2012. The buyer is UMW Oil and Gas, a company incorporated in Malaysia. The sale of the first rig will give an estimated net profit of USD 8,5m and if the option is declared for the purchase of the second rig, the estimated net profit from this transaction is USD 16.3m. The book equity of Standard Drilling will be approximately USD 416m after the transactions or USD 1.59 per share (NOK 9.52 per share). Net cash proceed from the sale of 324 is USD 68m.

If the option is decleared the net proceeds from the two transactions is USD 123m. Following exercise of the option, Standard Drilling will have 4 similar MOD B V drilling rigs under construction at Keppel FELS (the “Yard”) in Singapore with contractual delivery in June, November and December 2013 respectively and in May 2014. The construction is progressing well for all 4 units with no delays.

The sale of the two rigs will reduce the future capital investments (obligations vs Keppel FELS) by USD 297.6m. The total remaining commitment vs the Yard will correspondingly be reduced from USD 902.4m to USD 604.8m. After the transactions, Standard Drilling will have a net cash position of about USD 237m. The net unfunded investments are therefore about USD 368m plus running costs and investments in spares and lose drilling equipment. The Board of Directors in Standard Drilling is pleased with the sale of the two rigs. The net funding need for the remaining 4 rigs is comfortable and the Board of Directors expect the company to be able to finance the 4 remaining rigs at attractive terms in the commercial bank market.

Standard Drilling is currently building a strong management and operating team based in Singapore with senior personnel that has extensive experience from the drilling industry. Most senior positions have been filled and the management now consists of an 11 person strong team that have started to market the rigs and preparing for rig operation from mid 2013. The preparation for hiring the offshore staff for the 4 remaining rigs is going according to plan. Standard Drilling is already in discussion with oil companies for the hire of the first rig (June 13) and expect to sign the first drilling contract before the rig is delivered.

The Chairman of Standard Drilling, Mr. Gunnar Hvammen, says in a statement “A start-up company like Standard Drilling needs to balance the changes in the financial market with the changes in the offshore drilling market. Sale of two rigs gives Standard Drilling increased flexibility to grow the company when the timing is right. Further, the deleveraging increases the likelihood of competitive financing of the remaining fleet and secures the equity value for our shareholders. The paradox is that reducing the fleet in the current environment increases the chance of becoming a strong long term player in the jack-up drilling market. Standard Drilling continues with full force to build a first class operator of modern state of the art drilling fleet to supply premium service to the industry.”

Press Release, June 27, 2012

 

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