Keppel enters 3-way deal to save deferred jack-up rigs

This is for the construction of five jack-up rigs originally for Transocean.

Keppel Corporation has entered into a heads of agreement (HOA) with Norway-based Borr Drilling for the construction of five jack-up rigs.

The agreement allows Borr to acquire the said five jack-up rigs originally ordered by Transoceans. The current price of each rig is US$216m, below the original price tag of US$219m paid by Transocean in 2013. Borr will pay a down payment of US$275m to Keppel.

To recall, Transocean ordered the five jack-up rigs from Keppel to be delivered in various stages from 1Q16 to 2H17. Due to the slowdown of the jack-up rigs market forces, Transocean to defer the delivery of the new rigs until 2020.

Under the new agreement, Keppel will deliver three rigs to Boors drilling between 2017 and 2018, while the other two rigs are to be delivered in 2020. According to Upstream, Borr Drilling will acquire the entire jack-up fleet of Transocean, which consisted of 10 current rigs and the five new rigs which are under construction at Keppel.

"We believe the new arrangement with Borr Drilling should allow Keppel to breathe a sigh of relief, finally getting some visibility on the deferred jack-up rigs. The agreement would also enable Keppel to improve its cashflow and minimise the risk of further impairments to its balance sheet," UOB KayHian noted.