Teekay has entered into an agreement with Sevan Marine and holders of more than two-thirds of each of Sevan's bond loans for Teekay to acquire three floating production storage and offloading (FPSO) units from Sevan and make an equity investment in a recapitalized Sevan.
Under the terms of the agreement, which has also been approved by the Board of Directors of Teekay and Sevan, Teekay will:
Acquisition of Three FPSO Units
The Piranema and Hummingbird will be acquired by Teekay immediately upon closing of the transaction, which is expected to occur during the fourth quarter of 2011. The Voyageur will be acquired when the unit is deployed and has commenced its new charter contract on the Huntington field, which is expected to occur during the third quarter of 2012.
The 2007-built Piranema FPSO is currently operating under a long-term charter to Petrobras S.A. on the Piranema field located offshore Brazil. The charter includes a firm contract period ending in March 2018 followed by up to 11 one-year extension options.
The 2008-built Hummingbird FPSO is currently operating under a charter to Centrica Energy Upstream (Centrica) on the Chestnut field in the UK sector of the North Sea. The Hummingbird FPSO contract was recently extended to September 2012 and thereafter, includes one six-month extension option, one three-year extension option, and two one-year extension options.
The 2009-built Voyageur FPSO operated successfully on the Shelley field in the UK sector of the North Sea from August 2009 to August 2010. The unit is currently undergoing an upgrade prior to commencement of its charter contract with E.ON Ruhrgas UK E&P (E.ON) on the Huntington field in the UK sector of the North Sea. This charter is expected to commence in the third quarter of 2012 for a firm period of five years, with extension options. In addition to agreeing to acquire this FPSO unit from Sevan upon commencement of the E.ON contract, Teekay will finance the remaining upgrade cost which is expected to be $110 - $130 million.
Under Teekay's existing omnibus agreement and as further agreed between Teekay and Teekay Offshore Partners L.P. (Teekay Offshore), following the closing of the transaction, the Piranema will be eligible for sale to Teekay Offshore and the Voyageur will be eligible for sale to Teekay Offshore upon commencement of its contract with E.ON, both at fair market value. The Hummingbird will be eligible for sale at fair market value upon commencement of a new charter contract with a firm period of greater than three years in duration.
Teekay intends to finance the purchase of the three FPSO units through a combination of assuming Sevan's existing $230 million bank debt facility secured by the Voyageur, arranging new debt facilities, and utilizing its existing liquidity. Teekay expects that Teekay Offshore would finance its purchase of any FPSO units from Teekay through a combination of common unit issuance, assumption of debt or the arrangement of new debt facilities, and utilization of existing liquidity.
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