To benefit from the current strong demand for high specification drilling units Seadrill announced that it has entered into a turnkey construction contract with Hyundai Samho Shipyard for the construction of a new harsh environment semisubmersible drilling rig. The new rig will be a sister rig of the harsh environment semi-submersible unit Seadrill's subsidiary North Atlantic Drilling currently have under construction at Jurong Shipyard in Singapore.
The new rig will be of a Moss CS60 design, N class compliant and be fully winterized to meet the harsh and demanding weather conditions in the North Atlantic areas. In addition, the new rig will have premium ultra deepwater capabilities including water depth of up to 10,000 feet. The new rig is scheduled for delivery in the fourth quarter 2014.
Total estimated project costs is less than $650 million including a turn key yard contract with a back-end loaded payment structure. In addition, Seadrill has agreed a fixed price option for one further unit from the yard. Seadrill has already received charter interest in the firm unit. With the strong demand Seadrill feels it is likely that the option will be exercised. However, a final decision will not be taken before August 2012.
Seadrill's construction program now totals 18 units, including 6 drillships, 2 harsh environment semisubmersibles, 5 tender rigs and 5 jackups. In addition to the rigs under construction, Seadrill also controls several fixed price options at various yards.
Seadrill's 74 percent-owned subsidiary North Atlantic Drilling Ltd. has been granted a 6 months option to acquire the construction contract at original terms plus compensation for accrued cost. North Atlantic Drilling's exercise of the option is subject to securing an acceptable long-term contract for the unit in an area applicable to North Atlantic Drilling.
Alf C Thorkildsen, Chief Executive Officer in Seadrill Management AS says in a comment: "Based on the inquiries we receive from the major oil and gas companies and the current high oil prices, we are comfortable that the aggregate demand for modern floaters will exceed the supply of available units for several years to come. We are pleased that the good relationships Seadrill and the Fredriksen group have with the top quality yards have allowed us to get access to attractive delivery slots at competitive terms. With an expected strong cash flow from our solid contract backlog we are well positioned to secure attractive financing for our new building program. As a result we remain positive to the prospects of continuing to show higher growth and deliver better operational and financial performance than our peers in an industry that looks very attractive for the years to come."
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