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Songa Offshore Faces Possible Asset Sales, Rig Delay

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Reuters

OSLO, Aug 26 (Reuters) - Drilling rig operator Songa Offshore may have to sell more assets to finance four new rigs under construction and faces a delay of up to six months before the new units arrive, the company said on Monday.

Oslo-listed Songa's shares dropped 5.7 percent.

The company, which has already sold a highly coveted ultra deepwater rig to Seadrill to shore up its balance sheet, needs cash as the cost of the new units threatens to push its debt above the level agreed in its covenants.

"The Company continues to work on a number of initiatives in order to strengthen its balance sheet," it said. "These processes include possible sale of assets and potential partnerships."

Songa blamed the delay to delivery of the four Cat D rigs on capacity issues at its South Korean supplier DSME South Korea and said it would lead to "marginal" cost increases.

Songa did not have the cash at the time of the order to fund the equity component of two of the new rigs and covered it through a loan from Statoil. As this loan has to be repaid, Songa is under pressure to muster the financing before the end of the year, analysts said.

But Statoil has already signed up to use the four units under eight-year charter contracts offering a financial security that should improve Songa's financing options.

Songa's current operations remain strong as North Sea demand is robust and Norway's strict regulatory framework makes entry for new players difficult, the firm said.

Songa, which operates five rigs, said its second-quarter earnings before interest, taxes, depreciation and amortisation (EBITDA) fell 12 percent to $51.9 million, missing a consensus analyst forecast of $58.2 million.

(Reporting by Balazs Koranyi; editing by Tom Pfeiffer)

Copyright 2014 Thomson Reuters. Click for Restrictions.

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