Seadrill has entered into agreements with KFELS and PPL Shipyard in Singapore for the construction of in total four jack-up newbuilds with delivery in 2010.
The two units to be built at KFELS will be based on the KFELS Mod V ‘B’ design. The rated water depth is 400ft and drilling depth is 30,000ft. Deliveries are scheduled in June and November 2010 and the total contract price for the two units is approximately US$420 million. These jack-ups will be the fifth and sixth jack-up orders that Seadrill has placed with KFELS. The previous units have all been delivered on time and budget and are all in operation for various oil companies.
The two units to be built at PPL Shipyard will be based on the Baker Marine Pacific Class 375 Deep Drilling design. The rated water depth is 375ft and drilling depth is 30,000ft. Deliveries are scheduled in March and November 2010 and the total contract price for the units is approximately US$430 million. These jack-ups will be the second and third jack-up orders that Seadrill has placed with PPL Shipyard. The first unit, the West Triton was delivered on time and budget in early January this year and is currently operating for Apache in Victoria, Australia.
Seadrill has in addition received option agreements for further jack-up newbuildings in 2011.
Alf C Thorkildsen, CEO Seadrill Management AS, says in a comment,
“These newbuild orders are the best way to increase Seadrill’s near term earnings potential in the offshore drilling market. We are convinced that the market for offshore drilling units in general will remain tight in the years to come. The decision to initiate the US$850 million building program was taken based on expected high return on invested equity due to the following factors; the current jack-up order book is less than 20 percent of the existing ageing fleet (which has an average age of 23 years), the jack-up newbuild capacity before 2011 at first class yards is limited and the number of term contract for jack-ups is increasing.
“Furthermore, the combination of deliveries, pricing and expected return is attractive compared to other investment alternatives within the offshore asset market as well as corporate opportunities. The Seadrill Board has specifically concluded that this opportunity is superior to increasing the bid for Scorpion in order to achieve a potential higher acceptance. The four jack-up newbuilds will grow the Seadrill high quality jack-up fleet from eight to 12 units. It is not expected that the newbuildings will significantly reduce Seadrill’s short-term dividend capacity. Longer term, dividend is expected to increase as a function of the orders. Seadrill’s shareholders should be assured that Seadrill’s focus will continue to be on the deepwater segment. However, the Board will continue to work opportunistic in order to seek to maximize return to shareholders based on investments limited to modern drilling assets.”