ADM 685 (ex. Cantarell III)

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ADM 685 (ex. Cantarell III)

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11 Nov 2022
Keppel O&M secures two more jackup rig charters from ADES worth up to S$155 million

Keppel Offshore & Marine Ltd (Keppel O&M) has, through its wholly-owned subsidiaries[1], signed bareboat charter contracts with ADES Saudi Limited Company for two jackup rigs to be deployed in Saudi Arabia. This brings the total number of rigs Keppel O&M has on charter with ADES to four.

The charters will be for a period of five years, expected to commence in 1H 2023, and projected to generate total revenue of about S$155 million for Keppel O&M, which includes modification works to prepare the rigs for deployment.

These are the fifth and sixth bareboat charters secured by Keppel O&M this year, pointing to the continued demand for more high quality drilling rigs of Keppel’s proven KFELS B Class design.

The two rigs to be used for these charters are the Cantarell III and Cantarell IV jackup rigs which were under bareboat charters with subsidiaries of Grupo R [1]. These charters have since been terminated due to unremedied events of default under the bareboat charters by the charterers. The rigs, which will be renamed ADM685 and ADM686, are currently in Mexico and will be transported to Saudi Arabia for modification works before commencing their charters for ADES.

Mr Tan Leong Peng, Managing Director (New Builds) of Keppel O&M, said, “We are pleased to receive a repeat contract from ADES for the charter of another two of our jackup rigs. These high performance rigs have been operating successfully in Mexico and can be easily mobilsed to work in Saudi Arabia. They are equipped with our AssetCare digitalisation solution which increases the efficiency, safety and operability of the rigs.

“All of our KFELS B Class legacy jackup rigs have secured bareboat charters or are on contract, which reflects the value our rigs bring to rig operators and increases their marketability for sale to potential buyers and investors. Utilisation rates across both the jackup and floater segments have continued to trend upwards and we are confident our versatile and robust legacy rigs will be in demand across a variety of markets.”

As part of the definitive agreements Keppel Corporation has signed in connection with the proposed combination of Keppel O&M and Sembcorp Marine, these two rigs are part of Keppel O&M’s legacy rigs and they, as well as their bareboat charter agreements will be transferred to Asset Co[4] that is majority-owned by external investors on legal completion.

The above bareboat charter contracts are not expected to have any material impact on the net tangible assets and earnings per share of Keppel Corporation Limited for the current financial year.

Note:

[1]
13 Dec 2019
Keppel delivers another jackup rig to Grupo R with sale and leaseback deal

Keppel Offshore & Marine Ltd (Keppel O&M) through its wholly-owned subsidiary Keppel FELS Limited (Keppel FELS) has delivered the KFELS B Class jackup rig, Cantarell III, to a wholly-owned subsidiary of Grupo R with a perfect safety record.

As part of the deal, Grupo R has entered into a sale and leaseback arrangement for the rig with a wholly-owned subsidiary of Keppel O&M.

Keppel O&M will purchase the rig from Grupo R for about US$190m which is the balance contract value of the rig. Keppel O&M had received 20% down payment of the original contract value for Cantarell III when the contract was signed in 2013. Cantarell III will be leased back to Grupo R on a bareboat charter at competitive day rates over ten years, and will be deployed to work in offshore Mexico on a charter which will commence in 1Q 2020.

IPC, the parent company of Grupo R, will provide a Parent Company Guarantee on Grupo R's charter payment obligations.

Under the bareboat charter, Grupo R has the right to purchase the rig at pre-agreed prices during the term of the bareboat charter. After the fifth year, Keppel O&M may, at its discretion, put the rig to Grupo R at a pre-agreed price.

Mr Tan Leong Peng, Executive Director (New Builds) of Keppel O&M said, "We are pleased to enter into a mutually beneficial arrangement which will enable Grupo R to deploy another high-performance rig for its operations in Mexico. At the same time, Keppel O&M is acquiring another quality asset which will generate regular and healthy returns from its charter. As Mexico seeks to increase oil production, demand for jackup rigs has been rising.

"Our first sale and leaseback arrangement with Grupo R on the Cantarell IV has worked well. Cantarell IV, which was warm stacked in our yard from 2016 to the start of 2019, was able to go directly to the field upon delivery and achieve 99% uptime in its operations. It demonstrates the rigour of Keppel's preservation programme for the rigs in our yards. We expect Cantarell III to likewise serve Grupo R well upon deployment in Mexico."

The KFELS B Class design is the industry benchmark for jackup rigs. It has proven its robustness and efficiency in many fields around the world, and more than 10 KFELS B Class units have been delivered to Mexico.

Designed to operate in water depths of up to 400 feet and drill to depths of 30,000 feet, Cantarell III is equipped with an advanced and fully-automated high capacity rack and pinion jacking system, Self-Positioning Fixation System, and also has accommodation with full amenities for 150 persons.

Cantarell III is equipped with Keppel's proprietary RigCare Solution - a suite of digital services to support the rig's lifecycle needs, significantly increasing uptime and safety while reducing maintenance costs. Together with the Cantarell IV jackup rig, which was delivered by Keppel to Grupo R earlier this year, they are the industry's first drilling rigs with Smart Notations. Cantarell IV has been performing well in the Xikin field for Pemex and it has been able to utilise its RigCare features to further improve its operations.

Mr Jose Ramiro Garza, CEO of Grupo R added, "We are confident of the long-term outlook of the Mexican rig market with Pemex and international oil companies looking for additional jackup rigs to support the country's target to increase Mexico´s oil and gas production. As a leading rig operator in Mexico, we are well positioned to meet their needs with high quality rigs from Keppel such as the Cantarell III. Our KFELS B Class rigs, Cantarell I and II have proven to be a success in Mexico, and the addition of RigCare on Cantarell III and IV has further increased their productivity and cost-efficiency. We are pleased to have this win-win agreement with Keppel to service the growing Mexican market."

Grupo R is well-established as a driller in Mexico, with excellent uptimes and a strong track record of success with difficult wells. Besides Cantarell III and IV, Keppel FELS also delivered Cantarell I and Cantarell II to Grupo R in 2016, which have been achieving record uptimes for Pemex in Mexico.

The abovementioned transaction will not have any material impact on the net tangible assets and earnings per share of Keppel Corporation Limited for the financial year ending 31 December 2019.
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