Offshore contractor Borr Drilling is selling three of the five new jack-up rigs the company has on order in its latest effort to refinance. It is the second refinancing Borr has undertaken in the past 18 months in response to the prolonged downturn in the offshore drilling sector and despite positive comments by the company on the strengthening of the market for modern rigs.
The company announced to investors today that it has signed a binding letter of intent with an undisclosed buyer for three high-specification units under construction with Keppel FELS shipyard. They reported that the total consideration for the three vessels, named Tivar, Huldra, and Heidrun, will be $320 million. The three vessels, which are each 246 feet long with the capability to operate in water with a depth of up to 400 feet and a maximum drilling depth of 35,000 feet, are part of the company’s Super B Bigfoot class. The company retains two other, slightly smaller, vessels also under construction at Keppel FELS.
Announcing its second quarter results at the end of May, Borr told investors and analysts that its market conditions were quickly improving along the anticipated course. “The significant amount of contracts awarded recently, in combination with a sustained demand for additional rigs has put the offshore drilling industry on a strong growth trajectory,” said Patrick Schorn, CEO of the company. Citing utilization levels, day rates, and contracts, he predicted that demand for modern rigs was likely to outstrip supply. “The number of contracted jack-up rigs has now recovered to pre-COVID levels and we expect several new awards to be nearing conclusion. This will bring the total number of contracted jack-ups back to levels last seen in 2015.”
In January 2021, Borr announced that it had reached terms with its creditors to improve liquidity. As part of those agreements, Keppel had extended newbuild delivery facilities for three delivered rigs. The delivery dates for the five new rigs were also extended with the first delivery in May 2023 and the final delivery in December 2023.
Borr, however, in May 2022, told investors that its refinancing was ongoing saying with improving, strong market fundamentals it had multiple options. They said they were exploring debt solutions or assets sales to address the maturity profile of the company’s debt position and provide a long-term financing solution.
“This transaction forms an integral part of the refinancing and optimization of the capital structure of the company,” Borr reported in its announcement. “The company continues to actively engage with its creditors with a view to completing its refinancing and expects to update the market further on the progress in the coming days.”
Proceeds from the sale will be used to pay the delivery installments of the three rigs and eliminates the associated activation costs that would have applied in the future. The company also noted that the rigs are expected to be employed by the prospective owner in a captive market and would represent limited competition to Borr Drilling’s fleet.
Upon conclusion of the sale of the three jack-up rigs, the company’s fleet will be composed of 23 delivered rigs (of which 20 are currently contracted) and two rigs under construction with Keppel FELS. Borr said its ambition is to have all 23 delivered rigs contracted by the end of 2022, benefiting from the fast-improving jack-up market.
