Offshore Drilling Interest Unabated

If you want to market an offshore drilling transaction, particularly a start-up, Oslo must be one of the first stops, if not the only, on your itinerary. This is clearly evident from the following two deals which closed last month. The appetite for offshore appears to be nearly insatiable.

Prospector Offshore Drilling S.A.

In early December, Prospector Offshore Drilling S.A. successfully closed it private placement of 35 million shares at a subscription price of $2/share. Total gross proceeds amounted to $70 million. As part of the offering the Skeie Group and the management team agreed to subscribe for a minimum of$15 million, of which the latter on its own agreed to subscribe for $1.6 million. Post-issue there will be 35.445 million shares outstanding, with new investors owning 98.74%. Proceeds will be used for the initial down payments for the construction of two high specification harsh environment (“HS/HE”) jack-up drilling rigs as well as project management costs and SG&A until delivery of the first rig. While the rigs are classed as HS/HE, they can operate in the North Sea but are not suitable for Norway and the Arctic, where the delivery cost of a compliant rig is in excess of $500 million, more than double the cost of the Prospector rigs.

Continue Reading

Distress Suits Seadrill

Earlier this week, Seadrill Limited announced that it had agreed to acquire two ultra-deepwater semi-submersible drilling rigs, the Seadragon I and Seadragon II, which are currently under construction at Singapore’s Jurong shipyard. The total project price is expected to be $1.2 billion inclusive of all pre-delivery costs, with delivery in 1Q and 4Q 2011.
Continue Reading

Pareto and Odin Products Confab

Last week, Pareto Securities and Odin Group hosted a seminar on the product market and the news was generally good. In the introductory presentation on the market, Pareto’s Martin Korsvold, highlighted the “Positive Delta”, the fact that rates are at an historic low levels and upside is likely as market balance recovers. This outlook is supported by:
•    A manageable orderbook compared to other shipping sectors
•    Demand to outstrip supply going forward
•    The larger trend of more oil being refined closer to production areas
•    Limited investor knowledge of products compared to crude shipping, thereby creating opportunities
•    Oil demand trend gives a bullish backdrop as the oil market has tightened significantly in 2010 driven by strong demand growth, as evidenced by declining inventories.
Continue Reading

Sevan Gets an Early Start on the Holiday Season

Last Friday, Sevan Marine ASA successfully sold NOK 700 million of its 14% senior unsecured bonds due in 2014. This was the high end of the expected range (NOK 500 to 700) and reflects healthy investor appetite for the issue. Proceeds will be used for general corporate purposes. The joint lead managers of the transaction were First Securities and Pareto Securities with Arctic Securities, Fearnley Fonds and ING serving as co-managers. Further details of the transaction are shown below in the Guts of the Deal.
Continue Reading

DryShips Prices

On Wednesday, DryShips Inc. announced, in line with its expected time frame, that its wholly-owned subsidiary, Ocean Rig UDW Inc. has priced its private placement share offering at $17.50/share for total gross proceeds of $500 million, implying an offering size of approximately 28.6 million shares. At the conclusion of the offering, Dry Ships will own approximately 78% of Ocean Rig. The transaction is expected to close December 20th.
Continue Reading

Jasper Taps Bond Market

Last Friday, Singapore listed offshore oil and gas drilling firm Jasper Investments (“Jasper”) announced that it has added USD 75 million to its coffers, with the assistance from DnB NOR Bank ASA and Pareto Securities. The successful closing of this funding exercise will help to allay fears over its financial health previously highlighted by its auditor Foo Kon Tan Grant Thornton. Last month, the independent auditor raised a going concern issue on Jasper, drawing attention that the group’s current liabilities had exceeded its current assets by USD 56.1 million at the end of 31 March 2010.

The company explained that there is no need to be unduly worried, given that its existing current liabilities consist mainly of a loan from a Singapore bank that is secured against a mortgage on the drillship, the “Explorer”. As at 31 March 2010, the amount outstanding under the loan was USD 35 million against independent valuations of USD 280 million to USD 375 million, and therefore the security value is well in excess of the loan provided. Jasper further disclosed that this “local bank” has also increased the credit facility to USD 55 million at the end of last year. We believe that the effective interest rate for the loan is at 5.575% per annum. Jasper has no other third party borrowings other than the bank loan, and continues to receive material support from its controlling shareholders through the provision of shareholders’ loans of approximately USD 201 million. Continue Reading

Wedding Season or Offshore Consolidation Takes Two Giant Steps

Monday was a big day in the offshore sector with two major transactions announced. First BW Offshore (“BWO”) made a voluntary exchange offer for all of the shares of Prosafe Production Public Limited it does not currently own. The company is offering 1.2 BWO shares and NOK 5.25 in cash for each share, which consideration equates to NOK 16.21 based upon Friday’s closing price, valuing Prosafe at approximately NOK 4.1 billion or a 17% premium to Prosafe’s closing price on Friday. BWO currently owns directly or indirectly 23.88% of the total outstanding shares with a wholly owned subsidiary owning a further 6.1%. Presently BW Group owns 66.95% of the total number of shares in BWO and will be diluted to approximately 47% to 49% shareholding in the combined company based upon an acceptance level of between 90% and 100%. The combination will create an FPSO company with the diversification, presence, resources and competence to meet the increasing requirements from both clients and regulators.

BWO will finance the cash consideration from available credit facilities. In connection with the offer BWO has established a new bridging credit facility of $1.1 billion from BW Group on competitive terms with expiry in November 2011. The new facility together with the availability under the existing credit facility of $1.5 billion will be sufficient to finance the entire cash consideration and refinance Prosafe’s existing credit facilities, while providing capacity for growth.
Continue Reading

Aker Bonds

Norway continues to be the go to source for capital, particularly high yield bonds, for small energy companies. Highly leveraged already, the companies use the bonds, mostly short-term, to provide an equity bridge and a source of cash to meet an immediate cash need.

Last week, Aker Drilling ASA successfully completed a NOK 1.5 billion three year unsecured bond issue, which was guaranteed by its parent, Aker ASA. The bonds pay interest on a floating rate of NIBOR + 400 bps. Proceeds will be used to refinance NOK 800 million of an existing convertible bond maturing in October 2010 and for general corporate purposes. Details of the transaction are shown in the Guts of the Deal below.
Continue Reading

A Tanker Saga

On Wednesday, Arne Blystad went to market to raise equity for a new pure play large tanker IPO, Saga Tankers ASA, which will acquire three VLCCs from companies controlled by Blystad with the fourth on subjects. The company is looking to raise $80 million or $120 million in a private placement, however it intends to list the shares on the Oslo Axess in mid-June. For investors, the main attraction will be the full dividend payout model.

Constructed at Daewoo Shipbuilding, two of the VLCCs were built in 2000 with the third in 1995. The two younger vessels were valued at $69 million each, even though one is spot and the other is on time charter through Q3 2012. The 1995 built vessel is valued at $49 million and is employed in the spot market as well. The en bloc price is $187 million, excluding the option vessel, which is financed with the proceeds of the offering, the existing bank debt and an in-kind payment from the seller. The sources and uses of funds, as well as the pro forma percentage ownership is shown in the chart above for both the three and four vessel deals.
Continue Reading

Announce Deals; Get Check; and List on the NYSE

Only John Fredriksen can announce a deal a deal on Tuesday and have financing in place the same day. It has been a very busy week for the management of Seadrill who while in the midst of these transactions travelled to NY to open the New York Stock Exchange in honor of the listing of the shares here. The common theme here is growth capital.

It all began on Monday, when Seadrill acquired an additional 1.3 million shares in Scorpion Offshore at a price of NOK 36 per share. With this purchase, Seadrill now controlled ~36 million shares or 40.1% of the outstanding issued shares, triggering an obligation to make a mandatory cash offer for the remaining shares or reduce its holdings below that threshold within 4 weeks.
Continue Reading