Maersk Acquires New Jackup from Hercules Offshore
Maersk Drilling has reached agreement with a subsidiary of financially troubled Hercules Offshore for the acquisition of the high-spec newbuild jackup Hercules Highlander, which is completed and awaiting delivery at Jurong Shipyard.
Highlander is a Friede & Goldman JU2000E harsh environment jackup rig, with a maximum drilling depth of 30,000 feet and capabilities for high pressure / high temperature (HP/HT).
Maersk will settle the final $190 million payment for the rig with Jurong and assume ownership. It will be renamed Maersk Highlander and will start a five-year contract on the Maersk Oil / BP / JX Nippon Culzean gas field project off of the UK; the drilling contract is worth $420 million plus $9 million in mobilization, or more than twice the acquisition cost of the rig.
“This agreement represents an opportunity for Maersk Drilling to acquire a newbuild harsh environment jack-up backed by a firm long-term contract. We look forward to working with Maersk Oil and its partners on the Culzean gas field,” said the CEO of Maersk Drilling, Claus V. Hemmingsen.
The acquisition will take Maersk Drilling's fleet size to 23 rigs, and the firm has one more jackup under construction.
On the same day, Hercules Offshore announced that it will be filing for a second round of Chapter 11 bankruptcy protection, just over six months after it exited the last round. It said that it had reached agreement with the overwhelming majority of its senior lenders for a "pre-packaged" – pre-arranged and less costly – court proceeding. If the plan is approved, the firm would sell its assets and pay back its creditors.
Its first pre-packaged bankruptcy restructuring began last fall, and it exchanged $1.2 billion in bonds for equity. Market conditions continued to deteriorate as the price of oil fell, and by December, only eight of its 27 owned jackup rigs were actively working. In February Hercules said that it was considering selling itself, among other options, in order to preserve the value of the company. A sale did not move forward, and it ran into trouble in early May with allegations of default on a $450 million loan for the construction of the Highlander and calls from Jurong to pay for the delivery.
Maersk Drilling posted a profit of $750 million in 2015, its best year ever, and started 2016 strong with profits of $225 million in the first quarter, up ten percent year-on-year. In discussing the first quarter results, Maersk Group CEO Nils Andersen expected opportunities for acquisitions ahead. “We still have a very strong balance sheet and have plenty of liquidity reserves for unexpected and expected investments,” he said. The group’s cash reserves stand at about $12 billion.