SembMarine sells West Rigel rig for US$500m, but takes S$24m loss

SEMBCORP Marine has sold the semi-submersible rig West Rigel for US$500 million (S$672 million), taking a S$24 million loss after the original customer filed for bankruptcy protection.

The rig was originally contracted to a subsidiary of North Atlantic Drilling and Seadrill, both of which have applied for Chapter 11 restructuring in the United States, said Sembcorp Marine, one of the world's largest rigbuilders.

Under a standstill agreement from December 2015, the original customer was to market the rig for an acceptable drilling contract, while Sembcorp Marine's Jurong Shipyard subsidiary was to seek a new buyer. If no employment was secured and no alternative transaction was completed before the July 2018 conclusion of the standstill period, Sembcorp and the original customers would have had to form a joint asset holding company to jointly own the rig.

Although the new sale agreement will allow Sembcorp Marine to dispose of the rig and improve its liquidity position, the transaction will result in a loss of about S$24 million, Sembcorp Marine said. If the sale had occurred in the year ended Dec 31, 2016, if would have reduced earnings per share by 1.2 Singapore cents, but would not have had any material impact on net tangible assets.

The sale is still subject to conditions being met by both buyer and seller. Once those conditions are met, the West Rigel will remain at Sembcorp Marine's yard for certain works to be undertaken for reactivation.