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Keppel O&M, Borr Drilling defer delivery of 5 jackup rigs to 2022

KEPPEL Corp on Friday said its wholly-owned subsidiary Keppel Offshore & Marine (Keppel O&M) has entered into a framework deed with international drilling contractor Borr Drilling to defer the delivery of five jackup rigs to 2022.

The five rigs are part of 11 jackup rigs ordered by Borr Drilling, six of which have been delivered, Keppel Corp said in a regulatory update.

The move comes after Borr Drilling announced on May 20 that it had entered into discussions with its lenders and shipyards regarding actions which will allow it to strengthen its liquidity situation.

These actions include postponing yard commitments, adjusting covenants and reducing amortisation, as well as deferring its cash interest payment.

In the new schedule according to the framework deed, one rig's delivery will be deferred to Q2 2022. The other four rigs are to be delivered by the third quarter. Three out of the five undelivered rigs were originally scheduled for delivery by Q3 2020, and the remaining two by Q1 2022.

On delivery, two out of the five undelivered rigs will be partially financed by Keppel O&M through a seller's credit arrangement, and Keppel O&M will have a first lien in respect of both rigs.

Subject to the entry into of definitive agreements, another two of the five rigs will on delivery also be partially financed by Keppel O&M in the same manner, and Keppel O&M will likewise have a first lien on these two rigs.

For the four undelivered rigs, the seller's credit arrangements will amount to about US$415.3 million in total.

There is no seller's credit arrangement for the fifth undelivered rig.

Meanwhile, three out of the six delivered rigs have been fully paid for. Similar to the original contracts with Borr Drilling, three of the delivered rigs will remain partially financed by Keppel O&M through a seller's credit arrangement of around US$272.7 million in total. Keppel O&M also has a first lien on these three.

The framework deed will become effective upon the satisfaction of certain conditions, including Borr Drilling obtaining key creditor consents. 

Keppel O&M's entry into the framework deed is not expected to have a material impact on Keppel Corp's net tangible assets or earnings per share for fiscal 2020. 

Shares of Keppel Corp were trading at S$6.29 as at 4.21pm on Friday, up S$0.02 or 0.3 per cent.

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