Mermaid Maritime exits Seadrill offshore drilling venture for US$31m

THAILAND-BASED oil service specialist Mermaid Maritime Public Co will sell its 33.76 per cent stake in Asia Offshore Drilling (AOD) for US$31 million in cash.

Mermaid Maritime's wholly-owned subsidiary, Mermaid International Ventures (MIV), last Friday exercised a put option - about three weeks before it expires - to sell all its shares in AOD to Oslo-listed deepwater drilling contractor Seadrill. An affiliate of Seadrill holds the remaining 66.24 per cent interest in AOD.

Seadrill in April 2018 signed an agreement to grant MIV the put option, exercisable between Oct 1, 2019 and Sept 30, 2020, as part of AOD's loan refinancing at the time. Seadrill was also granted a call option in respect of MIV's shares in AOD, exercisable from Oct 1, 2020 to March 31, 2021.

In a bourse filing on Tuesday, Mermaid Maritime said the offshore drilling industry has been "seriously affected on all fronts" by the coronavirus pandemic, with a drought of new contracts, early termination of some existing drilling contracts and/or renegotiation of existing day rates.

As such, it decided to exit AOD at this time to minimise its exposure to the challenging industry conditions and protect its cash position.

The deal will also provide additional working capital, maintain liquidity and balance sheet strength during this challenging period, and enable Mermaid Maritime to focus on growing its core and related businesses with the aim of turning a profit, it said.

"If the company did not exercise the put option during this time and allowed it to expire on Sept 30, there would be no assurance that it would be able to exit from its investment in AOD in the future," said Mermaid Maritime.

Its board noted that due to challenging market conditions, the company already divested its own tender-assist-drilling rig business and disposed of its two remaining tender rigs in 2018, the same year it signed the agreement containing the put option.

Its investment in offshore drilling firm AOD is a non-core asset, said Mermaid Maritime, whose core business is in providing subsea and related services to the offshore oil and gas industry. Besides, Mermaid Maritime has no control over AOD's business and operations, given its minority shareholding.

The US$31 million deal price was agreed between MIV and Seadrill pursuant to the terms of the April 2018 agreement.

They took into consideration, among other things, two independent valuations of the three jackup drilling rigs owned by AOD conducted in August 2020 and the net book value of the other net assets of AOD.

Upon MIV exercising the put option, a binding contract for the sale of the shares was deemed to be entered into between MIV and the Seadrill associate buying the stake.

Mermaid Maritime said the disposal will be completed by the end of this month. It will update shareholders when this has taken place.

Shares of the mainboard-listed company fell 0.1 Singapore cent or 1.7 per cent to 5.7 cents as at 4.16pm on Tuesday.

It requested a trading halt on Tuesday before market open, and lifted the halt at 2.30pm after making the announcement.