Houston-headquartered offshore drilling contractor Atwood Oceanics announced Tuesday it has reached an agreement with South Korean shipbuilder Daewoo Shipbuilding & Marine Engineering to postpone the delivery of two newbuild ultra-deepwater drillships by two years.
Delivery of the newbuilds Atwood Admiral and Atwood Archer is now scheduled until September 30, 2019 and June 20, 2020, respectively, Atwood Oceanics said Tuesday.
Atwood Admiral and Atwood Archer were ordered in 2012 and 2013, respectively, at a cost of approximately $635 million each. Deliveries were originally scheduled for March 2015 and December 2015, but the deliveries were initially pushed back to September 2017 and June 2018.
In connection with the most recent delay, Atwood will make a payment of $125 million for the Atwood Archer on or before December 15, 2016, as well as a payment of $15 million on or earlier than June 30, 2018 or the delivery date. In respect of the Atwood Admiral, Atwood will make a payment of $10 million on or earlier than September 30, 2017 or the delivery date.
DSME has agreed to extend all remaining milestone payments, including $83.9 million plus fees and interest for the Atwood Admiral and $165.0 million plus fees and interest for the Atwood Archer, until December 30, 2022.
Under the agreement, Atwood has agreed not to terminate the construction contracts except in accordance with the terms of the supplemental agreements.
“The restructuring of payment and delivery schedules for the Atwood Admiral and Atwood Archer is an important step in our capital structure management, enhancing liquidity and improving capital commitment timing,” said Rob Saltiel, President and Chief Executive Officer. “The two-year extensions on the delivery dates greatly improve our confidence that we will secure suitable drilling services contracts on both rigs prior to taking delivery. We now have the opportunity to earn revenues on these rigs that will cover some or all of the final payments to the shipyard.”
“We appreciate the flexibility that DSME has provided to Atwood Oceanics in response to this severe industry downturn,” added Saltiel.
Mark Smith, Senior Vice President and Chief Financial Officer, added: “Our liquidity position is enhanced by approximately $250 million from June 30, 2018 until final payments are made to DSME on December 30, 2022. This lengthened time for making final milestone payments represents a staggering of our debt maturities. Following the December 15, 2016 payment, all interest expenses on the outstanding amounts due to DSME will be accrued and paid at the time of the final milestone payment, improving our free cash flows through 2022.”
NYSE-listed Atwood Oceanics currently owns 10 mobile offshore drilling units and is constructing the two ultra-deepwater drillships.