Keppel Charters ‘Legacy’ Jack-Up Rigs as Market Conditions Improve

Singaporean rigbuilder Keppel O&M has announced bareboat charter contracts for two “legacy” jack-up rigs that it had built for another customer but never delivered.

The two KFELS B Class rigs will be chartered by ADES Saudi Limited Company for a period of five years commencing in the fourth quarter and deployed in Saudi Arabia.

The jack-up rigs were originally ordered in 2014 by Fecon International Corp. as part of a three-rig contract worth about $$650 million. However, Keppel last month said it was terminating the contracts over the customers’ failure to take delivery of the rigs and pay the final installments. As a result, Keppel has taken ownership of the rigs and reserves the right to sell or charter them. Contracts for two other jack-up rigs, ordered in 2013 by Clearwater Capital Partners, were also terminated.

The rigs are now part of Keppel O&M’s “legacy” fleet of rigs and will be transferred to Asset Co., a separate entity.

Keppel said the charter contracts highlight improving conditions in the offshore oil and gas market.

“We are pleased to secure bareboat charter contracts for two of our jackup rigs, riding on improving conditions in the oil and gas market,” said Chris Ong, CEO of Keppel O&M.

“These charters attest to the good demand for Keppel O&M’s proven state-of-the-art KFELS B Class rig in markets such as the Middle East where our proprietary design has established an unrivalled operational track record. With superior drilling efficiency and proven high performance, our modern KFELS B Class rigs are an economical and attractive proposition for operators and oil companies looking to ramp up exploration activities,” Ong said.

Keppel said the bareboat contracts are expected to generate revenue of about $97 million (S$135 million) for Keppel O&M including modification works prior to deployment.

According to a report by Clarksons Research published in April 2022, rig markets have continued to tighten in 2022, with overall utilisation now at its highest level since 2015 and dayrates rising noticeably for jackups and floaters. Keppel said the outlook for the jackup market is optimistic, with demand expected to increase across 2022-23, underpinned by strong activity of national oil companies.

“We continue to see strong demand for our rigs, and are actively pursuing more charters, as well as sales opportunities. Our early success at securing new bareboat charters will not only enable us to start generating revenue and cash flows from the legacy assets but also improve the overall marketability of our rigs as we build up their operational track records,” Ong said.

Keppel last month reached a definitive agreement to merge with Singaporean rival Sembcorp Marine, creating the world’s larget builder of offshore oil rigs and a renewable and alternative energy giant.

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