Seadrill Banks Over $204 Million from Sale of Advanced Drillship to Subsidiary

West Polaris drillship. Photo: Seadrill
West Polaris drillship. Photo: Seadrill

 

Bermuda-based Seadrill Limited (NYSE: SDRL), an offshore oil drilling company controlled by billionaire John Fredriksen, has agreed to sell its 6th generation drillship West Polaris to its own subsidiary in a deal that will generate $204 million in cash and $203,000 per day in revenue for the company

The West Polaris is a dynamically positioned ultra-deepwater drillship delivered from the Samsung Heavy Industries shipyard in 2008. The drillship is expected to carry out operations in Angola until the end of its contract with ExxonMobil in March 2018.

Seadrill entered into the agreement with Seadrill Operating LP, the 58% owned subsidiary of Seadrill Partners, LLC, which will acquire all shares of Seadrill Polaris, the entity that owns the drillship. The total consideration for the acquisition is $204 million in cash and $336 million of debt outstanding under the existing financing facility.

The West Polaris is currently contracted with ExxonMobil on a daily rate of $653,000. Under the terms of the acquisition agreement, Seadrill Polaris has agreed to pay Seadrill any dayrate it receives in excess of $450,000 per day, adjusted for daily utilization, for the remainder of the ExxonMobil contract, which will amount to approximately $60 million in cash per year from the current ExxonMobil contract assuming 95% utilization. Additionally, Seadrill Polaris has agreed to pay Seadrill 50% of any dayrate above $450,000 per day, adjusted for daily utilization, after the conclusion of the existing contract until 2025.

By agreeing to sell the West Polaris, Seadrill will realize $204 million in cash upon closing of the transaction while retaining up to $203,000 per day in revenues under the current drilling contract without the associated operating expense.

All things considered, the board of directors of Seadrill believes that the total value proposition of the Polaris acquisition for Seadrill is approximately $750 million.

The acquisition is expected to close within 7 days.