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Singapore conglomerate Keppel has taken control of the 13 legacy rigs held by Rigco Holding at a time of improved conditions in the offshore rig market.
Keppel currently holds a 10% equity stake in Rigco, S$139m ($103.8m) in perpetual securities and approximately S$4.3bn ($3.2bn) in vendor notes.
Rigco will undertake a selective capital reduction exercise, set to be completed by the end of the year. All shares in the capital of the company not held by Keppel will be cancelled, resulting in Rigco becoming a wholly-owned subsidiary of Keppel and housed within a newly created private fund to be managed by Keppel.
With control over Rigco, Keppel will be able to manage when and how the legacy assets are monetised, to achieve the best risk-adjusted returns. Keppel will also have control of S$843m ($630m) of cash in Rigco as of September 31, which it can utilise to complete the unfinished rigs.
“Keppel has no intention of re-entering the offshore and marine business. As part of the existing master services agreement, Seatrium will continue to provide construction, maintenance, and other associated services for the legacy rigs for an initial period of 10 years after the combination of Keppel Offshore & Marine Ltd – now known as Seatrium Offshore & Marine – and Sembcorp Marine, now known as Seatrium Limited,” the Singapore firm explained.
In line with its asset-light business model, Keppel plans to establish a dedicated private fund, named the Keppel Offshore Infrastructure Fund, to own and manage the legacy rigs and its 49% stake in Floatel as well as attract third-party capital from limited partners and co-investors.
This will provide Keppel with greater strategic flexibility to respond to market opportunities by directly managing the rig assets through the fund, while potentially earning asset management fees as a general partner of the fund. The fund would also have the optionality of selling the rigs or exiting through a securitisation route in future.
“Rigco has one of the most advanced rig fleets available in the market today, where about half of these rigs are contracted and generating stable cash flows. Amidst the improving conditions in the offshore rig market, with some segments benefitting from utilisation rates of about 90% and improving day rates, securing control over the management and monetisation of our legacy rigs will enable us to reduce our risks as a substantial creditor to Rigco, and better realise the potential of its assets,” said Loh Chin Hua, CEO of Keppel.
He added that this move will put the company in a position to accelerate rig monetisation and unlock funds that can be used to reduce debt, reinvest for growth, and reward shareholders.
The fact that the global drilling fleet is ageing rapidly. There is also a shortage, especially in the jackup market, where a shortage of premium rigs is projected in the coming years.
According to Keppel, this trend presents a ‘prime opportunity’ to unlock the potential of its legacy rigs by offering operators a more cost-effective and quicker means of securing additional rigs for their near-term drilling requirements. |
