Seadrill has entered into an agreement with Seadrill Operating, subsidiary of Seadrill Partners, to acquire Seadrill Polaris, which operates the West Polaris (UDW drillship) in Angola for US$540mn
The Polaris acquisition is expected to close in a week’s time. The West Polaris is a sixth generation, dynamically positioned drillship delivered from the Samsung shipyard in 2008. The West Polaris is expected to carry out operations in the southern African nation until the end of its contract with ExxonMobil in March 2018.
The total consideration for the acquisition is comprised of US$204mn in cash and US$336mn of debt outstanding under the existing facility financing the West Polaris.
Seadrill Operating will fund the balance of the purchase price with a seller’s credit of US$50mn due in 2021 that carries an interest rate of 6.5 per cent per annum.
The West Polaris is currently contracted by ExxonMobil on a daily rate at US$653,000. Under the terms of the acquisition agreement, Seadrill Polaris has agreed to pay Seadrill any dayrate it receives in excess of US$450,000 per day, adjusted for daily utilisation, for the remainder of the ExxonMobil contract.
Assuming an average economic utilisation of 95 per cent, Seadrill will receive approximately US$60mn in cash per year from the current ExxonMobil contract.
Additionally, Seadrill Polaris has agreed to pay Seadrill 50 per cent of any dayrate above US$450,000 per day, adjusted for daily utilisation, after the conclusion of the existing contract until 2025.
As part of the acquisition agreement, Seadrill Operating’s obligation to repay the US$50mn seller’s credit due to Seadrill will be reduced if the average contracted dayrate under any replacement contract is below US$450,000 until the seller’s credit's maturity in 2021.
By agreeing to sell the West Polaris to Seadrill Partners, Seadrill will receive US$204mn in cash upon closing of the transaction while retaining up to US$203,000 per day in revenues under the current drilling contract without the associated operating expense.
