Sembcorp Marine - OCBC Investment 2017-10-09: Sells Nine Jackup Rigs To Borr For US$1.3b

Sembcorp Marine - OCBC Investment 2017-10-09: Sells Nine Jackup Rigs To Borr For US$1.3b SEMBCORP MARINE LTD S51.SI

Sembcorp Marine - Sells Nine Jackup Rigs To Borr For US$1.3b

  • Sembcorp Marine (SMM) announced on Friday that PPL Shipyard has signed agreements for the sale of nine Pacific Class 400 jackup drilling rigs to Borr Drilling for a total of about US$1.3b (~S$1.77b or US$144m/rig) plus a market-based fee calculated based on an uplift in value of the rigs sold. 
  • Borr will take delivery of the nine rigs progressively over a 14-month period from 4Q17 to 1Q19, and will make an upfront down payment of about US$500m; the balance US$800m will be paid at any time within five years from the respective delivery dates of the rigs. The nine rigs include all six rigs from contracts PPL had earlier terminated with its original customers, and three rigs presently under various stages of construction completion.
  • Recall that SMM had terminated five rigs in the past two months (with customers Oro Negro and Perisai); each unit was ordered at about US$208m in 2013. 
  • Excluding all interest and market fee payable by Borr, the transaction for the nine rigs will result in a loss of about S$15m for SMM. However this will significantly improve SMM’s liquidity position, helping it ride through the current cycle trough and be well-positioned for an industry recovery. 
  • Maintain BUY with S$1.98 fair value estimate on SMM.




Low Pei Han CFA OCBC Investment | http://www.ocbcresearch.com/ 2017-10-09
OCBC Investment SGX Stock Analyst Report BUY Maintain BUY 1.980 Same 1.980



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